The CAPUR Crusade

...In its public relations, CAPUR had remarkable success...

...I have lost more battles than I have won, but I am always mindful of a statement I read during one of our community efforts: Neighborhood groups seldom achieve their goals, but they do succeed in moderating the thrust of their adversaries...

...May 21, 1910 TOWERING GIANT The American oil industry is one of the towering giants of the national economy...

...The Editors CONCENTRATION OF POWER Internally, the greatest threat to American democracy is the concentration of power in the hands of a few thousand men...

...There had been adverse publicity, but the company had weathered it...

...The proposed changes meant that a candidate would have to get more than 20 per cent of the votes instead of 7 per cent...

...But the really big problem was financial—where to find the money to pay the costs...

...On the 27th, CAPUR called a press conference and revealed that I had lost by a wide margin but, typical of all losers, I claimed a moral victory, asserting that the attention drawn by the campaign would tend to make the company more responsive to the public...

...Not that the officers and steering committee were inexperienced in campaigning...

...The only place to look for help was in the general purpose of the Securities and Exchange Commission statutes which were promulgated to provide some degree of fairness in cases of board election contests, and CAPUR went to Federal District Court alleging frustration of the purpose of the proxy rules...

...NSP began mailing its proxy material the third week in July, accompanied by a letter in which the company's chairman asserted: "I believe that the opponents' primary interest is to promote their own social and economic objectives and, if possible, impose them on you and your company...

...Then, on the evening of April 6, the press informed us that NSP had announced it would attempt to change the election rules...

...And NSP is no corporate babe in the woods...

...Hence NSP was free to set its own rates except where municipal charters provide for hearings on rate increases...

...Back in 1915, Walter Lippmann called attention to the shareholders' responsibility for the behavior of the companies in which they owned stock and the dilemma in which they were caught as they invested their money and found they had no effective means of controlling the use of that money...

...With one exception, we got our corporate lawyers far afield—from the Center on Corporate Responsibility in Washington...

...CAPUR lacked the money to pay for a survey, but we did determine that there was genuine confusion when the second proxy came from the company...

...We had known we would not get the big institutional shareholders...

...CAPUR was as representative a group of consumers and ratepayers as could have been assembled in a relatively short time, given the initial indifference of the middle class and the unequivocal loyalty of the upper class (with a few exceptions) to the corporate establishment...

...But none of us had experienced a proxy contest, no one anticipated the lengths to which NSP would go to defeat us, and it was not until we sought help among corporate lawyers that we learned how far the NSP tentacles reach into the legal community...

...Paul, appears to have such power and to have exercised it...

...Paul, and it has a near-monopoly elsewhere...

...The CAPUR proxy was different...

...but, to their credit, they hung in to the end...

...Its story was told from coast to coast...

...And while the writer of the letter admitted that there might be adverse publicity, still ". . . you would be a hero to the managements of other companies who are harassed by similar groups and I suspect the SEC would welcome such a suit...

...They run our giant corporations, banks, and insurance companies, command capital, publish the newspapers and magazines of mass circulation, and control the radio and television stations of the country...

...Exactly one year earlier, on January 15, 1973, I was interviewed by the Coalition to Advocate Public Utility Responsibility (CAPUR) as one of its potential nominees to the board of Northern States Power...

...its influence in the field of foreign policy is often decisive...

...It appeared to be a major victory for us, and it was—except for the concession on staggered terms...

...After closing its book early this year, the steering committee voted to dissolve, but member groups are as sedulous as ever in their concern for consumer and environmental problems...

...Somehow we limped along...

...It knows that the public memory is short and that groups like CAPUR may come and go but the company, like the river, goes on—perhaps not forever— but for a long time...

...Always the message was the same—to throw away the CAPUR proxy and send the "orange card," the company's proxy, back...

...It is the censorship of Business...

...But that 14 per cent fell to 4 per cent as the results of the second mailing were tallied...

...First the protagonists must be identified...

...CAPUR showed elected officials that there is need for legislative action...

...Its resources and profits are prodigious...

...many of them, like me, had worked in political campaigns and public cause groups...

