Industry Courts the Hand That Feeds It

Stockholder Relations

Every top executive knows how important good employee relations are to the running of a business. But management has been slow to learn the importance of good relations with another big group in the company: the stockholders. Sometimes the lesson has been taught the hard way. The managements of such big companies as New York Central Railroad, Decca Records and American Woolen Co., which never went out of their way to woo stockholders, suddenly found themselves this year fighting for survival in bitter proxy wars. In some cases the awakening came too late. In many others management had to take desperate steps, declare extra dividends and stock splits, and hurriedly beef up stockholder programs to keep from losing control.

In a poll of 1,000 stockholders, the Opinion Research Corp. of Princeton, N.J. reported that 71% wanted more than financial information. They also wanted news about new research and development, plant improvement and expansion, and the men who run the companies. The spreading of such information is a big job. The number of shareholders in U.S. industry has grown until now there are an estimated 6,700,000 individual owners listed on U.S. stock exchanges. Though few own more than 100 shares in any one firm, together they control many of the nation's biggest and busiest corporations.

Management's need for better stockholder relations is more than just the problem of keeping control. For one thing, confident, well-informed stockholders will hang on to their stock, thus prevent rapid and often damaging speculation. For another, stockholders now form industry's handiest market for 1) raising new capital, and 2) selling its products. Celanese Corp., which had trouble raising $40 million for expansion before it brought out a better stockholders' program in 1947, recently raised $200 million without difficulty, largely from its own stockholders.

As salesmen and buyers, stockholders are even more important. General Motors alone has almost 500,000 stockholders, thus a "presold" market for hundreds of thousands of cars. American Tobacco continuously urges its stockholders to "Buy American," hands out cartons of Luckies to its shareholders to pass on to their friends. Borden Corp. tested customer acceptance of its instant coffee and cheese products by first passing them around to stockholders. General Foods puts on fancy spreads of its foods at annual meetings, has a special order department so that stockholders can buy (at cost) $5 gift packages of its products to give away as Christmas presents.

To educate stockholders and keep them eager to support the companies they own, some corporations have formed special departments to stir up stockholder interest. Giant A.T. & T., with some 1,300,000 stockholders, has a department with a full-time staff of more than 300 employees to handle stockholders as if they were all members of one big happy family. A.T. & T. has even got its stockholders hotel reservations in New York and has met their boats, planes or trains when they travel. A.T. & T. sends welcome letters to all new stockholders, sends out a flood of quarterly reports and newsletters, holds frequent open houses and meetings for stockholders at its local offices around the U.S.

General Mills has a traveling panel of 35 executives who visit stockholders in eight cities biennially, answering questions, explaining company projects with charts and movies. General Electric uses radio and TV commercials to boom the advantages of owning stocks.

Financial reports are another method by which many companies have learned to educate their stockholders. Financial World magazine started a contest for annual reports in 1941. It aroused so much interest that the number of entries rose from a few hundred at the start to 5,000 last year.

Gradually, companies are learning to hold their annual meetings in big cities instead of drab, out-of-the-way factory towns. Westinghouse has started holding regional annual meetings around the U.S. so that as many stockholders as possible can attend. Matson lines takes its stockholders on a gala tour of its luxury liner Lurline. Chas. Pfizer & Co., maker of antibiotics, once brought in eight piebald baby pigs and a testy tiger cub to demonstrate the benefits of a new synthetic milk product. Chesapeake Industries perked up its annual meeting this year with a special preview of Hollywood's Crossed Swords, starring Errol Flynn and Italy's buxom Gina Lollobrigida, to show off a new film process developed by one of its subsidiaries. To entice stockholders to come to its meeting, the Public Service Co. of Arizona this year handed out Polaroid glasses to watch color photos in 3-D of the company's construction projects.

Such programs cost money, take executives' time and energy. But corporations think they pay off by making stockholders active boosters of the company instead of mere moneylenders.

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