Wolfson Takes a Round

To Louis Wolfson it was a key round in his fight for control of Montgomery Ward & Co. The Illinois Supreme Court ruled in a suit filed by Wolfson that Ward's staggered-director system, by which only three of the nine directors were elected each year, is unconstitutional. Thus the highest court in the state of Illinois upheld a lower court decision (TIME, Feb. 14) that all nine Ward directors must be elected each year, and wrecked Chairman Sewell Avery's built-in majority (i.e., six directors with unexpired terms) on the company's board of directors. The staggered-director system overturned by the court violated the Illinois Corporation Act section on cumulative voting, i.e., a stockholder may cast one vote for each member of the board of directors or concentrate all the votes for one director. The purpose of cumulative voting, said the court, is "to afford a minority protection in proportion to its voting strength." But the staggered system cuts this protection. Thus, if all nine members of the board are elected each year, a minority holding 49% of the stock could elect only four. But if only three are elected every year, the minority "would be able to elect only one director at each election and could never have more than three directors on the board at one time." The traditional right of a majority is also "impaired," since the majority would have to "wait for two or three years" to get control of the company. Claim & Counterclaim. Wolfson's court victory was no proof that he would win the proxy fight. Ward President Edmund Krider, who said that the company had spent $125,000 on the fight so far, boasted that Avery had proxies for "well over 51% of the 6,700,000 shares outstanding." Therefore, said Krider, "There is no chance that Mr. Wolfson and his backers will elect a majority." In Chicago's LaSalle Street, the betting gave Wolfson one or two seats on the Ward board, four at the most. The reason : brokers and investment counselors, who influence large blocks of stock held by their customers, have been scared off by Wolfson's swooping inroads on other corporations and by his latest proxy-fight tactics, e.g., showcasing baseball players and football coaches, making extravagant promises of dividends, etc. "Big Fat Lie." In brokerage houses, the report persisted that Avery had got the proxies of investment trusts and other large stockholders on his promise to step down from the company's chairmanship after he wins the fight, and turn Ward's over to new, outside management. But Avery's closest backers denied the buzzing rumor. Said one: "Personally, I don't think he's ever going to resign." As the showdown at Ward's annual meeting neared this week, Wolfson, who two months ago had been singing victory hymns, changed to a more modest tune. Instead of predicting a majority of the nine-director board, Wolfson, who admitted that he has already spent $500,000 in his proxy battle to win control, now said: "All I can say is I have four directors ... I hope to have the fifth and the sixth, but I actually have only four." When a newsman asked about Krider's claim of 51% of Ward proxies, Wolfson scoffed, "Krider knew he was telling nothing but a big fat lie." Yet Wolfson started conditioning his followers for possible defeat by hauling out a wait-till-next-year sign. Said he: "Nineteen fifty-six will be a different story now that we've got rid of the staggered-director system . . . Mr. Avery is an 81-year-old man. He can't live forever."

This file is automatically generated by a robot program, so reader's discretion is required.