National Conference on Trusts and Combinations (19.

Proceedings of the National Conference on Trusts and Combinations under the auspices of the National Civic Federation, Chicago, October 22-25, 1907 online

. (page 38 of 46)
Online LibraryNational Conference on Trusts and Combinations (19Proceedings of the National Conference on Trusts and Combinations under the auspices of the National Civic Federation, Chicago, October 22-25, 1907 → online text (page 38 of 46)
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ernmental supervision and constant interference with the busi-
ness operations of institutions transacting a large percentage
of the country's business is impracticable. But even if it were
practicable, vast evils would flow from such constant interfer-
ence, and be inflicted upon the public.


The only kind of business to which the anti-trust act was
found to be clearly applicable was interstate transportation.

I will not attempt a reference to the results of the enforce-
ment of the act against carriers engaged in interstate transpor-
tation, but will call attention to the fact, referred to a monient
ago, that the act has been practically nullified in its applicability
to interstate railroads by the rulings of the Interstate Commerce
Commission under the Hepburn Rate Act construing its pro-
visions. The China and Japan Trading Company complained to
the commission against a rate of 85 cents per hundred on cotton
goods, agreed upon between the railroads from New England
points to the Pacific Coast, while the rate from Southern points
to the Pacific Coast was $1.25. The commissioners, on the first
day of last July, upheld the 8s-cent rate, and held that in doing
so they were, in effect, establishing and fixing that as the legal
rate. But they went further, and held that the fact that the
making of the 85-cent rate was the result of a combination
among the railroads was of no importance ; that the commis-
sion having examined it and found it to be reasonable, its ruling
was equivalent to an act of Congress of later date than the
anti-trust act, and hence superseded it. An amendment of the
anti-trust act to permit of pooling arrangements between inter-
state railroads, as proposed by the President, appears to be un-
necessary. The same result seems to have been reached by the

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enactment of the rate law and operations of the commission un-
der it. And thus we see that the little that remained of the
Sherman Act, all of it that was in any respect effective and vital,
has been repealed, or, rather, superseded, by this subsequent
legislation. And it is probably true, as has been charged, that,
for this and other reasons, the railroads did not really oppose,
but actively favored, the Hepburn Act.


In these remarks I have directed my effort to showing, and
believe I have shown, that as respects what are known as in-
dustrial trusts their legal status is, insofar as Federal legisla-
tion has affected them, invulnerable and unassailable, and that
as to interstate carriers, the effect of recent legislation has been
to supersede and nullify all prior legislation on the subject. And
until some honest and effective remedy is proposed all discus-
sions on the subject of remedies for monopoly should be ac-
cepted by the people as mere claptrap; as efforts of politicians
to confuse and mislead them and postpone the day of settlement.

My views have not been in any respect changed, but rather
strengthened, by those who have already addressed the con-
ference. Mr. Ellis, the Attorney-General of Ohio, proposes that
the Federal Government shall, in some way which he omits to
explain, take away the power of State corporations to hold
stocks in other corporations. It is difficult, or rather impos-
sible, to see, under what constitutional provision Congress de-
rives any such power; certainly not under the interstate com-
merce clause. When a sovereign State empowers a corpora-
tion to use its capital or property, or even its credit to buy
stocks, that power is as much a vested right as the power given
a State corporation in its charter to borrow money and give its
note, and Congress could no more interfere with the exercise
of one right than with the other. His proposition does not pre-
tend to cover the two or three hundred existing monopolies as
to stocks already acquired under State authority. Each issue
has involved the making of a contract. Surely neither Mr. Ellis
nor any other sane lawyer would contend that there is any
power anvwhere to invalidate these contracts, or to deprive even
a trust of the full benefit of their due observance.

The scheme of such judicial interpretation as will enlarge the
powers of Congress under the Constitution is, of course, idle


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and vain. Even if such a process were desirable or could be
tolerated, it cannot be done unless the Supreme Court be
changed; and to change it would be about as tedious and un-
satisfactory a process as changing so many wooden images into
images made of stone.

