The Stock and Mutual Plans Compared with Reference to the Control of Companies

The control of stock companies, as we have seen, rests with the stockholders, generally by means of proxy voting. Nearly always a majority vote carries with it complete control, although in some instances the minority is able to secure some representative in the company's management through a system of cumulative voting. Control of mutual companies, on the contrary, rests in theory at least with the policyholder. All such companies allow their policyholders to express their will by attending the meetings and voting in person. But it is clear that in the case of a large company doing business throughout the country it is impossible for more than a few of the total number of policy-holders, to attend in person, hence in nearly all companies the proxy system is employed in one form or another. Sometimes the proxies are good until revoked, while in other instances they are good only for the given meeting or for a limited period. Sometimes no member is allowed to vote proxies for more than a certain designated amount of insurance, like $100,000; while in other instances no limitation is imposed. In still other instances direct voting by mail is permitted.

The foregoing distinction between control of companies by stockholders and by policyholders has not proved of much importance in the past. In either case experience has demonstrated that the company is usually controlled by a limited number of persons, and that the situation with respect to a large mutual life-insurance company is similar to that presented by other large corporations with thousands of stockholders widely scattered. Experience has clearly shown that very few policyholders attend the meetings, and that proxies can usually be obtained in sufficient numbers by those who are interested in controlling the company. The average policyholder seems to manifest little interest in the management of the company in which he is insured, and, especially in view of the stringent regulation of the business by the state, makes little effort to keep himself informed. The great majority of policyholders, moreover, even if desirous of attending the meeting or of expressing an independent judgment by proxy, are not sufficiently well informed to-day to vote intelligently on important matters that may come up for decision. Even,when attempts have been made to organize groups of policyholders in local associations with a view to bringing their influence more effectively to the attention of the company's management, the efforts have in nearly all instances met with little success.