...The letter advised NSP to deny access to the shareholders list to CAPUR shareholders who might request it in order to "force [CAPUR] to bring suit . . . you could get the case transferred to a Federal court shortly with the possibility that the SEC might join in...

...of two directors who would "add new viewpoints" to its board...

...CAPUR accepted the offer...

...This concern arose from one of the more widely publicized incidents in the CAPUR contest, involving the State Board of Investment: The state treasurer had automatically voted the state proxies for 203,800 shares of NSP stock for management...

...THE WAY WE SAW IT These excerpts from articles and editorials published during The Progressive's sixty-five year history have been edited only to achieve brevity...

...All charges of alleged violations were dropped and the company agreed to handle and mail our proxy material—for a fee, of course...

...CAPUR pricked the conscience of small shareholders who had not previously recognized that they had responsibilities beyond cashing their dividend checks...

...for or against the bylaw change...

...it may have been its directness in dealing with the press and the public...

...It reasoned that Alpha Smaby is a former member of the Minnesota legislature with long experience as a citizen activist in community and political affairs...

...Whatever it was, it gained and held public attention any experienced politician might envy...

...There will be such in every generation...

...Legal precedent overwhelmingly suggested that a corporation could do anything with its bylaws that a majority of its stockholders approved, so long as it acted in accordance with state law...

...In this country we have a censorship quite as effective, though perhaps not so sweeping...

...And in that year CAPUR and Northern States Power waged a battle that is instructive for those who seek a measure of public responsibility in public utility management...

...But a newspaper editor could not be contradicted when he reminded us that he had had no voice in selecting the "public advocate" candidate and that I was not necessarily his representative...

...And we agreed...

...I have served as a member of the Minnesota legislature, and I have been among the leaders of innumerable campaigns, ranging from Adlai Stevenson's bid for the Presidency to George McGovern's, from community battles against freeways to the antiwar movement...

...Accordingly the Council called together a number of leaders of community organizations, most of them consumer and environment oriented, and proposed a joint effort to screen and select likely nominees, submit their names to NSP, and—should the company refuse to elect any of them—choose one as a candidate and challenge the firm in a proxy contest...

...We had to rely on small donations, on fund raisers with contributions of $10 or $15...

...They had listened politely as we put our case, and some of them tacitly agreed that NSP had acted in an "unseemly" manner in opposing us and that one "different" voice on the board would hardly destroy the company...

...Indeed, that latter cost is still a source of embarrassment to me...

...There was a motive in this prodigal madness: It gave management an opportunity to put the worst possible interpretation on Judge Lord's ruling,, deliberately misrepresenting it by claiming NSP could not mail its proxy material...

...CAPUR dared to challenge that corporation, to demand a halt to its arrogant behavior and show it how it might improve its public image...

...Whether another cause will create another CAPUR is for the future to answer, but what CAPUR represented, what it attempted, and what it did should serve as inspiration for other groups...

...The final count was known well in advance of September 28, the date set by NSP for announcing the vote...

...Most were small and far from affluent, and the steering committee which represented them was young, unfamiliar with the ways of the corporate world, and without any experience in proxy contests...

...And the changes NSP proposed were clearly permitted by statute...

...the proxy mailing alone added up to $15,000, and redeeming the proxies at the post office cost $2,500— far more than had been anticipated...

...This is not a history of that battle, nor an exercise in casuistry...

...We learned, too, that many shareholders did not understand that merely by returning management's proxy, signed, they were voting for the company...

...since only some 7 per cent of the votes were needed to elect a member to the fourteen-man board (and it was all male), and since there was provision for cumulative voting, it might be possible to elect one public advocate...

...We felt a great sense of relief...

...And how could we be surprised, aware as we were of the interlocking directorships...

...The proffered terms included the date of September 12 for the annual meeting, no change in election rules except for a reduction in the size of the board from fourteen to twelve, the payment of court costs and attorneys' fees incurred by CAPUR, totaling about $24,000, and putting the proposal for staggered terms to a vote in this election but postponing the effective date, if approved by the shareholders, until 1974...

...The judge's ruling meant that the annual meeting, set for May 9, 1973, would have to be postponed, and the company made that move immediately...