To the proposition to give the Federal Government more
power by constitutional amendment, of course the sticklers for
State rights object. For my own part, I know of nothing so
absurd and worthless as this narrow, ingrained prejudice based
upon the threadbare doctrine of State rights, a doctrine of no
benefit to any individual on the face of the earth, a doctrine
which has been a barrier to progress since the foundation of the

These conflicting views produce a fatal cotmter-balance, and
the people stand divided and helpless while gradually they are
impoverished and economically enslaved.

It is also proposed that Congressional sanction be given to
combinations among the railroads by amending the Sherman
Act. I have already shown that this was indirectly accomplished
by the Hepburn Rate Act. I, for one, desire to enter a protest
against this proposed amendment of the Sherman Act in the
interest of monopoly. The railroads are already in unlawful
combination against the people. Travel east, west, north and
south, and you will find the rates non-competitive and exorbi-
tant. Let me remind you of the fact that since the Hepburn
law was passed there has been poorer service, more fatal ac-
cidents, slacker enforcement of safety appliance laws, an all
around increase in freights and fares, increased earnings and
increased dividends, despite the fact that more water has been
added to the stocks on which they were paid. The Interstate
Commerce Commission merely sits as an equalizing board, do
ing the work of traffic managers for the railroads, their salaries
paid by the people, equalizing the rates always upward, never
downward. What the public demands is better service and
lower rates. To legalize combinations will be a step backward,
and will postpone the legitimate demands of the people indefi-
nitely. Very naturally Mr. Mather, who addressed you last
evening, like other railroad presidents, prefers national to State

J. have observed one feature in common in the views of a
majority who have participated in this discussion. No matter
how learnedly or to what thength they discuss the monopoly


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problem, they generally agree upon the one point-^-either that
nothing can be done, or that very little ought to be done.

I hope that the next conference held by the National Civic
Federation will be called to consider amendments to the Fed-
eral Constitution. I, for one, think it should be amended in
several particulars. Among others, so as to give Congress more
power over existing and future corporations, providing for the
election of United States Senators by popular vote, and better
defining and limiting the jurisdiction of the Federal courts, and
I hope the Federation will have the credit of calling and holding
such a conference at an early date. If it delays it the credit will
belong to others, because it cannot be long delayed.

THE CHAIRMAN: Gentlemen, the next speaker, repre-
senting the attitude of labor, is Mr. Warren S. Stone,^ Grand
Chief of the International Brotherhood of Locomotive En-

Mr. Warren S. Stone.

Mr. Chairman — ^I did not learn until since luncheon that I was
going to be one of the speakers. Unfortunately I have not been
able to attend any of the four meetings. I have not heard any of
the speeches, and have only heard the one speech of Mr. Dawes
last night, so I can say all I want to say to you in a few minutes.
I am going to boil it down, as Finnegan did, when, sending in a
report of a railroad collision, referring to one of the trains, he
said: "Off again, on again, gone again, Finnegan!" I ques-
tion very much why I should be called upon to speak on trusts,
unless it should be considered that we are a labor trust, and, of
course, we would deny that assertion at once. But in travelling
to and fro over this great country of ours — and regardless of
what may be said to the contrary, it is the best on earth — ^you
don't have to go very far nor talk to a g^eat many people until
you learn that the whole nation is thoroughly aroused. Men
are discussing questions to-day which have never been consid-
ered before, and it is out of this individuality of our people, of
the many different opinions of our people, that the success of
this country is due to a large extent. If you listen to some of
the so-called labor leaders you would think this present con-
dition of affairs was going to be wiped out.


