1. See, for example, Brinkley, Alan, The End of Reform: New Deal Liberalism in Recession and War (New York, 1995)Google Scholar; Goodwin, Doris Kearns, No Ordinary Time: Franklin and Eleanor Roosevelt: The Home Front in World War II (New York, 1994), 43Google Scholar; and Leuchtenburg, William E., Franklin D. Roosevelt and the New Deal, 1932–1940 (New York, 1963), 252–274, 347.Google Scholar

2. Basil Rauch was the first to make reference to a “first” and “second” New Deal to describe policymaking during President Roosevelt's first term in office (The History of the New Deal, 1933–1938 [New York, 1944]Google Scholar). The first New Deal consisted of reforms enacted prior to the 1934 congressional elections, and these focused on economic planning (AAA, NRA, TVA). The second New Deal happened after the 1934 elections and was characterized by government regulation of business, the expansion of social welfare provision, and recognizing organized labor through the passage of the Wagner Act (see Schlesinger, Arthur M. Jr., The Age of Roosevelt: The Coming of the New Deal [Boston, 1959]Google Scholar, and The Politics of Upheaval [Boston, 1960]). A more recent group of scholars has noted a “third” New Deal, which began in FDR's second term (see, for example, Karl, Barry, The Uneasy State: The United States from 1915 to 1945 [Chicago, 1983]Google Scholar, chap. 8; and Jeffries, John, “A ‘Third New Deal’? Liberal Policy and the American State 1937–1945,” Journal of Policy History 8, no. 4 [1996]: 387–409)CrossRefGoogle Scholar. I chose to divide policymaking at the SEC into two periods, an early and late New Deal. The early New Deal comprises the period up to 1937, and the period after this I refer to as the late New Deal. The third New Deal and the late New Deal cover the same time periods, 1938 to 1945.

3. It is difficult to measure the exact influence the shareholder proposal rule has had on how corporations are governed, but the following examples highlight a number of successes. Through the use of the rule, shareholder proponents encouraged a number of corporations to adopt cumulative voting and shareholder ratification of auditors in the 1940s and 1950s (see Gilbert, Lewis D., Dividends and Democracy [Larchmont, N.Y., 1956], 182–184, 218)Google Scholar. After a social shareholder action called Campaign GM in 1970, General Motors appointed Reverend Leon Sullivan to its board of directors and established a committee of ecologists to monitor GM's impact on the environment. This action took place despite the fact that two related shareholder proposals were voted down.

Although the vast majority of proposals are voted down, the shareholder proposal rule has value in that it creates debate and dialogue between shareholders and management. Rather than have shareholder proposals clutter their proxy statements, some corporate managers negotiate agreements with shareholders. Others are, over time, persuaded of the benefits of certain proposals and adopt them, while some corporations staunchly oppose every shareholder proposal. The reason shareholder proposals are seldom adopted by shareholders is that the board of directors recommends that shareholders vote against the proposals. Corporate management supplies written responses that suggest proposals, often regardless of their merit, are unnecessary. For information about shareholder proposals, see, for example, Emerson, Frank D. and Latcham, Franklin C., Shareholder Democracy: A Broader Outlook for Corporations (Cleveland, 1954)Google Scholar. Graves, Samuel B., Rehbein, Kathleen, and Waddock, Sandra, “Fad and Fashion in Shareholder Activism: The Landscape of Shareholder Resolutions, 1988–1998,” Business and Society Review 106, no. 4 (2001): 293–314CrossRefGoogle Scholar; and Vogel, David, Lobbying the Corporation: Citizen Challenges to Business Authority (New York, 1978)Google Scholar. I use the words shareholder and stockholder interchangeably.

4. For examples of institutional theories of policymaking, see Finegold, Kenneth and Skocpol, Theda, State and Party in America's New Deal (Madison, 1995)Google Scholar; March, James G. and Olsen, Johan P., “The New Institutionalism: Organizational Factors in Political Life,” American Political Science Review 78 (1984): 734–749CrossRefGoogle Scholar; Skowronek, Stephen, Building a New American State: The Expansion of National Administrative Capacities, 1877–1920 (New York, 1982)CrossRefGoogle Scholar; and Wilson, James Q., Bureaucracy: What Government Agencies Do and Why They Do It (New York, 1989).Google Scholar

