A Significant Episode in Life Insurance Management
By L. A. S.
LIFE insurance circles were recently agitated by some disclosures relating to the management of an insurance company which is spoken of as “perhaps the most conspicuous institution in the whole world of insurance and finance,” which are not calculated to increase public confidence in such organizations. The company in question is the Equitable Life Assurance Society, of New York City. This organization has six hundred thousand policy-holders, assets of over four hundred millions of dollars, and includes among its directors many men of note in the financial world. This society is a stock company, capitalized at one hundred thousand dollars, consisting of one thousand shares of the par value of one hundred dollars each, and limited as to dividends to seven per cent per annum. The income which can be legitimately derived from the entire capital stock is seven thousand dollars per annum. The society was controlled by the shares of stock, and the policy-holders had no voice in its management. Something over half this stock is owned by the family of one man, Mr. James H. Hyde, son of the founder of the Equitable Life, from whom he derived his interest in the same by inheritance. Mr. Hyde is vice-president of the organization. For this controlling interest in the society, the whole legitimate income from whose entire capital stock could be, as stated, but seven thousand dollars per annum, it is stated that Mr. Hyde was offered by Mr. E. H. Harriman and his associates the sum of five million dollars. The reader can judge as to the purpose for which Mr. Harriman wished to get control of the Equitable’s stock; that is, as to whether he wished it for its legitimate or for its speculative value. Certainly this vast sum was not offered to purchase the legitimate use of less than one hundred thousand dollars’ worth of property. But, as the New York Sun observed, “The speculative value of Mr. Hyde’s shares makes them cheap on the basis of five million dollars of cash for fifty-one thousand dollars’ worth of actual property.” To control the management of the vast interests of this great corporation, with its enormous resources and business which reaches out across the ocean, and to use this control to back up transactions of a speculative and stock-jobbing character, is worth more than five million dollars from a monetary point of view. This offer precipitated trouble in the organization, and a petition was presented to the board of directors by the society’s officials, calling for the removal of Mr. Hyde from office, and asking that policy-holders be invested with the right to vote on questions relating to the management of their own property. At a meeting of the directors it was decided that policy-holders should be given this right, and the internal dissensions were quieted without taking the contemplated action against the vice-president, thus removing the threatened danger of control of the organization for purposes wholly foreign to those for which it was founded. But the incident throws a shadow over the whole realm of life insurance corporations, and leaves open a field for disquieting contemplation. The problem of regenerating the corporation, so as to make it the friend, and not the enemy, of the common people, and bar out the increasing tendency to use its resources for speculative rather than legitimate business purposes, is coming to be, says Judge Grosscup of the Chicago federal court, “the paramount political problem of our time.” In the case of the Equitable Life Assurance Society we have, says the New York Sun, “the broad disclosure of the stock-jobbing possibilities of a life insurance corporation, which are inseparable from its pseudo-mutual character.” The whole tendency of the times, in business, in politics, and in religion, is to cut loose from safe and legitimate principles and methods, and plunge into the new and untried realm of speculation, in the hope of greater achievements than have been reached by the sober men of the past. On all sides are to be seen the evidences of it. And these things should remind the people of God that it is high time to cut loose from the world, and make sure of their connection with a better realm.