As related in these pages, the history of Crown Cork and Seal (hereafter known as “Crown”) provides us with a case of a company that stopped paying dividends but establish a disciplined share repurchase policy and did so for all the right reasons. Under family ownership in the 1950s, Crown lost market share and was on the brink of bankruptcy when its largest shareholder, John Connelly, was elected chairman of the board in 1957. Under John Connelly’s leadership, the firm restructured its operations and began a payout policy based solely on stock repurchases. During the Connelly era, the firm did not pay a penny of common dividends, which is remarkable for a mature firm in a slow growth industry. Using share repurchases instead, Crown managed the agency and information problems that beset public companies with outside shareholders.

In what follows, we show how a flexible payout policy can result in superior returns to shareholders over three decades. When faced with declining prospects in its industry, Crown pursued a focused and disciplined growth strategy. Crown’s high degree of managerial ownership resulted in more focused investments than the diversification strategies pursued by Crown’s competitors. To fund its acquisitions, the firm used internally generated cash flow, avoided external financing, and maintained very low levels of leverage. Crown’s flexible financial policy allowed the firm to pursue value-increasing investments that represent the legacy of the Connelly era (and whose payoffs are depicted graphically in Figure 1).

Document Type


Publication Date

Fall 2010

Publisher Statement

Copyright © 2010 Morgan Stanley. Article first published online: 23 DEC 2010. DOI: 10.1111/j.1745-6622.2010.00300.x.

The definitive version is available at:

Full citation:

Ang, James, Tom Arnold, C. Mitchell Conover, and Carol Lancaster. "Maintaining a Flexible Payout Policy in a Mature Industry: The Case of Crown Cork and Seal in the Connelly Era." Journal of Applied Corporate Finance 22, no. 4 (Fall 2010): 30-44. doi:10.1111/j.1745-6622.2010.00300.x.