International Styles

The Control of Mixed Companies

Mixed companies, or those which are organized as stock companies but which allow the insured to participate to some extent in the surplus and grant them some measure of voting power, do not possess any great advantage over pure stock companies as regards control by policyholders. An examination of the various plans now in existence gives abundant evidence of this fact. A few permit stockholders only to vote for directors; while a considerable number, although allowing stockholders to vote in person or by proxy, require policyholders to vote in person, and in various instances still further limit control by the insured by restricting the voting power to those who carry a certain amount of insurance, like $5,000, or pay a certain annual premium, like $75 or $100. Such restrictions will amply safeguard the management against a loss of control through the action of the company's policyholders, since it is practically certain that the number carrying $5,000 of insurance who will appear to vote in person will never even approximate the number of shares, to each of which a vote is given. Various other restrictions, sometimes used in conjunction with those already mentioned but at other times constituting the only restrictions, may also be mentioned. Thus, it may be provided that one-half of the directors shall be elected by the stockholders and the other half by the members, or that the stockholders shall elect, say two-thirds of the directors, and the policyholders one-third. Again it is quite common to provide that only stockholders owning a designated number of shares may be directors, while in a limited number of instances only may directors be either stockholders or members. Under such restrictions only half the board with the president is needed for control on the part of the management, while if the stockholders are entitled to elect more than half of the directors, the voting privilege extended to policyholders is apt to be worthless.

The methods adopted by mixed companies for allowing the insured to participate in the profits of the company also differ greatly in their details. Usually the dividend on the stock is limited to 7 or 10%, per annum, or to this rate plus a certain proportion of the remaining surplus, such as one-fifth or one-eighth. In at least one instance the interest of the policyholders in the profits of the company shall be "as hereafter provided, unless otherwise expressly agreed between the company and the insured". Another company limits the return on the stock to 7%, plus the profits on non-participating business; while a few others place no limit upon the stock dividends,. yet have been paying large dividends to policyholders. Provision for retiring the stock seldom exists, and where such provision has been made it is usually stated that the retirement shall occur only when it is voted by the members and that a certain proportion of the surplus, like one-fourth, may be applied for that purpose.

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