...Georgeson & Co...

...CAPUR was born in 1972, conceived by the Council for Corporate Review, a watchdog organization which, at the NSP annual meeting in May 1972, had succeeded in getting a vote by shareholders on a proposal to place "two public interest advocates" on the board of the company...

...We protested as vigorously as we could and got a modicum of publicity, but not until we announced that we would initiate a lawsuit did we receive sympathetic attention from the public and the media...

...Just how one board member could destroy continuity of experience was left for the public to fathom...

...The classified—staggered terms— board which NSP lusted after is being regarded with a critical eye as state lawmakers study California's statutes requiring annual election of corporate boards...

...On that proxy there was only one place to make the traditional "x" sign and that was on the matter of staggered terms for board members...

...Because the company reacted so strongly and wrongly, the proxy contest came to life...

...And what it learned should be carefully noted by those who would emulate it...

...Its top staff is not young...

...And are the large institutional shareholders, the banks and insurance companies, meeting their fiduciary responsibilities to their investors as they continue their unswerving support of corporate management...

...Neophytes that we were, we were probably too open, too candid...

...On both state and Federal levels there is talk of limiting the amount of money a corporation can spend in a proxy campaign, and of reducing the voting strength of large shareholders by weighted voting procedures...

...CAPUR-type groups hope they can persuade Governor Wendell R. Anderson to appoint at least one nominee of their choice to the Commission...

...In Minnesota there is consideration of a legislative policy for voting state proxies...

...But it did it the expensive way, by sending letters to all 100,000 shareholders at a cost of at least $17,000...

...Aside from church-oriented groups, where the Council for Corporate Review had established rapport, there was no large contribution from any organization...

...its impact on domestic political life is felt on every level of government...

...Some legislators are asking whether corporate lobbyists should be allowed to buy tickets to political fund raising events...

...Had all the members of CAPUR known how much money would be needed, there might have been fewer representatives on the steering committee...

...We were off to a dull start, and it was only because our steering committee was so young and optimistic that the movement went on...

...Unless an author's name is appended, the material appeared as editorial comment...

...it is composed of older men who have come up through the ranks...

...As for the third party in the contest, the candidate CAPUR selected, I am a sixty-three-year-old grandmother, scarred by many a community and political battle...

...only one municipality, St...

...That is why under our system every generation must fight for the kind of society and economy it desires to have, and the standards of the government it is to live under...

...It focused public attention on a giant corporation and pointed out that the company had special responsibilities because of the special privileges which had been granted to it by the people...

...It should have included community improvement associations, women's groups, and labor unions...

...Then, astounding news...

...Newsmen regarded the settlement as a clear victory for us and we scored, again, in the publicity as we called attention to NSP's impulsive and erratic behavior, hardly befitting "The Giant of the Northland," and to the company's disregard of costs which would have to be met by the ratepayers...

...In the course of the trial discovery, CAPUR became privy to documents and letters which, hitherto, had been hidden in NSP's files...

...We had 14 per cent of the votes before the second proxy mailing was counted, and even the experts who had been engaged to make the final count were of the opinion that we would win...

...The response by the shareholders—more than 9 per cent of the votes favored the proposal—was amazingly positive compared to other attempts to determine the mood of investors...

...Former Chief Justice Earl Warren August 1955...

...I suggested we ask shareholders to place their own stamps on the envelopes containing their proxies in order to save us money...

...nor, probably, would our proxy materials have been cleared in time for mailing...

...But organized labor was indifferent, even hostile, and the middle class, the backbone of most community and women's organizations, showed little interest in CAPUR's cause, at least in the beginning...

...Northern States Power is a quasi-public utility with a service area comprising much of Minnesota and parts of Wisconsin, and North and South Dakota...

...It was a major admission from a corporation which for nine months had bungled its way through a proxy contest, giving the impression of such insecurity that one could only wonder what its reaction would have been to a challenge from another large corporation...

...But on the last point they were even with NSP, for in the sixty-three years of the company's existence there had been no election contests...

...Lippmann's advice was simple and direct: Organize with other investors of like mind...

