"Disease of the Times"

One afternoon last week in the assembly room on the 23rd floor of the Manhattan headquarters of Western Union Telegraph Co., suave old Board Chairman Newcomb Carlton fingered a gavel, peered out anxiously at 200 faces, more of Western Union's 30,772 stockholders than he had ever seen at one time. Western Union's President Roy Barton White, stocky old-time railroad telegrapher, was reading a prepared statement explaining why Western Union had lost $1,637,000 in 1938. When perspiring President White lamely concluded that the report was the company's and not to be considered as "my report," an angry voice broke out:

"Who is responsible for the report?"

"Who is president?" yelled another.

"Who draws the salary?"

"The chairman. . . ."

As Newcomb Carlton imperiously whacked his gavel, a short, balding, dimpled little man circulated happily through the muttering crowd. He was Stockholder Arthur C. Flatto,* enjoying a day to which he had looked forward for many months.

When he was 15, Arthur Flatto began buying stocks out of his allowance (first was U. S. Rubber). In 1929 he got into Western Union, at 240, later bought more. Russell Sage once said that only once in a lifetime did a man have the chance to enrich himself by buying Western Union below $50 a share, and when that chance came, Arthur Flatto took it and held on. Last week he held 1,350 shares of Western Union, selling at $18.

The chain of circumstances that discredited Russell Sage, angered Arthur Flatto and many another Western Union stockholder, is similar to that with which railroads are familiar: revenues down and costs up, largely for reasons beyond the management's control (see below). But Arthur Flatto believed that the management had "failed to function properly in producing profits," three months ago started rounding up proxies to oppose the management slate. No mere corporate troublemaker, he spent $4,450 out of his own pocket convincing other dissatisfied shareholders that they were entitled to minority representation "just like the Supreme Court." This proposition Messrs. Carlton and White dismissed, arguing that under Western Union's bylaws minority representation would be impossible.

So Mr. Flatto turned up for last week's meeting, claiming to hold 9,000 proxies representing 250,000 shares. He demanded to know what would happen if he had 300,000 shares and the management had 300,001. Mr. Carlton retorted that nothing would happen.

Mr. Carlton then adjourned the meeting to count the Flatto proxies. At 5 p. m. he announced an adjournment to the following day. Next day, as officials continued to dig through the Flatto proxies, the meeting was adjourned until this week. By this time Western Union's management, harried by Flatto threats to challenge every one of their proxies, diagnosed the most serious stockholders' revolt in their 88-year history as a "disease of the times."

*Mr. Flatto is a ribbon manufacturer. This year, thanks to Shirley Temple Hair Bows and a vogue for beribboned lingerie and millinery, his business is 50% better than in 1938-

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