I believe that labor organizations have come to stay. I real-
ize that this is an age of big things in this country of ours. We


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are crowding events of centuries into decades, and decades into
single years. I believe it is necessary to have corporations. I
have no objection whatever to trusts rightly managed; in fact,
it would have been impossible to develop this country of ours
without combinations of capital. The next thing is, what is the
proper legislation to have? I could give you my idea of it in
a very few words. Not long ago I was making a wage scale
with a certain railroad president and he said: "Mr. Stone, we
can't aflFord to pay it." I said: "I don't see why you can't.
You paid i8 per cent, on your common stock last jrear, to say
nothing about your preferred stock." "Yes," he said, "but you
must remember that all represents real value. There is no
water in it." I believe the great question is that we should
have not so much more law, but better enforcement of the law ;
better respect for the law, and the same law applied to all sec-
tions of the country alike. I don't believe in these imaginary
lines, or trying to array class against class. I believe in one
country, under one flag, for all people, and the same law apply-
ing. I don't even want to go down South and try to fight out
the race problem. I believe the people in the South are better
able to settle that themselves. But, coming back to the trust
question, it seems to me what we want is supervision of over-
capitalization. I do not believe in buying a street railroad for
$23,000 and pouring in two and one-half millions of water, as
was done recently. It is not so much the water, although some
trusts and corporations are so waterlogged they will not float.
It is not water so much as it is dividends on the watered stock.
Demands for dividends on watered stock are the curse of the
laboring man of this country. Put a fair valuation and a fair profit
on the real value of any of your big corporations or trusts, if
you please, and we labor men will be satisfied and will recognize
that capital is entitled to a fair share of remuneration. But when
you come down to demanding 25, 30 or 40 per cent, because
you have that much water — ^that is what hurts all of us, be-
cause we work for a living. The declaring of dividends that
have not been earned on watered stock that has not a fair value
is one of the abuses that should be remedied. This is something
the law can reach ; I don't care whether you call it the anti-trust
or Sherman law, or what you call it. I don't suppose the time
will ever come when labor and capital will agree on what is a
fair division, because in the exchange of values between those
who have something to sell and those who want to buy there is


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always a difference, but I do believe the thing can be regulated
so as to give each interest fair compensation and its fair share.
I believe at times both labor and capital are unfair and unjust
in their demands, but I do believe, if we meet the questions and
settle them in a fair and equitable manner, we can meet the com-
plex questions that may arise to-morrow and settle them, if we
attempt to do so. I believe we are going to have trusts and
corporations regardless of everything. It is necessary to have
combinations of capital to do these big things; but the only
plan, it seems to me, would be to regulate the over-capitaliza-
tion of these many industries and stop paying or declaring un-
earned dividends on something that has never been earned. And
now I am going to give way, because there are other speakers.
This is my idea of the whole trust question, boiled down in a
few words.

THE CHAIRMAN: The next speaker is the Hon. Avery
C. Moore, of Idaho.

Hon. Avery C. Moore.

Mir. Chairman — I am going to take a text for my few re-
marks: "Every man, no matter where he was born or what
creed he professes, whether he is an employer or a wage-earner,
is entitled to be judged on his worth as a man. In return he is
bound in honor to give to every man a fair deal, for no man de-
serves more and no man should receive less." These words are
from a recent public address of a prominent member of the
Brotherhood of Locomotive Firemen, Theodore Roosevelt. And
in passing, I would add I belong to the same union. It has been
my privilege for a number of years to work alongside of men who
toil for a living. During the years some of you who have been
in the counting-room or the school, drinking at the fountain
of classic literature, perhaps, I have been working shoulder to
shoulder with the men who bear upon their backs the burdens of
the world's industry ; mingling not with the men of wealth, but
those who create it; mingling with those not in authority.

THE CHAIRMAN: I hope I will not be considered out of
order to ask the speaker to confine himself to the subject of
the conference.

