Politicians howled last month when Texaco, America's third-largest oil company, announced a 211 percent increase in profits over the same period last year. But the news may have made somebody happy.
It wasn't Texaco stockholder Lovida Coleman, a special assistant to the U.S. attorney general. Two years ago, she invested a work bonus in 100 shares of Texaco at $26.
"I thought, my goodness, oil is going up, up, up, and what more perfect hedge could there be . . ."
But the stock has been going down, down for several weeks, from a high of $32, at a time when Coleman said she had to sell it anyway because she is buying a house, whose cost has been inflated by higher oil prices.
Selling the stock at $27.50, on Nov. 7, she figures she'll be lucky to break even after brokers' fees and inflation.
The idea seems so simple when Bob (Texaco) Hope explains it in his televison commercials: the specter of Big Oil that we rage against is really ourselves. Hope talks about the 14 million Americans who own stock in the major oil companies and benefit from higher profits.
Industry officials and others, including The Wall Street Journal, have held up these mom-and-pop shareholders as an argument against legislative "punishment," such as the proposed tax on windfall oil profits.
They are partly right. But it isn't nearly as simple as Texaco's TV pitch makes it sound.
Many of those counted as owners receive either nothing at all, or only a tiny fraction of the oil companies' profit increases, have no say in how the profits are divided up or how the company is run and may not know they even own an interest.
Take Bob Hope's sponsor, an enormous multinational corporation, as an example. Some "600,000 Americans own our stock," company officials said.
That statistic includes 390,000 individual investors, from small ones, such as Lovida Coleman, to powerful ones, such as Sir Arthur Patrick H. Forbes, the earl of Granard, who has 113,018 shares and serves on Texaco's board of directors.
There are also 4,000 banks and brokers that manage 150,000 accounts on behalf of other investors (Texaco officials said they don't know who these investors are), plus thousands of corporations, investment companies, insurance companies and other institutional investors.
Corporations and brokers consider the names of individual shareholders privileged information, and refuse to give them out. Some information on major stock voters (not always share owners) is available, but, according to Senate aides who have studied the subject, it is scattered in "various and expensive sources which make it difficult to collect."
Shareholders were reluctant to volunteer, through brokers, to be interviewed. As one broker for Paine Webster put it, "People don't want their relatives to know they've got anything."
If Texaco's individual shareholders are typical of those in big oil generally, as defined by an industry study, nearly half are retired people whose average age is over 70. More than half are women, and virtually all are highly educated, the sort of people who are able to save money to invest. Those who work tend to be "managers, professionals or proprietors."
What such profiles do not show is the concentration of stock ownership. Ownership, or at least voting control, of the stock is concentrated in the hands of a few powerful institutions and wealthy individuals, while the rest is spread thinly among a declining number of mom-and-pop owners, critics say.
Presumably, ownership patterns in oil companies are about the same as in other publicly held companies. Among all such companies, about three-fourths of the stock is owned by individuals, Federal Reserve Board statistics indicate. And Internal Revenue Service statistics indicate that this stock is bunched in the upper-in-come brackets.
In 1976, for example, more than 25 percent of all the taxable dividend income that went to individuals went to those with incomes over $100,000. These made up 2 percent of those with taxable dividend income.
"The principal category of owners, in the sense of control, is the one category tdhat isn't mentioned by the American Petroleum Institute, the Chamber of Commerce . . . or Bob Hope, and that's the banks, insurance and investment companies," said Vic Reinemer, former staff director of the State Governmental Affairs subcommittee that conducted the basic study in the field of stock ownership.
The top five share voters in Texaco Inc., as listed in the subcommittee study last year, wsere Continental Illinois National Bank and Trust, National Bank of Detroit, Citibank, Morgan Guaranty Trust Co. of New York and a mutual fund complex under Capital Research and Management Co. The top five shareholders voted 5.33 percent of the stock, the study said. It was based on figures from the end of 1976.
The Bob Hope commercial was based on a study, prepared four years ago by the American Petroleum Institute, titled "Who Owns Big Oil." It covers the top six oil companies. The New York Stock Exchange served as a technical consultant.
API claims that 14 million Americans own big oil but, by its own figuring only 2.3 million are direct individual owners of the sort who can call their stockbroker and tell him, sell. Most of the others, whom they call indirect owners, were in private or public pension plans, mutual funds and insurance companies.
