Corporate Governance and the Feminization of Capital.

• Author: Haan, Sarah C.

Table of Contents Introduction I. The Feminization of Capital A. Women Shareholders in the New Century B. Women as Shareholder Activists C. The Expansion of Shareholding and the Great Bull Market D. The Modem Corporation and Private Property 1. Gender and companies under "management control" 2. The customer stockholder E. Women Move into the Majority F. Pro Rata Shareholding and the Feminization of Capital G. Race and the Feminization of Capital H. The End of the Feminization of Capital II. Implications of the Feminization of Capital A. Gender and the Separation of Ownership and Control B. The Pathology of "Passivity" C. Gender and Stakeholderism D. Gender and the "Average" Shareholder 1. Curating the image of stockholding as male 2. Women's economic interest in gender equity E. Women and Corporate Control Conclusion Introduction

In 1951, the American Telephone and Telegraph Company (AT&T) became the first corporation in America with one million stockholders. (1) The company celebrated the milestone with a publicity campaign, flying the one-millionth stockholder--a Michigan couple who had bought the stock jointly--to New York for a publicity tour. (2) Photos from the campaign showed the company's president, Leroy Wilson, presenting a stock certificate to a young automobile salesman, Brady Denton, as the couple's school-age sons looked on. Behind them all, partly obscured by Wilson's arm as it reached past her, stood Dorothy Denton, Brady's co-owner, gazing into the camera lens with a strained smile. (3) The image celebrated a young couple's entrance into the stockholder class, but it also depicted Dorothy as marginalized in the transaction. Newspapers around the country memorialized the event and proclaimed the democratization of AT&T's shareholder class: It had become "a cross section of America, including farmers, businessmen, clerks, mechanics, clergymen, merchants, teachers, housewives, doctors, lawyers, Civil Service workers, people who [had] retired, widows, home-town folks and neighbors." (4)

But this picture--the staged photo, the list of shareholder occupations that emphasized "farmers" and "businessmen," even AT&T's choice of a married couple as its millionth stockholder--was misleading. By 1951, most of AT&T's individual stockholders were women. (5) They outnumbered individual men stockholders by almost two to one. (6) In fact, women stockholders had outnumbered men stockholders at AT&T since at least 1910. (7) As recently as 1948, AT&T had disclosed that 43% of its stock was owned by women, considerably more than the 26% owned by men. (8) In 1951, individual women stockholders held 12 million shares, (9) about 41% of AT&T's stock--more if you included stock held jointly. Women comprised AT&T's largest stockholder demographic whether you counted shareholders by the head or by the share. (10)

That year, the New York Times described AT&T's April shareholder meeting, held at the company's Manhattan headquarters, as "Ladies Day." (11) At least half of the stockholders who attended were women. (12) During the meeting, Wilma Soss, a well-known shareholder activist and the founder of the Federation of Women Stockholders in American Business, gave a short speech. (13) She pointed out that women comprised not only 48% of AT&T's stockholders but also more than 60% of its nearly 650,000 employees. (14) Soss argued that women deserved representation on AT&T's board of directors, and that the company would benefit from it. She nominated to the board a Nevada businesswoman who owned half as much AT&T stock as all seventeen of AT&T's directors combined. (15) Soss's nomination was a protest gesture. There was no way for a floor nomination to succeed because there were not enough shares represented at the meeting to win a vote.

When Soss was done presenting in favor of her nominee, a second woman, Cathrine Curtis, who headed a different organization of women investors, rose to speak. (16) She nominated a second woman candidate to the board. (17) Like Soss, Curtis understood that her candidate stood no chance of election. Ballots were circulated while the company's president moved on to other subjects, and then the defeat of the women candidates--and the successful election of seventeen men--was confirmed. (18)

But the meeting wasn't over. President Wilson invited another investor, Ella Aronstam, to present a proposal she had submitted for the shareholders' consideration. (19) Taking advantage of a rule enacted by the Securities and Exchange Commission (SEC) only nine years earlier, Aronstam had asked AT&T to add her resolution to the materials that the company sent to its million stockholders in advance of the meeting. (20) The company had included Aronstam's proposal in its proxy statement, alongside its instruction that stockholders vote against her. (21)