5. Skocpol, Theda and Finegold, Kenneth, “State Capacity and Economic Intervention in the Early New Deal,” Political Science Quarterly 97 (Summer 1982): 255–278CrossRefGoogle Scholar. See also Workman, Andrew A., “Creating the National War Labor Board: Franklin Roosevelt and the Politics of State Building in the Early 1940s,” Journal of Policy History 12, no. 2 (2000): 233–264.CrossRefGoogle Scholar

6. See, for example, McCraw, Thomas K., Prophets of Regulation (Cambridge, 1984)Google Scholar; idem, “With Consent of the Governed: SEC's Formative Years,” Journal of Policy Analysis and Management 1 (1982): 346–370; Seligman, Joel, The Transformation of Wall Street: A History of the Securities and Exchange Commission and Modern Corporate Finance (Boston, 1995).Google Scholar

7. By the early 1920s, the federal government had virtually abandoned any role in administering corporate regulation; increasingly it relied on trade associations to develop standards for their industries. By the late 1920s, voluntarism became the preferred policy approach of political elites, and those who believed in more statist approaches had less influence. See Davis, G. Cullom, “The Transformation of the Federal Trade Commission, 1914–1929,” Mississippi Valley Historical Review 49 (1962): 437–455CrossRefGoogle Scholar; Himmelberg, Robert F., The Origins of the National Recovery Administration: Business, Government, and the Trade Association Issue, 1921–1933 (New York, 1993), xiGoogle Scholar; Landis, James, The Administrative Process (New Haven, 1938), 113Google Scholar; Seligman, The Transformation of Wall Street, 49.

8. See, for example, McCraw, “With Consent of the Governed”; Seligman, The Transformation of Wall Street; and Nicholas, Philip A. Jr., “The Securities and Exchange Commission and the Shareholder Proposal Rule: Agency Administration, Corporate Influence, and Shareholder Power, 1942–1998” (Ph.D. diss., University at Albany, 2002), 67–73.Google Scholar

9. Leiserson, Avery, Administrative Regulation: A Study in Representation of Interests (Chicago, 1942 [reprinted 1969]), 215–220Google Scholar; McCraw, “With Consent of the Governed,” 357; idem, Prophets of Regulation, 198–200; Seligman, The Transformation of Wall Street, 184, 188.

10. Sobel, Robert, N.Y.S.E.: A History of the New York Stock Exchange, 1935–1975 (New York, 1975), 12Google Scholar; testimony of Congressman Fiorello La Guardia (DN. Y.), in Hearings before the United States Senate Committee on Banking and Currency, 72d Cong., 1st sess., 22 April 1932, 440–64.

11. In the early 1930s, floor traders and specialists held a majority of the Board of Governors seats on the New York Stock Exchange, and commissioned brokers had less influence. The brokers favored a new governing structure that would give them proportional representation on the Board of Governors and the NYSE committees, and also support other reforms to strengthen public confidence. This split among NYSE members was cultivated by William O. Douglas. In a speech he implied that the SEC would work with members of the NYSE who wanted reform. By October 1937, brokers on the NYSE began to cooperate with the SEC, and this led to a number of changes in how the NYSE was governed (see Seligman, The Transformation of Wall Street, 161, 173).

12. McCraw, “With Consent of the Governed,” 349.

13. Chatov, Robert, Corporate Financial Reporting (New York, 1975), 171, 172.Google Scholar

14. Ibid., 106–10; Seligman, The Transformation of Wall Street, 108, 551.

15. De Bedts, Ralph F., The New Deal's SEC: The Formative Years (New York, 1964), 99, 106Google Scholar; Koskoff, David E., Joseph P. Kennedy: A Life and Times (Englewood Cliffs, N.J., 1974)Google Scholar; Schlesinger, The Coming of the New Deal, 469. In 1950, the president of the United States was given authority by Congress to appoint a chairman of the SEC.

16. De Bedts, The New Deal's SEC, 92, 103.

17. Douglas, , Go East Young Man (New York, 1974), 266.Google Scholar

18. In a letter to FDR recommending that Healy be reappointed to the SEC, Landis noted how Healy had strong viewpoints and frequently dissented on many decisions reached by the other commissioners. “I feel that if his viewpoint had carried in several significant instances the work of administration would have been seriously clogged due to his failure adequately to appreciate the exigency for practical and workable methods of control.” Landis to FDR, 6 May 1936, President's Secretary's File Box 164, Folder Securities and Exchange Commission, FDR Library.

