Proxy Fight

The 15 directors of the Missouri-Kansas-Texas Railroad Co. ("Katy") feared that there would be wigs on the green at the annual stockholders' meeting in St. Louis last week. Edward N. Claughton, holder of the largest single block of Katy stock (11%), had loudly voiced his dissatisfaction with the way the Katy president, natty, gregarious Matthew S. Sloan, was treating his stockholders.

Claughton's chief complaint: no dividends were paid out of the fat $6.1 million profit earned in 1944. Since 1941, Sloan has poured Katy earnings back into the system by making $89 million of improvements to physical property, and reducing funded debt by $36 million. Yearly fixed charges have been cut $1.8 million.

This astute management of the finances of a once shaky railroad did not appeal to dividend-hungry stockholders like Florida's Claughton. As spokesman for a stockholders' protective committee claiming 40% control of Katy common stock, Claughton cried, "If the Katy can't pay dividends when it is earning good money, then what can stockholders expect after the war ? "

But when the proxy votes were counted, 13 of Sloan's directors were still in office. Stockholder Claughton won only a small victory, i.e., two directors on the board.

By Plane, Train & Auto. "Matt" Sloan, 63, ex-president of the New York Edison Co., commutes by plane between Manhattan and his Southwest railroad. He has traveled over every mile of the 3,293-mile Katy system. On inspection trips he fires a barrage of questions at Katy railmen, once stopped his special train at a lonely station to shake hands with a legless dispatcher.

When Sloan became president of the Katy, eleven years ago, he shattered two railroad traditions: 1) he had landed at the top without working his way up from a roundhouse or telegraph desk; 2) he equipped an automobile with flanged wheels and put-putted over branch lines to save the expense of a special train.

A skillful infighter, he dug into Claughton's past when the proxy fight began to get hot, unearthed the fact that Claughton had run foul of Georgia banking regulations, landed in prison in 1934. (He was later pardoned by Governor Eugene Talmadge.) Bluntly Sloan told his stockholders that Claughton's was not the type of management they wanted.

Katy was on the verge of bankruptcy when Sloan took over. By whittling away at Katy's debt, Sloan should be able to keep the line out of the sheriff's clutches when its freight and passenger traffic goes back to normal levels after the war.

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