Resolving the Subsidiary Director's Dilemma

Hastings Law Journal

Volumn 47, Issue 2, 1996, Pages 287-

  Gouvin, Eric J ^a  

^a NONE

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EID: 0042538963     PISSN: 00178322     EISSN: None     Source Type: Journal    
DOI: None     Document Type: Article

References (4)

1. In this article, the term "holding company" refers to the common situation where a typically nonoperating parent corporation owns a number of operating subsidiaries. This form of ownership plays a huge role in the U.S. and world economies. The vast majority of the banking, insurance, transportation, communications, and securities firms in the U.S. economy are subsidiaries of holding companies. MELVIN ARON EISENBERG, THE STRUCTURE OF THE CORPORATION 277-81 (1976). The most famous examples of the holding company form of ownership are the multinational conglomerates formed in the 1960s such as L.T.V., Gulf & Western, and others. See id. at 282; see also BURTON G. MALKIEL, A RANDOM WALK DOWN WALL STREET 58-65 (1990) (presenting a straightforward discussion of how the conglomeration device works from a financial point of view).
2. In this article, the term "holding company" refers to the common situation where a typically nonoperating parent corporation owns a number of operating subsidiaries. This form of ownership plays a huge role in the U.S. and world economies. The vast majority of the banking, insurance, transportation, communications, and securities firms in the U.S. economy are subsidiaries of holding companies. MELVIN ARON EISENBERG, THE STRUCTURE OF THE CORPORATION 277-81 (1976). The most famous examples of the holding company form of ownership are the multinational conglomerates formed in the 1960s such as L.T.V., Gulf & Western, and others. See id. at 282; see also BURTON G. MALKIEL, A RANDOM WALK DOWN WALL STREET 58-65 (1990) (presenting a straightforward discussion of how the conglomeration device works from a financial point of view).
3. This figure reflects corporate affiliates identified as "subsidiaries" or "non-U.S. holdings" in the database. DIALOG, File No. 513 (Oct. 28, 1995) (searching Field "HR," or "Corporate Family Hierarchy"). The subsidiary figures for the Fortune top ten are: General Motors, 91 subsidiaries; Ford Motor Company, 183 subsidiaries; Exxon, 44 subsidiaries; Wal-Mart Stores, 1 subsidiary; AT&T, 17 subsidiaries; General Electric, 72 subsidiaries; International Business Machines, 76 subsidiaries; Mobil Oil Corp., 55 subsidiaries; Sears Roebuck and Company, 4 subsidiaries; and Philip Morris, 80 subsidiaries. These figures may be somewhat inflated in that they include subsidiaries of subsidiaries in the calculation. Looking only at subsidiaries whose immediate parent is one of the Fortune ten, the average number of subsidiaries drops to 34.3 per corporation. Drawing on data compiled in 1982, Phillip Blumberg noted that each of the 1000 largest U.S. industrial corporations on average controlled 48 subsidiaries. PHILLIP I. BLUMBERG, THE LAW OF CORPORATE GROUPS: SUBSTANTIVE LAW xxxiii (1987) [hereinafter BLUMBERG, SUBSTANTIVE LAW]; PHILLIP I. BLUMBERG, THE LAW OF CORPORATE GROUPS: PROCEDURAL LAW 463- 74 (1983) [hereinafter BLUMBERG, PROCEDURAL LAW].
4. This figure reflects corporate affiliates identified as "subsidiaries" or "non-U.S. holdings" in the database. DIALOG, File No. 513 (Oct. 28, 1995) (searching Field "HR," or "Corporate Family Hierarchy"). The subsidiary figures for the Fortune top ten are: General Motors, 91 subsidiaries; Ford Motor Company, 183 subsidiaries; Exxon, 44 subsidiaries; Wal-Mart Stores, 1 subsidiary; AT&T, 17 subsidiaries; General Electric, 72 subsidiaries; International Business Machines, 76 subsidiaries; Mobil Oil Corp., 55 subsidiaries; Sears Roebuck and Company, 4 subsidiaries; and Philip Morris, 80 subsidiaries. These figures may be somewhat inflated in that they include subsidiaries of subsidiaries in the calculation. Looking only at subsidiaries whose immediate parent is one of the Fortune ten, the average number of subsidiaries drops to 34.3 per corporation. Drawing on data compiled in 1982, Phillip Blumberg noted that each of the 1000 largest U.S. industrial corporations on average controlled 48 subsidiaries. PHILLIP I. BLUMBERG, THE LAW OF CORPORATE GROUPS: SUBSTANTIVE LAW xxxiii (1987) [hereinafter BLUMBERG, SUBSTANTIVE LAW]; PHILLIP I. BLUMBERG, THE LAW OF CORPORATE GROUPS: PROCEDURAL LAW 463-74 (1983) [hereinafter BLUMBERG, PROCEDURAL LAW].