THE EQUITABLE LIFE ASSURANCE SQCIETY
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THE EQUITABLE LIFE ASSURANCE SOCIETY — A POSSIBLE REMEDY TO CANCEL THE STOCK CONTROL1 Robert Rentoul Reed A CORPORATION is in legal effect the sum of the legal relations established by it. These relations differ very materi ally between different classes of corpora tions. Corporations have been roughly classified as lay and eleemosynary, public, quasi-public, and private, membership and stock corporations. There are also classi fications such as banking, railroad, and in surance corporations. The latter have been subjected to a further classification of stock, mutual and "mixed" corporations.2 In a strictly eleemosynary corporation, there are, generally speaking, no persons outside of the corporation itself having any ownership in its assets. Its members are specially selected or designated persons having the power of control over its assets for a public or charitable purpose. Re moved in character but close in analogy to such a corporation is that of a savings bank which is quasi-public in its aim and nature. The control is usually vested in a body of trustees whose original probation, selection, and management is specially and carefully safeguarded by the enabling statutes which authorize their formation. The assets, how ever, are owned by the depositors, as a continuing body, entitled to a periodic dis tribution of the increase of their invest ment by way of interest, and entitled also to withdraw their deposit upon proper notice at any time. The distinction between such corpora tions and corporations for profit has as a rule been clearly recognized, and the relations established between the incorporators and the state, and the special interests confided 1 This subject was first proposed and discussed by the present author in an article in the Green Bag, July, 1906. Ed. 1 See Cooley's Briefs on Insurance, Vol. 1, p. 53.
to them, have been carefully denned and regulated. To some degree insurance corporations have been recognized as subject to special supervision, but they have for most pur poses been classified as business corpora tions, all the parties to which are able, mentally and financially, to make their own contracts and abide by them. They have been formed both under general and special laws, and as a rule no public super vision or safeguards have been provided for the selection of the trustees or directors. In these, as in other corporations, this has been left to the members, whether stock holders or policyholders, and the normal rule of relationship between these members, as between the members of other business corporations, is that of joint ownership of the assets and joint management of the corporation. The normal rule of voting under modern statutes has been one share one vote, for stock corporations, while in the absence of statute or by-law and in membership and mutual insurance corporations, the rule of the common law, one member one vote, survives.1 Such is the general rule around which principles and precedents have de veloped, the rule of joint control and man agement as the normal incident of joint ownership surviving the change in form from that of the individual to ownership united in the corporate body. This rule underlies practically all the reasoning and decisions on general corpora tion law. The possibility of a relationship between members and co-owners, other than that of joint control and management, does not enter into the practical legal principles 1 Am. & Eng. Enc. Law, 2d ed., Vol. xxvi., p. 1003.