19. De Bedts, The New Deal's SEC, 93; Douglas, Go East Young Man, 266.

20. Lash, Joseph, Dealers and Dreamers: A New Look at the New Deal (New York, 1988), 195Google Scholar; McCraw, Prophets of Regulation, 175, 185–203; Ritchie, Donald A., James M. Landis: Dean of the Regulators (Cambridge, 1980), 45CrossRefGoogle Scholar; Tucker, Ray “Wall Street's Boss Talks of His Job,” New York Times Magazine, 6 10 1935, 3, 14.Google Scholar

21. Beschloss, Michael R., Kennedy and Roosevelt: The Uneasy Alliance (New York, 1980), 93Google Scholar; Seligman, The Transformation of Wall Street, 2, 21, 108; Chatov, Corporate Financial Reporting, 106–10; Khademian, Anne, The SEC and Capital Market Regulation: The Politics of Expertise (Pittsburgh, 1992), 40Google Scholar; Pecora, Ferdinand, Wall Street Under Oath (New York, 1939).Google Scholar

22. Chatov, Corporate Financial Reporting, 110.

23. Perkins, Frances, The Roosevelt I Knew (New York, 1946), 360, 380, 385Google Scholar. See also Schlesinger, The Coming of the New Deal, 535, 536, and Skowronek, Stephen “Franklin Roosevelt and the Modern Presidency,” Studies in American Political Development 6 (Fall 1992): 332, 333.CrossRefGoogle Scholar

24. Douglas, William O., “Directors Who Do Not Direct,” 47 Harvard Law Review (06 1934): 1305–1334CrossRefGoogle Scholar; Douglas, Go East Young Man, 258. William O. Douglas believed that in order for shareholders to hold corporate directors more accountable, they needed a strong advocacy organization, not just government mandates on the private sector. No organization capable of doing this would form in the United States in the 1930s or 1940s. A number of shareholder activists, such as Lewis Gilbert and Wilma Soss, worked to improve corporate governance, but their small numbers and relatively weak organization did not give shareholders the ability to monitor or investigate the more than 1,000 publicly traded corporations.

25. Douglas, William O., “Protecting the Investor,” 33 Yale Review (03 1934): 529.Google Scholar

26. Seligman, The Transformation of Wall Street, 165.

27. Douglas to FDR, 12 April 1939, SEC Chairman Files Box 32, Folder White House—The President, Record Group 266, Records of the SEC, National Archives II.

28. Douglas to FDR, 18 February 1938, Chairman Files Box 32, Folder White House General.

29. Volkomer, Walter E., The Passionate Liberal: The Political and Legal Ideas of Jerome Frank (The Hague, 1970), 9–13CrossRefGoogle Scholar. Volkomer noted that George Peek, the director of AAA, opposed Frank's appointment as General Counsel because he thought that Frank was too liberal and would not support the farm owners and middlemen.

30. Frank to FDR, 20 November 1939, Chairman Files Box 33, Folder Memoranda—Chairman; Frank to FDR, 13 June 1939, Chairman Files Box 32, Folder White House—The President; Seligman, The Transformation of Wall Street, 182, 183, 217.

31. Emerson, Thomas I., Young Lawyer for the New Deal: An Insider's Memoir of the Roosevelt Years (Savage, Md., 1991), 142–145Google Scholar; Lynch, David, The Concentration of Economic Power (New York, 1946), 47Google Scholar; Schwarz, Jordan A., The New Dealers: Power Politics in the Age of Roosevelt (New York, 1993), 147–148Google Scholar; Seligman, , The Transformation of Wall Street, 237; “Eicher Moves Up,” Business Week, 19 04 1941, 18–19.Google Scholar

32. See, for example, Joel Seligman's account of the legislative history of the Investment Company Act of 1940, in Transformation of Wall Street, 222–31.

33. Chapman, Richard N., The Contours of Public Policy, 1939–1945 (New York, 1981), chap. 4Google Scholar; Patterson, James T., Congressional Conservatism and the New Deal: The Growth of the Conservative Coalition in Congress 1933–1939 (Lexington, Ky., 1967)Google Scholar; Riddick, Floyd M., “The First Session of the Seventy-Eighth Congress (January 6, 1942–December 21, 1943),” American Political Science Review 38 (04 1944): 302Google Scholar. In the four congressional elections preceding 1938, Democrats had won seats in both chambers. In 1938, the Republicans won 8 seats in the Senate (23 total), and 89 in the House (189). In the 1942 congressional elections, Republicans picked up 47 seats in the House and 10 in the Senate. The partisan breakdown of the House was 222 Democrats to 209 Republicans with 4 third-party members, and 57 Democrats to 38 Republicans and 1 third-party Senator.