So how much did these stockholders benefit from those boosted profits?
There are two possible ways for them to get theirs.
One is through increased dividends. Texaco's board of directors recently decided, as they have for the past four years, not to increase dividends. Other oil companies have announced small increases.
By one estimate, about 40 percent of the increase in profits among the 26 largest oil companies can be expected to go out in dividends to stockholders.
The other way they might benefit is from an increase in the value of the stock, assuming there is one. But to make money that way, they have to sell at the right time.
The New York State Teachers Retirement System, for instance, lost $6.8 million when it sold its 742,000 shares of Texaco stock over a period of several months ending last summer, according to spokesman Nathan Kullman.
But, he added, "We made nearly $20 million on other oil company stock that we sold, so we had a net gain of $11.7 million."
When the retirement system's portfolio of stocks makes money, it is the employer -- the taxpayer -- rather than the teachers who benefit most directly, he said. The schools don't have to contribute as much money into teachers' retirement benefits as they would otherwise, "so, in a way, this helps all the taxpayers in the school districts."
Stock in the major oil companies is considered blue chip, which means, as one stockholder put it, "It will be steady but nobody's going to make a killing."
Why isn't Lovida Coleman's Texaco stock a better deal for her at a time when its product is in such demand?
The answer lies partly in Texaco. Some people think it was badly managed a few years ago. Because of the way it was set up abroad, Texaco wasn't able to cash in on the higher oil prices in the early 1970s.
Texaco last year made less money, relative to its size, than most other major oil companies. Its profit increases this year represent a comeback, and specialists said there is little likelihood that it will be sustained.
But the answer also lies in forces that seem to move all the big oil companies, not just Texaco.
Large influential investors are very intelligent folks, and they have foreseen since the early 1960s, that the international political landscape made big oil a risky investment, according to Barry Good, a verteran oil stock analyst for Morgan Stanley Co. in New York.
Knowing that a company might be nationalized or that its tax incentives might be cut or that any number of other political upheavals could alter its prospects, investors have not been willing to pay as much for oil companies relative to the companies' earnings, he said, as investors would in other industries.
In other words, the same explosive international environment that sent oil prices soaring, and attracted small investors such as Coleman, also has kept their investment from paying better.
If Coleman and the other investors aren't getting much out of Texaco's higher profits, where is the money going?
Into drilling and testing at the ocean site east of Atlantic City, where the company recently discovered natural gas, and into a new desulfurization plant in Baton Rouge, and into countless other business investments, according to Richard Pigeon, Texaco's manager of investor relations.
Officials of the big oil companies often make the claim that they have been reinvesting about twice their income in recent years. Critics maintain that their books do not reflect their true worth, including, in simplified terms, the soaring value of oil in the ground.
Taking the first six months of this year as an example, Pigeon said, Texaco earned or borrowed $1.61 billion,of which it reinvested $1.2 billion.
The company paid out $285 million to stockholders, he said.
The spending for which oil companies frequently take it on the chin -- advertising lobbying in Washington, executives salaries -- account for only a minuscle fraction of that, Pigeon said.
The going rate last year for Maurice F. Granville, Texaco's chairman of the board, was $659,315 in salary plus over $150,000 more in property, benefits and the like, according to company records.
The question of who owns stock in oil companies should be irrelevant when it comes to setting energy policy, in the view of some people.
But others argue that oil policy is, or should be, tied up with questions of social equity and of income redistribution.
For example, those who benefit through private pension funds, however indirectly, represent the lucky half of the workforce whose companies have pension plans, according to Karen Ferguson of the Pension Rights Center here.
"They tend to be the higher paid workers, those who work continuously enough -- usually at least 10 years -- to qualify for the pension," she said.
Even if an oil company distributed all of its profit increases directly or indirectly to the people who own the shares, "all these benefits still would not go proportionately to the people in society who are made to bear the heaviest burden caused by the excess profits," charged Abraham Briloff, an accounting specialist at City College of New York.
"There is definitely a lack of symetry in who benefits and who pays," he said.
Stock owner Lovida Coleman said, "If I had the money, I still think I'd invest in an oil company, a different one. It makes sense. It's a chance to participate. That's the wonderful thing about our system."