MR. MOORE: Very well. Mr. Dawes, the former Comp-
troller of the Currency, said last night — and I hope that that is
in line with the purpose of the conference — that the Department


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of Justice was playing to the galleries in prosecuting violators
of law. In this instance the galleries are the American people,
and they are very generous with their applause. The certain
way for the trusts to prevent or to stop the applause from the
galleries would be for the trust magnate to cease furnishing the
Department of Justice with occasion to provoke the applause of
the gallery. If there is one danger more than any other in this
land of ours to-day, it is the disposition to ask immunity from
laws that displease ; and yet, it must be obvious that to encour-
age disrespect for some law very speedily will encourage disre-
spect for all law. The trouble with Mr. Davsres and those for
whom he found it expedient to speak, is not that we are passing
special laws against the rich, but that we are no longer employ-
ing that process in our governmental affairs which grants spe-
cial immunity to the man behind the dollar.

Ours is a Government designed to establish man in the full-
ness of liberty. There are institutions in this land to-day
primarily existing to defeat the large welfare of the American
people by concentration of powers, powers in the hands of a
few men. There is an exhibition of that power a little to the
eastward in these days. It had its inception, however much
it may have gotten away from the men who started it, in the de-
sire to challenge the American people and call a halt in the
attack of the American people upon predatory wealth and the
bringing to the bar of justice of men who defy the people's law.
That challenge received an answer from the American public
yesterday morning, under Nashville date line, and Theodore
Roosevelt said it. There is no desire upon the part of the peo-
ple^ in my section of this nation of yours, to hammer the man
who is going according to the orderly processes of law in the ac-
cumulation of capital ; but we do demand that the law-breaker,
wherever he be, in the palace or in the hovel, shall respect the
statute law of this Republic, and they will, and we are powerful
enough to see that they do. Shakespeare said, "It is excellent
to have a giant's strength, but it is tenderness to use it like a
giant." The people have been patient under the abuse of power.
This power is the essence of the evil in the trust problem ; but
cowardice does not belong to the American character, and
the American people fear no problems, present or impending.
We are going to solve them in the spirit of justice, according
to the light of reason. This is the day and this is the hour of
reason. The day of physical conflict is over, in labor disputes


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and all other realms of thought. The cause that cannot defend
itself by reason has not any ground to stand upon. I bring in
conclusion this word: That the people of the section where I live
are, as your people, a law-loving, a liberty-loving people.
They, are not afraid either of the power of money or of alien
foes. Hand in hand we want to walk down the pathway of
the future and overcome these problems as they arise ; ha)nd in
hand we are going to do that. We ask you to accept no threat
from predatory wealth ; no coercion in your walk of life, but to
say that the mandates of the people must be supreme ; and we are
ready to back up the law-makers of this land and the Depart-
ment of Justice in this country and the President of the United
States, whether it be Roosevelt, a Republican, or Bryan, a Dem-
ocrat, when he takes the oath of office of President of the
United States. We are going to hold up his hands and say that
the American people are equal to every problem that confronts

THE CHAIRMAN : The next speaker is Mr. H. Jennings,
of Washington, D. C, who will speak to us about the ^'English
Incorporation Act."

Mr. Hennen Jennings.

Mr. Chairman — I have prepared no speech, but the Hon. Her-
bert Knox Smith, in his remarks before the convention, touched
briefly upon a subject which, I think, should receive the fullest
consideration at the hands of this convention. I refer to the
"Companies' Acts" of Great Britain. By reason of having
worked under these laws, or modifications of them, as an en-
gineer in the Transvaal for about ten years, and in London for
about six years, in addition to an experience as a mining en-
gineer in this country, I feel that I have had opportunities to
observe the practical operation of such legislation.

The willingness of the American engineers to receive and
utilize information from any and all sources is, I believe, one of
the chief causes of their success. I see no reason why our law-
makers should not do likewise, especially in view of the fact that
our common law was received from Great Britain. The limited
liability laws had their rise in England, the first act having been
passed in 1862, and since that time some of the highest legal
talent in that country has been engaged in perfecting the laws
relating to corporations. This has resulted in revision upon re-
vision and much new legislation, the company laws having been
very greatly revised in 1900.