Tiny and white-haired, Aronstam was a retired schoolteacher from Brooklyn who owned 100 shares. (22) Her proposal asked the company to expand the board by one member--and to fill the vacant position with a woman. (23) "I don't expect the resolution to pass this time," she told a reporter before the meeting, "but we will put up a good fight." (24) When the votes were tallied, more than a million shares of AT&T stock were cast in favor of Aronstam's proposal--just over 5% of all the shares that were voted. (25) Management had voted all of the proxies it had collected against the proposal. (26)

AT&T's vibrant 1951 annual meeting--alive with women, the dominant shareholder demographic, rising to give speeches, propose resolutions, and demand representation--was, in many ways, typical for its time, although it defies our present-day understanding of corporate history. (27)

Over the first half of the twentieth century, the percentage of women among individual shareholders at American public companies continuously grew until, sometime between 1952 and 1956, women became the majority. (28) The trend was documented over six decades in ad hoc studies conducted by government agencies, journalists, investment firms, and eventually the New York Stock Exchange (NYSE). In 1956, the NYSE published the first comprehensive study finding that women constituted a majority of shareholders across the U.S. public capital markets. (29) But the trend received almost no recognition in the academic literature--not in economics, corporate law, or business management, the three academic disciplines in which scholars studied and published information about the expanding shareholder class and the role of shareholders in corporate organization. This silence contrasts strongly with the scholarly attention lavished on the rise of institutional holders starting in the 1950s--a time when women's shareholding was reaching a high point. (30)

Women's market-wide majority status may have been less important than the feminization of shareholding at individual companies. Before the 1929 stock market crash, women shareholders outnumbered men at some of America's largest and most influential public companies, including AT&T, General Electric, and the Pennsylvania Railroad--the "blue-chip" companies whose CEOs and directors formed an elite cadre of business leaders. (31) As the gender of their companies' shareholders changed--a process that began before the crash and continued after it--these men watched their managerial leadership become accountable to an expanding population of women. This change would have been apparent not only from stockholder lists, but in real-world shareholder meetings where women's increasing presence was visible and where women's voices were audible. But the feminization of shareholding occurred during a period in American history in which--due to then-prevailing gender bias--women were widely regarded as unsuited to participate in business management.

Throughout the first half of the twentieth century, several large public companies tracked and disclosed the gender of their own stockholders, and the financial press wrote numerous articles proclaiming the growing number, and common stockholding power, of women investors. Business experts expressed anxiety about women's expanding role, sometimes suggesting that the influx of women shareholders had significance for corporate organization. Corporate law scholarship has never before acknowledged that this early period, in which control of widely held corporations shifted from shareholders to managers, coincided with a change in the gender of the stockholder class. This Article tells the forgotten story of the feminization of capital (32)--the transformation of public-company stockholders from majority male to majority female--and argues that early-twentieth-century gender politics played a role in shaping corporate-governance theory. (33) The Article lays out the evidence showing, among other things, that the feminization of shareholding encouraged corporate law experts to view shareholders as "passive" actors, and justified laws and practices that shifted power away from shareholders toward corporate managers.

During the early decades of the twentieth century, ownership of the nation's biggest corporations became "widely scattered." (34) In the conventional narrative, the dispersion of stockholding caused "passive" shareholders to lose the power of control, and a new and growing cadre of technocratic managers to gain it. (35) The separation of ownership and control reflected the triumph of centralized corporate management over the dispersed, small shareholder. (36) The separation framework introduced a "separate spheres" dichotomy to corporate-governance theory that not only survives to this day, but became the basis of modern corporate law. In recent years, some scholars have questioned the timing of the separation of ownership from control. (37) Virtually everyone agrees, however, that ownership did eventually separate from control--and that reducing the resulting "agency costs" has become the singular focus of...