...Newspapers, magazines, television, and radio turned their spotlights on CAPUR, and the public—notably that great middle class which, initially, had been bored with the whole business—came to our support...

...He issued a temporary restraining order on April 12 and a preliminary injunction on April 23, prohibiting NSP from mailing proxy materials under the proposed new rules...

...That was what CAPUR was all about...

...Can some other system be devised...

...we had spent hours on the telephone with the Securities and Exchange Commission, trying to conform to its regulations and to persuade it that we had no ulterior motives...

...It was on April 6 that NSP blew it...

...At a press conference in mid-February 1973, where CAPUR announced that it would attempt to place me on NSP's board, the newsmen almost yawned...

...A confusing maze of interlocking directorships involving banks, insurance companies, supermarkets, railroads, and investment firms raises serious questions of conflict of interest on the board...

...The title it has given itself, "The Giant of the Northland," is apt...

...The company has had numerous confrontations with the public over rate policies, promotion programs, pollution, termination of service, plant siting, and its obsession with nuclear power...

...Until 1973, five of its fourteen board members were staff men...

...I further believe that, if they succeed, your company's growth would be impeded, your financial interests would be adversely affected, and management could not continue to administer the affairs of your company effectively...

...Had it not been for their encouragement and help, we probably would not have taken NSP to court...

...Obviously, even with cumulative voting, such a goal would be unreachable for a minority candidate...

...Our original estimates of costs were naively low...

...Not only did our supporters fail to comply with our request, but the opposition responded by jamming the envelopes with unsigned proxies and metal pieces and heavy cardboard in order to increase the amount of postage we would have to pay...

...it provided for the traditional sign, for or against Alpha Smaby...

...after all, it had never happened before...

...When consumer-minded legislators discovered this and made a public protest, everyone, including the governor, got into the act...

...It was a unique phenomenon, and I am grateful for having been a part of it...

...It took NSP itself to provide the spark we needed...

...But they voted, solidly, for management, and the bankers among them advised the foundations and individual investors whose shares they held in trust that they, too, should support management...

...Then NSP began to pour it on in a nationwide telephone campaign, again utilizing Georgeson & Co., to reach all shareholders...

...The shareholders, when the final choice was made, came down solidly on the side of dividends rather than principles...

...had been right...

...Were the governor to accede to their wishes, one more victory would be chalked up for grass-roots organizations...

...Finally, CAPUR's efforts suggest that the proxy method of voting is not in the best interests of small shareholders, particularly in view of their inability to control annual meetings...

...our attorney had been negotiating with NSP's legal counsel regarding the mailing of our proxy material and arrangements for the annual meeting...

...In his ruling, Judge Lord referred to NSP as "a provider of vital public services for a four state area" and a "unique corporation in that its position imposes upon it certain public responsibility and public duty...

...they channel the investments, direct the production of goods, seek to shape public opinion and influence our political parties...

...The case was heard by Judge Miles Lord...

...That such passion could be generated by one candidate seeking one board seat out of twelve is frightening testimony to the importance of dividends in the minds of shareholders...

...Karl E. Meyer May 1957 PROGRESS AND SOCIALISM There are still among us those who would call it [Robert M. LaFollette's "Wisconsin Idea"] socialism...

...Those changes included reducing the board from fourteen to twelve members and staggering their terms...

...There was considerable naivete in our whole operation...

...NSP helped, of course, but there was a quality in CAPUR which appealed to the public and the media...

...its special tax privileges have no parallel in the business community...

...It enjoys an absolute monopoly in supplying electric power to the metropolitan area of Minneapolis and St...

...T. K. Quinn March 1957 CENSORSHIP In Russia the autocratic government officials decide what may be printed in the press...

...It was an ambitious idea...

...It depends heavily on fossil fuels, but it has turned increasingly toward nuclear plants, paying little or no heed to other potential sources...

...CAPUR's challenge to NSP did not have a propitious beginning...

...In fact, the material could have been mailed under the traditional rules, and CAPUR seized the opportunity for more press coverage which would embarrass the company...

...The most interesting of these papers was a letter to NSP's chairman from a New York firm NSP had hired, Georgeson & Co., specialists in proxy contests, no less...

