Graham Throw, Corporate Managers

496 The Intelligent Investor

• The administration of President George W. Bush made progress in early

2003 toward reducing the problem of double taxation of corporate dividends, although it is too soon to know how helpful any final laws in this area will turn out to be. A cleaner approach would be to make dividend payments tax deductible to the corporation, but that is not part of the proposed legislation.COMMENTARY ON CHAPTER The most dangerous untruths are truths slightly distorted.

-G. C. Lichtenberg WHY DID GRAHAM THROW IN THE TOWEL? Perhaps no other part of The Intelligent Investor was more drastically changed by Graham than this. In the first edition, this chapter was one of a pair that together ran nearly 34 pages. That original section (”The Investor as Business Owner”) dealt with shareholders’ voting rights, ways of judging the quality of corporate management, and techniques for detecting conflicts of interest between insiders and outside investors. By his last revised edition, however, Graham had pared the whole discussion back to less than eight terse pages about dividends.

Why did Graham cut away more than three quarters of his original argument? After decades of exhortation, he evidently had given up hope that investors would ever take any interest in monitoring the behavior of corporate managers.