34. Emerson, Young Lawyer for the New Deal, 137; Seligman, The Transformation of Wall Street, 230.

35. Rowe to FDR, 15 April 1941, Joseph Lash Papers, Box 68, Folder 4, FDRL.

36. Seligman, The Transformation of Wall Street, 238.

37. Ney, Richard, The Wall Street Gang (New York, 1974), 65.Google Scholar

38. Seligman, The Transformation of Wall Street, 183, 218–22; Rowe to FDR, 15 April 1941, Joseph Lash Papers, Box 68, Folder 4, FDRL; Geisst, Charles R., Wall Street: A History (New York, 1997), 261–264Google Scholar; Who's Who in the East (Chicago, 1951), 827.Google Scholar

In describing Robert O'Brien's appointment as associate director of the Public Utilities Division to President Roosevelt, SEC Chairman Jerome Frank noted how O'Brien was “a two-fisted former Assistant General Counsel” and “one of the boys we have brought up at the Securities and Exchange Commission. He has been with us since the beginning, in jobs of steadily increasing importance and responsibility.” Frank to FDR, 13 June 1939, Chairman Files Box 32, Folder White House—The President.

39. Rowe to FDR, 15 April 1941, Joseph Lash Papers, Box 68, Folder 4, FDRL. Senator Robert F. Wagner (D-N.Y.) to FDR, 1 March 1941; Biography of Edmund Burke Jr.; Rowe to FDR, 24 June 1941, all found in FDR Official File 1060, Box 11, Folder Burke, Edmund Jr., FDRL.

40. See, for example, Berle, Adolf A. Jr. and Means, Gardiner, The Modern Corporation and Private Property (New York, 1932).Google Scholar

41. “Bethlehem Steel Adjourns Meeting,” New York Times, 12 April 1939, 33; “Bethlehem's Board Upheld at Meeting,” New York Times, 26 April 1939, 33.

42. Dean, Arthur H., “Non-Compliance with Proxy Regulations: Effect on Ability of Corporation to Hold Valid Meeting,” Cornell Law Quarterly 24 (06 1939): 483–532.Google Scholar

43. Purcell to Congressman Charles Wolverton (R-N.J.), 2 October 1942, Chairman Files Box 45, last folder (unmarked); John Davis to Purcell Chairman Files Box 41, Folder General Counsel Misc. Memos.

44. Hearings Before the Committee on Interstate and Foreign Commerce, House of Representatives, Seventy-Eighth Congress first session on H.R. 1493, H.R. 1821, H.R. 2019, 9–11 June 1943, 18; Chairman Files Box 45, last folder; Box 44, Folder Proxy Regulations; Box 52, Folder Material on Proxy Rules Revision.

45. Schram to O'Brien, 12 October 1942, Chairman Files Box 52, Folder Material on Proxy Rules Revision; “Summary of Comments of Corporations and Their Counsel on Suggested Changes in the Proxy Rules,” Box 52, Folder Material on Proxy Rules Revision.

46. Chairman Files Box 44, Folder Proxy Regulations, “Miscellaneous Comments by Various Persons Other Than Issuers.”

47. 1943 Hearings, 142–43; Chairman Files Box 44, Folder Proxy Regulations; Caplin, Mortimer M., “Shareholder Nominations of Directors: A Program for Fair Corporate Suffrage,” Virginia Law Review 39 (02 1953): 157CrossRefGoogle Scholar. Caplin implied that the business committee discouraged the rule that would have allowed shareholders to nominate directors.

48. See Securities and Exchange Act Release 3347, 18 December 1942.

49. See, for example, Chapman, The Contours of Public Policy, 191, 223.

50. Purcell to Wolverton, 2 October 1942, Chairman Files Box 45, last folder; 1943 Hearings, 17, 77, 89, 106, 184, 202–5, 237, 238, 272, 280; remarks of Representative Walter A. Lynch (D-N.Y.) in the Congressional Record (14 October 1942); “Sec's Philosophy Slated for Inquiry,” New York Times, 3 February 1943. In addition to the four members of Congress mentioned, a handful of other representatives opposed proxy reform or criticized Chairman Purcell and Milton Freeman at the congressional hearings.