...In retrospect, it seems clear that CAPUR's base should have been broader...

...What, then, did CAPUR accomplish...

...it may have been its youth, its refreshing naivete...

...On the heels of the telephone blitz the company made a second proxy mailing, the better to "counteract" CAPUR's appeal...

...On the other side it was rumored that the Securities and Exchange Commission would send a top staff member to testify against us and that our alleged violations of the Commission's regulations would have total exposure...

...It may have been its audacity in taking on a giant corporation...

...The purpose, arrogantly stated, was "to make it more difficult for small groups of shareholders who oppose management to gain representation on the board," and "to assure further continuity of experience...

...the proposal would be submitted for an immediate vote at the annual meeting and, if approved, would apply to the current election...

...And almost all of those who were in opposition told us what they thought of us and where we should go, with comments ranging to the obscene...

...with one exception the others came from big business and industry...

...There is a new concern about interlocking directorships and possible conflicts of interest...

...The ten groups ranged from tenants' unions to the Minnesota Environmental Control Citizens' Association and the Minnesota Public Interest Research Group...

...For weeks we had been meeting with organized groups, with students, with anyone who would listen...

...The vote so impressed NSP's chairman that he invited suggestions of names for such board positions, and the Council took him at his word...

...Or should there be public ownership of the production and transmission of electric power...

...That statement made me something of a minor prophet, in view of NSP's announcement on January 15, 1974, that it had elected two more directors, and the comment of the company's vice president for environmental and consumer affairs that "the Smaby campaign encouraged the company to seek new viewpoints on its board...

...And it was testimony, too, to management's understanding of the shareholder mentality: suggest that earnings will be endangered, and the "enemy" will be assaulted...

...They decide largely what people may read or see...

...In its 1974 session the Minnesota legislature provided for two additional members on the PSC and gave it statewide regulatory authority over electric power rates...

...Suggestions have been made that the legislature appoint ombudsmen-type members to corporate boards, giving them veto power...

...And what of CAPUR now...

...After all, we were challenging a corporation with which their own people were involved as board members or through those astounding interlocking directorships...

...It is, rather, an attempt to show how a grass-roots organization of ratepayers—CAPUR—with large dreams and a small budget, challenged a billion-dollar utility, NSP, in a proxy contest which stretched out for nine months and which was, in fact, a pioneer effort by a group of ratepayers seeking a voice in the decision-making of a huge corporation...

...While Wisconsin monitors rates through its Public Service Commission, there was no such regulatory commission in Minnesota until this year...

...There were those among us who felt we were deserting a prime principle by agreeing to that part of the settlement, but there was little enthusiasm for another argument...

...What caused the drastic change is a subject for speculation...

...It employs skilled lobbyists...

...The taxes it pays give it economic and political clout...

...After days of front page headlines the problem was resolved by withdrawing the proxies and not voting, a decision that was interpreted by the press as another CAPUR victory...

...those who refuse to make any distinction between socialism and social progress...

...Neither they nor the public were carried away by me as the candidate or by CAPUR's criticism of NSP...

...Only hours before the trial was to begin, NSP offered to settle out of court...

...Most recently, attention has been focused on the state Public Service Commission as it conducts hearings on rate increases requested by Northwestern Bell Telephone...

...We learned early that the largesse of wealthy suburbanites, so often available to "causes," was not going to be shared with us...

...As a consequence, it may be that the motives and actions of the directors and officers must be scrutinized all the more carefully to insure that NSP's obligations to the public are carried out...

...Judge Lord set the trial date for the last week in June, and CAPUR announced that it would seek punitive damages as well as a permanent injunction...

...those whom Lincoln described as being unable to distinguish a horse chestnut from a chestnut horse...

...Still another source of money was not within our reach: The labor unions, though the business agents in one county encouraged us verbally, gave us not a dime...

...The decision to take NSP to court was not made lightly...

...It was that mailing that did us in...

...So CAPUR was incorporated by those groups which had had confrontations with NSP over rate discrimination, termination of service, plant siting, air and water pollution, radioactive discharges, promotion policies, and other issues...