Securities and Exchange Commission Historical Society

The Center for Audit Quality Gallery on Corporate Governance

Evolving Corporations and Governance

Laissez Faire and Listing Standards

June 24, 1965 G. Keith Funston

After New Deal reforms and wartime emergencies, shareholders and regulators seemed to welcome a post-war laissez faire attitude. The imprimatur of the “arsenal of democracy” improved corporate reputations, and renewed prosperity proved a balm for shareholder grievances. With the exception of brief forays into proxy regulation, the SEC remained quiescent during the post-war years.

With minimal state involvement and negligible federal efforts in corporate governance reform, it was left to the individual players in corporations and other institutions to negotiate the rules and norms of corporate governance in a process known as “private ordering.” One of the most effective of such efforts to promote corporate governance without state involvement was made by the exchanges working through listing standards. As Emil Schram, President of the New York Stock Exchange, proclaimed, “I wish to make this point, with full emphasis, that if anybody is the friend of the security-holder, it is the New York Stock Exchange. He is the customer of our membership.”7

The post-war boom years fueled fierce competition among exchanges for new listings and new investors, capped by the New York Stock Exchange’s 1954 “Own Your Share of American Business” campaign. The promise of corporate democracy became part of the pitch, with exchanges urging corporations to provide more disclosure, more standardized accounting, and more generous provisions for proxy voting.

Some of the work had been done before. In 1926, the New York Stock Exchange had restricted listings only to issues bearing voting rights, leading Berle and Means to note that, with the exception of railroad securities, “Disclosure of the quality necessary to permit a market to appraise a security is required only by the New York Stock Exchange.”8 In the 1940s and 1950s, the NYSE hardened its attitude toward non-voting stock, refusing even to list companies that denied voting rights to holders of unlisted securities. It increased the number of issues mandating a shareholder vote and made active solicitation of proxies compulsory.9 It also introduced what would become a latter-day corporate governance staple when it required at least two outside directors for each listed company. By 1962, 97% of listed corporations were in compliance.

Other exchanges followed the NYSE’s lead. The American Stock Exchange introduced its first voting standards in the mid-1940s. As part of comprehensive reforms in the early 1960s, the AMEX included new requirements on voting rights, shareholder approval for expansions of stock, and proxy solicitation.10

By the middle of the 1960s, the American economy had enjoyed nearly two decades of untrammeled growth. During two centuries of American history, corporations had gone from rare, and suspect, economic entities to popular providers of plenitude. Interest in their governance, never high, had ebbed and flowed. But the honeymoon years were ending. More than a decade of social and economic upheaval would severely test the goodwill accumulated by U.S. corporations.


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Related Museum Resources

Papers

December 3, 1925
image pdf (All rights are owned exclusively by NYSE Euronext (copyright) 2010 NYSE Euronext. All Rights Reserved, courtesy New York Stock Exchange Archives. All worldwide intellectual property rights including without limitation moral rights vest in NYSE Euronext and/or its affiliates.)
July 14, 1933
transcript pdf (Adolf A. Berle, Jr. Papers, courtesy Franklin Delano Roosevelt Presidential Library)
July 18, 1933
transcript pdf (Adolf A. Berle, Jr. Papers, courtesy Franklin Delano Roosevelt Presidential Library)
July 24, 1933
transcript pdf (Adolf A. Berle, Jr. Papers, courtesy Franklin Delano Roosevelt Presidential Library)
October 10, 1933
transcript pdf (Adolf A. Berle, Jr. Papers, courtesy Franklin Delano Roosevelt Presidential Library)
October 11, 1933
transcript pdf (Adolf A. Berle, Jr. Papers, courtesy Franklin Delano Roosevelt Presidential Library)
October 24, 1933
transcript pdf (Adolf A. Berle, Jr. Papers, courtesy Franklin Delano Roosevelt Presidential Library)
October 24, 1933
transcript pdf (Adolf A. Berle, Jr. Papers, courtesy Franklin Delano Roosevelt Presidential Library)
February 14, 1934
transcript pdf (Adolf A. Berle, Jr. Papers, courtesy Franklin Delano Roosevelt Presidential Library)
November 1, 1934
image pdf (Courtesy of National Archives)
November 5, 1934
image pdf (Courtesy of National Archives)
November 15, 1934
transcript pdf (Courtesy of National Archives and Records Administration)
December 5, 1934
transcript pdf (Courtesy of National Archives and Records Administration)
December 11, 1934
transcript pdf (Courtesy of National Archives and Records Administration)
1936
transcript pdf (Adolf A. Berle, Jr. Papers, courtesy Franklin Delano Roosevelt Presidential Library)
March 4, 1936
transcript pdf (Adolf A. Berle, Jr. Papers, courtesy Franklin Delano Roosevelt Presidential Library)
May 9, 1936
transcript pdf (Adolf A. Berle, Jr. Papers, courtesy Franklin Delano Roosevelt Presidential Library)
July 9, 1936
image pdf (Courtesy of National Archives)
January 26, 1937
transcript pdf (William O. Douglas Papers, courtesy Library of Congress)
June 15, 1937
transcript pdf (Adolf A. Berle, Jr. Papers, courtesy Franklin Delano Roosevelt Presidential Library)
June 16, 1937
transcript pdf (Adolf A. Berle, Jr. Papers, courtesy Franklin Delano Roosevelt Presidential Library)
June 18, 1937
transcript pdf (Adolf A. Berle, Jr. Papers, courtesy Franklin Delano Roosevelt Presidential Library)
June 19, 1937
transcript pdf (Courtesy of National Archives and Records Administration)
June 25, 1937
image pdf (Courtesy of National Archives)
November 5, 1937
transcript pdf (Adolf A. Berle, Jr. Papers, courtesy Franklin Delano Roosevelt Presidential Library)
January 17, 1939
transcript pdf (Courtesy of National Archives and Records Administration)
April 2, 3, 4, 5, 8, 9 and 10, 1940
Hearings before a Subcommittee of the Committee on Banking and Currency, U.S. Senate on S.3580, A Bill to Provide for the Registration and Regulation of Investment Companies and Investment Advisers, and for Other Purposes, Part I