51. Purcell to FDR, 31 December 1942, Chairman Files Box 38, Folder Confidential; Purcell to Sam Rayburn (D-Tex.), 17 December 1942, Chairman Files Box 44, Folder R; Representative Francis Myers (D-Pa.) to Commissioner O'Brien, 4 February 1943, Chairman Files Box 51, Folder Congressmen; W. H. Sommer to Purcell, 23 March 1943, Chairman Files Box 47, Folder Sm-ss.

52. The institutional forces that often constrained congressional conservatives regarding securities policy were FDR, powerful congressional supporters of the SEC like Sam Rayburn, and the SEC Chairman and other commissioners who kept in close contact with friends in Congress. It is difficult to conclude which of these forces were most responsible for holding congressional conservatives at bay regarding the SEC's proxy powers, but it appeared that Chairman Purcell and other commissioners worked to maintain support for the agency in Congress that would have made it difficult for any anti-SEC legislation to proceed (see sources in note 51, and Seligman, The Transformation of Wall Street, 236–38, for a slightly different view).

53. Memorandum from Freeman (undated) to the Commission, Chairman Files Box 44, Folder Proxy Regulations. 1943 Hearings, 180, 218, 263.

54. Chairman Files Box 45, last folder (unmarked) (undated).

55. Address of SEC Commissioner Robert H. O'Brien, “Stockholders and Corporate Management,”before the Conference Board,New York City,23 January 1943,Google Scholar 7, SEC Library.

56. “Comments of the New York Stock Transfer Association on Proposed Revision of Proxy Rules” (21 September 1942), Chairman Files Box 52, Folder Material on Proxy Rules Revision.

57. “Miscellaneous Comments by Various Persons Other Than Issuers,” Comment of Randolph Phillips, Chairman Files, Box 44, Folder Proxy Regulations; Comment of the New York Stock Transfer Association, Chairman Files, Box 52, Folder Material on Proxy Rules Revision.

58. Memorandum from Milton V. Freeman and Charles B. Collins to the Commission, 3 October 1942, Chairman Files Box 52, Folder Material on Proxy Rules Revision.

59. O'Brien, “Stockholders and Corporate Management,” 5. He was citing the stockholder proposals that had occurred over the past five years since the agency required corporations to disclose proposed actions of shareholders at company meetings in 1939.

60. O'Brien, “Stockholders and Corporate Management,” 3.

61. See, for example, Freeman, Milton V., “An Estimate of the Practical Consequences of the Stockholder's Proposal Rule,” University of Detroit Law Journal (04 1957): 555.Google Scholar

62. See, for example, Bernstein, Barton J., “The Conservative Achievements of Liberal Reform,” in Graham, Otis L. Jr., ed., The New Deal: The Critical Issues (Boston, 1971), 148.Google Scholar

63. For a discussion of how institutional and ideological theories of the state are not mutually exclusive, see Brinkley, Alan, “The Transformation of New Deal Liberalism: A Response to Michael Brown, Kenneth Finegold, and David Plotke,” Studies in American Political Development 10 (Fall 1996): 424.CrossRefGoogle Scholar

64. Brinkley, The End of Reform; Jeffries, “Third New Deal.”

65. See, for example, Jacobs, Meg, “‘How About Some Meat?’: The Office of Price Administration, Consumption Politics, and State Building from the Bottom Up, 1941–1946,” Journal of American History 84, no. 3 (12 1997): 910–941CrossRefGoogle Scholar; Karl, The Uneasy State, chap. 8; Wells, Wyatt, Antitrust and the Formation of the Postwar World (New York, 2002), 37–82; and Workman, “Creating the National War Labor Board.”Google Scholar

66. See, for example, Finegold, Kenneth and Skocpol, Theda, State and Party in America's New Deal (Madison, 1995)Google Scholar; March, James G. and Olsen, Johan P., “The New Institutionalism: Organizational Factors in Political Life,” American Political Science Review 78 (1984): 734–749CrossRefGoogle Scholar; Skowronek, Stephen, Building a New American State: The Expansion of National Administrative Capacities, 1877–1920 (New York, 1982)CrossRefGoogle Scholar; and Wilson, James Q., Bureaucracy: What Government Agencies Do and Why They Do It (New York, 1989).Google Scholar