In 1947, James Peck and Bayard Rustin, members of the radical pacifist group the Fellowship of Reconciliation were preparing for a civil rights protest they called the Journey of Reconciliation, now remembered as the first Freedom Ride. Peck, who was white, and Rustin, who was African-American, would ride with other members of the Fellowship as an interracial group in buses across the upper South, sitting together in nonviolent protest against the region’s laws mandating segregation. But first they did something else radical: they bought shares in a corporation.
A year later, after their travels in the South had led to death threats, beatings, and in Rustin’s case a term on a chain gang, they brought their activism to a new site for protest, the annual shareholders meeting of that corporation, Greyhound Bus Lines. At the meeting Peck and Rustin invoked a different body of laws—the Federal securities laws—to insist that Greyhound allow all its shareholders to vote a proposal condemning Greyhound’s acquiescence to segregation. The specific law they cited was only a few years old; in 1942 the Securities and Exchange Commission (SEC) had adopted the “Shareholder Proposal Rule” (now Rule 14a-8), giving a shareholder the right to make proposals to corporate management and requiring companies to send those proposals to all their shareholders in their annual proxy solicitations—at the company’s expense.
Greyhound refused to circulate Peck and Rustin’s proposal, arguing that the rule allowed it to reject proposals that spoke only to “general social or political issues,” and in 1951 the SEC agreed. Peck fought back. With financial backing from the famed civil rights group the Congress of Racial Equality (CORE) he sued Greyhound in the case that became Peck v. Greyhound, arguing that the proposal he and Rustin had crafted was an appropriate matter for shareholders. Peck pointed out that the proposal targeted a specific policy adopted by Greyhound, and pointed as well to the harm the segregation policy did Greyhound, as it threatened to produce lawsuits against Greyhound by African-American passengers.
To end Peck’s suit, and cut off future ones, in 1952 the SEC amended the shareholder proposal rule. Before then the SEC had allowed companies to exclude proposals of a “general political, social, or economic nature.” The 1952 amendment, however, specifically targeted the Greyhound proposal, and added new language to forbid proposals “primarily for the purpose of promoting . . . general economic, political, racial, religious, or social or similar causes” (emphasis added). In an attempt to insist that racial causes were illegitimate subjects for shareholders concern, the SEC had written race into the securities laws. The language would not be removed until 1976.
I tell this story in my new article, “Shareholder Meetings and Freedom Rides.” Until now, neither securities law scholars nor historians of the civil rights movement have paid much attention to this case. That’s too bad, because the story of Peck v Greyhound illustrates the surprising interplay of race and corporate and securities laws. Drawing on the records of two organizations rarely discussed together, CORE and the SEC, my article shows how the case can tell us much about law and society in a turbulent decade. The case itself was not Peck’s alone, but also the work of Bayard Rustin, a legendary civil rights leader. Their campaign against Greyhound was in turn a product of, and shaped by, the ethos of the Fellowship of Reconciliation, one of the nation’s most notable and long-lived radical pacifist organizations. The ensuing litigation was guided and funded by CORE, the pathbreaking civil rights organization. And eventually the case and subsequent rule change would have an impact not only on corporate America, as it helped minimize the 1950s movement for “shareholder democracy,” but also on the civil rights movement, as it largely closed off the shareholder proposal as a vehicle for protest during the civil rights era.
The complete paper is available for download here.
Harwell Wells is a I. Herman Stern Professor of Law at Temple University James E. Beasley School of Law.