(Government Records)

April 26, 1940
image pdf (All worldwide intellectual property rights including without limitation moral rights vest in NYSE Euronext and/or its affiliates.)
June 21, 1940
transcript pdf (Courtesy of National Archives and Records Administration)
August 22, 1940
image pdf (Government Records)
October 1940
The Distribution of Ownership in the 200 Largest Non-Financial Corporations

(Courtesy of National Archives)

January 7, 1941
transcript pdf (Courtesy of the American Institute of Certified Public Accountants)
September 9, 1942
image pdf (Courtesy of the National Archives and Records Administration)
September 12, 1942
image pdf (Courtesy of National Archives)
September 17, 1942
transcript pdf (Courtesy FINRA)
October 10, 1942
image pdf (Courtesy of the National Archives and Records Administration)
December 18, 1942
image pdf (Courtesy of the National Archives and Records Administration)
March 1, 1943
transcript pdf (Courtesy of National Archives and Records Administration)
March 2, 1943
image pdf (Courtesy of the National Archives and Records Administration)
March 15, 1943
transcript pdf (Courtesy of National Archives and Records Administration)
January 15, 1945
image pdf (All worldwide intellectual property rights including without limitation moral rights vest in NYSE Euronext and/or its affiliates.)
April 3, 1950
transcript pdf (Adolf A. Berle, Jr. Papers, courtesy Franklin Delano Roosevelt Presidential Library)
October 3, 1950
transcript pdf (AICPA Collection, University of Mississippi)
October 3, 1950
transcript pdf (AICPA Collection, University of Mississippi)
April 28, 1952
transcript pdf (All worldwide intellectual property rights including without limitation moral rights vest in NYSE Euronext and/or its affiliates.)
April 20 and 21, 1954
transcript pdf (All worldwide intellectual property rights including without limitation moral rights vest in NYSE Euronext and/or its affiliates.)
May 12, 1954
image pdf (All worldwide intellectual property rights including without limitation moral rights vest in NYSE Euronext and/or its affiliates.)
December 3, 1954
transcript pdf (Adolf A. Berle, Jr. Papers, courtesy Franklin Delano Roosevelt Presidential Library)
August 23, 1955
transcript pdf (Courtesy of National Archives and Records Administration)
October 14, 1955
image pdf (All worldwide intellectual property rights including without limitation moral rights vest in NYSE Euronext and/or its affiliates.)
March 15, 1957
transcript pdf (Gardiner Means Papers, courtesy of Franklin Delano Roosevelt Presidential Library)
March 22, 1957
transcript pdf (All worldwide intellectual property rights including without limitation moral rights vest in NYSE Euronext and/or its affiliates.)
May 22, 1957
transcript pdf (Courtesy of Ann Wallace)
June 4, 1957
image pdf (All worldwide intellectual property rights including without limitation moral rights vest in NYSE Euronext and/or its affiliates.)
April 24, 1959
image pdf (All worldwide intellectual property rights including without limitation moral rights vest in NYSE Euronext and/or its affiliates.)
October 13, 1960
image pdf (All worldwide intellectual property rights including without limitation moral rights vest in NYSE Euronext and/or its affiliates.)

Film, Radio And Television

1949

What is a Corporation?

courtesy of the Prelinger Archives

1952

"What Makes Us Tick," New York Stock Exchange Film

courtesy of the Prelinger Archives, Library of Congress; made possible through the support of the Securities Law Student Association, Columbus School of Law, The Catholic University of America

February 20, 1952

G. Keith Funston, New York Stock Exchange, on "Longines Chronoscope Television Journal"

courtesy of the Longines Wittenauer Watch Company, Inc. Collection, National Archives and Records Administration; made possible through the support of the Securities Law Student Association, Columbus School of Law, The Catholic University of America

1956

"Working Dollars," New York Stock Exchange Film

courtesy of the Prelinger Archives, Library of Congress; made possible through the support of the Securities Law Student Association, Columbus School of Law, The Catholic University of America

Early 1960s

"The Big Board," New York Stock Exchange Film

courtesy of the Prelinger Archives, Library of Congress; made possible through the support of the Securities Law Student Association, Columbus School of Law, The Catholic University of America

1962

The Lady and the Stock Exchange

With prologue of tours of New York Stock Exchange

courtesy of the Prelinger Archives, Library of Congress

Galleries

The Richard C. Adkerson Gallery on the SEC Role in Accounting Standards Setting

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