Financial History 142 Summer 2022 - Page 32

University of Wyoming , American Heritage Center , Wilma Soss Papers , Accession # 10249 , Box 8
Soss frequently rubbed elbows with bigwigs . Here she is pictured with G . Keith Funston , president of the New York Stock Exchange .
was a bad idea to give her savings to some “ fiduciary ” with dubious incentives . What would be a good idea , instead , was trusting herself . In their book Security Analysis ( 1934 ), Columbia University professors Benjamin Graham and David Dodd argued that disciplined investors who were willing to do their homework on companies could protect themselves from the danger of extreme loss if they estimated the intrinsic value of each company and only bought shares that were undervalued in the market .
Some of the promotional campaigns the NYSE ran after the war — advertisements that stressed the importance of buying stock for both personal and patriotic reasons — may also have influenced Soss ’ s thinking . Buying a share of stock was buying a share in America , so said the NYSE . Seeing what the country accomplished during wartime , who would bet against the United States ?
But perhaps the biggest reason she reentered the market was the fact that owning even one share of a company allowed her to attend its annual meetings . With her background in journalism , she knew the value of getting the story first-hand , and buying one share seemed a relatively cheap way to gain access .
Soss bought a single share of U . S Steel , a position she gradually increased to a grand total of five . The investment was a paltry sum for someone whose PR business had thrived for a decade and a half . But that one share set her down the path of shareholder activism , turning her into a “ professional investor ,” or a “ corporate gadfly ” as corporate apologists preferred .
Brandishing her shares in U . S . Steel , she eventually became a major irritant to its management , most especially its venerable chairman , Irving Olds . She would go on to buy more stock in more companies , and a host of Fortune 500 executives would come to rue what they called the “ Wilma problem .”
In May 1946 , Soss decided to attend U . S . Steel ’ s annual stockholder meeting , her first ever . Like most Americans , she also paid attention to events unfolding on the world stage , as tensions ratcheted up between an expanding Soviet Union and its former allies , particularly the United States . Early that month , former British Prime Minister Winston Churchill , visiting Westminster College in Missouri , warned Americans that “ From Stettin in the Baltic to Trieste in the Adriatic , an iron curtain has descended across the continent .” On stage with him sat Missouri native Harry Truman , who had succeeded Franklin D . Roosevelt as President 13 months earlier . Truman had to contend with the growing Soviet threat and meet Churchill ’ s challenge to the United States — to face up to its position as “ the pinnacle of world power ” and curtail the Soviet Union ’ s expansionist tendencies .
The immediate reaction to Churchill ’ s “ Iron Curtain ” speech was sharply negative . Americans had just emerged from a long war and prayed for a prosperous , peaceful future . Soss and others feared getting dragged into another conflict but also dreaded the spread of communism worldwide and sought to render the free enterprise system resilient .
She may have attended the U . S . Steel meeting as a distraction , as a means of determining if she should buy additional shares or as a ploy to drum up business for her PR consultancy . At the time , few investors bothered to attend stockholder meetings , which were often short affairs held in small venues in out-of-the-way places . At Standard Oil ’ s meeting in 1934 , only three shareholders attended .
Same for a General Motors meeting held “ in the little Du Pont Law Library in Wilmington , Delaware .” Only 25 of 60,000 shareholders showed up at a Republic Steel meeting in 1952 . And the few shareholders who appeared rarely spoke up . Investors tended to be passive if only because they realized they were nearly powerless anyway . As late as 1950 , gurus like Jackson Martindell argued that corporations were not democracies and that powerless stockholders could only “ accept management on faith .”
Moreover , selling shares was far cheaper than fighting management on its own turf . Most individual investors , and even large institutions , followed the so-called “ Wall Street Rule ” and sold their shares when they suspected malfeasance or mismanagement . To agitate for reform resembled running into a fire instead of away . Economists call this the “ free rider ” or “ collective action ” problem . Why should A bear the costs of helping B , C , D and , in the largest corporations , tens of thousands of others ? Soss , however , held that “ there is no more cynical philosophy than to sell a stock because you do not like some managerial practice .”
Annual meetings were also lightly attended because corporations typically did the legal minimum to publicize their meetings . Management at U . S . Steel
30 FINANCIAL HISTORY | Summer 2022 | www . MoAF . org