In investor letters, the desire to make money is sincere; not everything else is. Illustration by Tamara Shopsin

In 1926, Benjamin Graham, a professional investor in his early thirties, was working in the Washington, D.C., record room of the Interstate Commerce Commission when he came across something he considered “treasure.” It appeared in the prosaic form of a twenty-page document detailing the financial condition of Northern Pipeline, one of eight pipeline companies established when the Supreme Court broke up Standard Oil, the monopoly created by John D. Rockefeller. Northern Pipeline’s shares were trading at sixty-five dollars, and the company generated an annual six dollars of earnings per share. That was generally known. What Graham discovered was that Northern Pipeline was sitting on a fat pile of holdings in other companies. According to his calculations, the company could make a one-off payment of ninety dollars per share to all its stockholders, without having any impact on its ongoing earnings. That’s as sweet a deal as you’ll ever find, so Graham, after an unsuccessful attempt to persuade the company’s senior managers to distribute the cash, loaded up on shares and travelled to the Northern Pipeline annual shareholders’ meeting, in Oil City, Pennsylvania.

The location should have been a warning. Why would a company whose offices were in New York, at 26 Broadway, and most of whose shareholders were also in New York, choose to have its annual meeting in a place that most New Yorkers could get to only after taking an overnight train to Pittsburgh and then a cold, rickety local train ninety miles north? Graham found out when he arrived. Of the six people present, he was the only one who wasn’t an employee. He asked the chairman if he could read a memorandum. The chairman asked him to put his request in the form of a motion. Graham did. “Is there any second to this motion?” the chairman asked. Silence. “I’m very sorry, but no one seems willing to second your motion,” the chairman said. “Do I hear a motion to adjourn?” Meeting over. Ben Graham went back to New York, humiliated and angry, and vowing revenge.

In the next six months, Graham bought more shares in Northern Pipeline, turning himself into the second-biggest holder of the stock, and then wrote a letter to the body that owned more shares than he did, the Rockefeller Foundation. The letter called the state of affairs at Northern Pipeline “absurd and unfortunate,” and made a cogent case for giving back the excess cash to its real owners, the shareholders: “The cash capital not needed by these pipe line companies in the normal conduct of their business, or to provide for reasonable contingencies, should be returned to the stockholders, whose property it is.” The Rockefeller Foundation listened to Graham politely, then told him that it did not interfere in the running of its holdings. Graham, who later taught economics at Columbia when he wasn’t managing his investments, wasn’t put off. He lobbied the other shareholders, collected their proxy votes for the next annual meeting, and won two of the company’s five board seats. Northern Pipeline caved in, and distributed the cash to its shareholders.

In an engaging and informative book, “Dear Chairman: Boardroom Battles and the Rise of Shareholder Activism” (HarperBusiness), Jeff Gramm argues that this letter marked an important turning point in the history of modern capitalism. It was the moment at which shareholders began to assert their rights as the owners of companies, against managers who tended to run the companies in their own interests instead. Economists call this state of affairs the “agency problem,” in which a company’s agents—the managers—have interests that are not aligned with those of the company’s owners. Gramm’s book focusses on eight investor’s letters that sum up some of the great agency-problem battles in the history of American business. It is a valuable set of stories. As Gramm says, “It is incredible how much useful information from the business world is becoming lost to history. I can get detailed box scores from decades-ago college football games, but finding a 1975 annual report from a midsize company is surprisingly difficult.”

The letters in “Dear Chairman” are in one sense structurally identical: they are written by investors in public companies, sometimes addressed to the management of those companies and sometimes to other investors, telling them what to do. Within that over-all similarity, there is a broad story about the evolution of modern capitalism. Ben Graham’s innovation was followed by the “proxyteer” wars, in which activist shareholders gathered together collections of proxy votes to overturn complacent managements. After that came the “corporate raiders,” outsiders who sent “bear hug letters” offering to buy companies, and threatening a hostile takeover if the offer was refused. (A takeover is hostile when the management doesn’t want it; if shareholders approve the takeover, the managers are usually fired.) Gramm gives the example of Carl Icahn’s battle against Phillips Petroleum, in 1985, which is interesting, since Icahn is still, more than three decades later, America’s best-known activist investor, and is still regularly writing to the bosses of his chosen companies. “Dear Chairman” then takes the story all the way up to the present, with the activist hedge-fund investor Daniel Loeb firing off a series of letters to public-company chairmen.

From the literary-critical point of view, there is always going to be a difficulty with the genre of the investor’s letter. What we’re dealing with here, in essence, is rich people wanting more money. That creates issues of tone. The attempted solutions to the problem change over time, just as financial fashions change. In the early days, a moral note is struck. Ben Graham’s prose is sincere and concerned—Wharton School of Business meets Edith Wharton (“Your attention is respectfully directed . . .”). By 1985, Ross Perot is communicating in bullet points, even when he is writing a blisteringly personal letter to the head of General Motors:

For example, during the recent meeting in Detroit, you were —Obviously bored. —Barely tolerated what others said. —Your attitude and comments stifled open communication.

By the time we get to Loeb, in 2005, the tone is that of Internet flame wars. “Ridicule is a radiating weapon,” a hedge-fund manager has said; Loeb acts on that conviction. Here’s a sample letter, to the head of a target company: “It is time for you to step down from your role as CEO and director so that you can do what you do best: retreat to your waterfront mansion in the Hamptons where you can play tennis and hobnob with your fellow socialites.” Welcome to the twenty-first century.

These letters are performances, attempts at persuasion: they are trying to get someone to do something. The desire to make money is always sincere, but not everything else is. When Carl Icahn was a big investor in Apple, he wrote an annual letter to Tim Cook, its C.E.O., urging him to spend the company’s cash on buying back its own stock. “There is nothing short term about my intentions here,” he wrote in the first letter, in October, 2013. In October, 2014, he wrote that “Apple is one of the best investments we have ever seen from a risk reward perspective,” and that, while he was urging a share buyback, he was also eager “to preemptively diffuse any cynical criticism that you may encounter with respect to our request.” In a letter of May, 2015, he said that Apple was “very much a long term growth story from our perspective.” The company represented “one of the greatest growth stories in corporate history, as well as one of the greatest opportunities ever for a company to invest in itself by repurchasing its shares.” A year later, after the company had spent eighty-seven billion dollars buying back its stock, Icahn announced that he had sold most of his Apple shares, for an over-all profit of around two billion dollars. Fool me once, shame on you. Fool me twice, and you’re starting to develop a business model.