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The basic feature of these laws is their more or less automatic
enforcement. Every company must be registered and must fur-
nish a memorandum of association and a prospectus, the pro-
moters being criminally responsible for the statements appear-
ing in these papers. The phraseology and form of the articles
of association are largely discretionary with the promoters and
directors, but the crown laws demand that certain vital facts be
shown, such as the full intent and purposes of the company, the
basis upon which capital is to be raised, precise particulars of
any allotment of stock for other than a cash consideration, the
names and addresses of vendors of any property purchased or
acquired by the company, and a statement of all commissions
paid for subscriptions, which must be authorized in the articles
of association and disclosed in the prospectus. A part payment
of the capitalization is required before the company is allowed
to begin operations, and the shares are subject to further call
up to their face value.

Directors are elected at the first general meeting of the stock-
holders, one-third retiring annually, subject to re-election. The
directors are financially liable for funds improperly applied and
for dividends paid out of capital not earned, and are also liable
to two years' imprisonment for wilfully making a statement false
in any material part, knowing it to be false. The stockholders
annually appoint auditors at their general meetings, who are
furnished with a list of all company books, to which they have
access at all times. These men are usually chartered account-
ants and have to pass examinations as to competency.

The holders of one-tenth of the issued capital of the company
can convene an extraordinary meeting by giving twenty-one
days' notice, and demand information of the officers of the com-
pany. The list of stockholders is open to every individual mem-
ber, and copies of such register and of articles of association
can be purchased by any one for a nominal sum. In some
articles of association the minority holders are protected by
graded voting power of shares in favor of the small holders. At
the general and extraordinary meetings reporters are allowed,
and thus additional publicity is secured.

Although there have been few criminal prosecutions under the
British laws and much perfunctory examination of accounts,
etc., the fear of such prosecution has kept directors far more
honest in dealing with the affairs of the company than would


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the fear of fines and losses which would be paid by the company
and by no means be synonymous with individual losses.

I heartily sympathize with Mr. Smith in his confessed bewil-
derment if he has endeavored to obtain an understanding of
some of the complex and verbose articles of association and
prospectuses which it has been my lot to examine. In most
cases these documents are formed to cover every possible
change or extension of the business of the company, and some-
times unnecessary words are used for the purpose of confusing
and tiring the reader, but they cannot escape the requirement
that the essential facts be included.

I am satisfied the British laws are conducive to publicity\ in
the affairs of corporations and to honest administrations. ITieir
effectiveness is secured, first, by universal registration under one
law, and without registration the company is illegal; second,
publicity, both in the articles of association and prospectuses and
the meetings of stockholders ; third, the power given the minor-
ity stockholders to investigate the acts of the majority ; fourth,
the crin^iinal as well as financial responsibility of the promoters
and directors.

I by no means recommend servile copying of the British sys-
tem, but would plead that our lawmakers carefully examine it
and see if there are not some features at least that could be
adopted to advantage in this country.

THE CHAIRMAN : This morning I stated that at 4 o'clock
the floor would take possession of the debate, and that will be
carried out the moment the clock points at 4. In the mean-
time, there are two speakers who wll make addresses. The
first is a man who ought to be able to teach us a great deal
on this subject — a professor of the University of Washington,
a man who was commissioner, representing the United States
in five international expositions — Mr. James H. Gore, of Wash-
ington, D. C, whose topic is "The Relation of Industrial Com-
binations to Export Trade."

Mr. James H. Gore.

Mr. Chairman — ^The manufacturer, in his efforts to develop
an export trade, finds problems and difficulties that did not
confront him when he sought wider markets at home. The
longer time that intervenes between the soliciting of an order
and its filling has unlimited possibilities for fluctuations in


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prices of material, wages and transportation, and the delays in
settlement lock up capital that might be utilized several times
over if the consumer had been nearer the producer. Laws af-
fecting import duties may be changed in the interim, contracts
to purchase may be broken with the annoying difficulties that

Online LibraryNational Conference on Trusts and Combinations (19Proceedings of the National Conference on Trusts and Combinations under the auspices of the National Civic Federation, Chicago, October 22-25, 1907 → online text (page 38 of 46)