Business: Tide Water Tangle

Posed in simple form in Manhattan last week was a basic problem of modern capitalism—the divorce of ownership from control. While the management of the $187,500,000 Tide Water Associated Oil Co. counted proxies for a corporate simplification plan in the company’s office downtown at No. 17 Battery Place, Tide Water’s biggest stockholder, a man with a $20,000,000 stake in the proceedings, sat uptown in his swank Sutton Place penthouse unable to do anything about it.

He was J. (for Jean) Paul Getty, 43, Oxford-educated spokesman for the Los Angeles Getty oil interests, who let one of his representatives, Harold L. Rowland, state his attitude toward the merger of two Tide Water operating subsidiaries with the parent holding company.Although his father left an estate of $21,000,000, Jean Paul Getty, an only son, had to make his own way in the oil world. In 1920 he was $400,000 in debt, by 1926 was a millionaire in his own right. Early in 1932 he bought a controlling interest in Pacific Western Oil Corp., a rich California producer. He put his father’s executor, H. Paul Grimm, in as president. Pacific Western was Oilman Getty’s springboard to big Tide Water. Pacific Western dipped into surplus funds, bought 360,000 shares of Tide Water Associated Oil Co. common stock at depression prices while Mr. Getty and other Getty interests acquired 500,000 other shares. Tide Water directors quickly saw to it that Oilmen Getty and Grimm were elected to their number.

In 1935, to further his interests in Tide Water, Oilman Getty purchased working control of Mission Corp., an investing company which owns 1,128,000 shares of Tide Water Associated stock.* With this move the Tide Water directors apparently grew suspicious of Mr. Getty’s intentions. At the next Tide Water stockholders’ meeting, over Mr. Getty’s opposition, an amendment was passed which changed the terms of directors. President William Francis Humphrey and three others were re-elected for three-year terms, biggest Stockholder Getty for asingle year. At the 1936 stockholders’ meeting, Mr. Getty tried to secure the repeal of the three-year term for directors and defeat two other amendments sponsored by the management which he considered inimical to stockholders’ rights. According to lean, curly-haired Mr. Getty, President Humphrey and nine other Tide Water directors besides himself and Mr. Grimm controlled only 8½% of the company’s stock, yet they ran it and sought to perpetuate themselves. But the otherstockholders, having been solicited by both sides, stuck by the management. Mr. Getty lost on each point, was unseated as a director. Although he would have lost anyway, Mr. Getty was annoyed by the fact that Mission’s 1,128,000 votes, which he nominally controlled, were cast against him. Reason: Mission was, and still is, dominated by Tide Water officials.

Corporation Meeting. In funereal atmosphere punctuated only by tugboat tootings in the harbor, two score small fry and a few big stockholders gathered at No. 17 Battery Place last week to approve or vote down the merger of Tide Water Oil Co. and Associated Oil Co. into a new Tide Water Associated Oil Co. William Francis Humphrey, stout, double-chinned president of Tide Water Associated who is also head of San Francisco’s famed Olympic-Club, called the meeting to order, clipped through parliamentary procedure in approved police court fashion.

Mr. Rowland, Oilman Getty’s representative, read a letter to the chairman setting forth that the Getty interests, “having the largest single investment” in Tide Water, approved of themanagement’s efforts to effect operating economies and tax savings, but opposed the form of the merger agreement. Disapproval was voiced of 1) the directors’ rights to determine conversion privileges and price of 873,000 shares of unissued preferred stock, and 2) “deprivation of rights which should belong to the stockholder,” namely, the ability to vote annually on directors. Unperturbed, President Humphrey queried: “Does that mean you are voting against the merger, Mr. Rowland?” Answer: “We’re not voting.”

A stockholder on the other side of the room asked: “How much preferred and common stock do the directors own?” President Humphrey, pointing to a big stack of ledgers under the table, replied: “That’s difficult to say. The books are here for inspection.” Adjusting his horn-rimmed glasses, he read “these figures from our treasurer”: Tide Water’s estimated net income for the year, $11,000,000. Available for common stock dividends, $1.26 per share. Last year the profits on common were 73¢ per share.

The vote on the merger was called for, ballots issued and collected, proxies tabulated. Result: for, 5,318,107 shares; against, 50; not voting, 782,328 (Getty interests); absent 631,003.

Said Lawyer Rowland to Oilman Humphrey after the meeting broke up: “Thanks for letting me read our statement.” Replied Mr. Humphrey: “That’s all right. Sorry you’re not with us.”

It was not likely that Oilman Getty would soon be “with” Tide Water directors on business matters. Last year Mission Corp., whose management is substantially the same as Tide Water’s, changed the date of its annual stockholders’ meeting from January until May 1937—after Tide Water’s annual meeting at which elections will be held. When Mission stockholders finally do meet, says Oilman Getty, the present directors will be voted out and no longer will Mission votes be cast against him at Tide Water meetings.

Actually the Mission votes have had nothing to do with Mr. Getty’s lack of success at Tide Water meetings. Whatever his own feeling may be, an overwhelming majority of the other Tide Water stockholders and more than 50% of Tide Water stock, exclusive of the Mission holdings, have consistently supported the Humphrey management.

*Mission Corp. was founded New Year’s Eve 1934 by Standard Oil of New Jersey, the entire issue of Mission stock (1,399,000 shares) being exchanged for 1,128,000 shares of Tide Water Associated and a big block of stock in Skelly Oil Co. then held by Standard. Subsequently Standard distributed Mission shares to its stockholders, about 45% of which Getty promptly bought up.