Essex County herald. [volume] (Guildhall, Vt.) 1873-1964, 1903-11-06
THE LESSON OF
The STEEL TRUST
Facts About the Largest In
dustrial Corporation.
OBJECT OF ITS ORGANIZATION.

Have Been Calculated and Not
Tangible-what the Public May
Learn From Its Promoters' Scheme.
The United States Steel corporation
Is thus discussed in the Worlds Work
for November:
The United States Steel corporation
was organized by men who were re-
garded as the strongest financiers and
promoters in the world. 1t is the lar
gest industrial corporation ever organ
lied. Its products are the very basis
of commerce. Although their prices
have shown great fluctuations - Mr..
Carnegie has called the steel business
a pauper and millionaire industry -
they are the first necessity of COM
merce. 1t was possible therefore, to
organize great steel and iron business
not 50 as TO prevent, but surely SO as TO
provide against, trade depressions, for
there is no business about which there
is fuller knowledge.
And there were many facts about the
colossal steel corporation that were ad-
mirable and attractive. For one thing,
ii began at once TO publish much fuller
reports than most corporations have
published 1t inspired unusual conf
dence from the beginning. This was
to be, If there ever could be, a great in
dustrial corporation which should real
ly take advantage of the economies of
consolidation and be managed for the
benefit of the stockholders. The great
est financial organizer of our time, per-
haps of any time, was identified with it.
Its first president was man in the
full vlgor of youth who had had re-
markable career in this business. The
great company was launched as no 9th
er ever was.
But it was the handiwork of the pro-
moter after all, as hundreds of other
great corporations are. The dominant
motive In its organization was not the
better manufacture of iron and stee!
nor its cheaper manufacture nor the
better handling or marketing of the
product nor the steadying of its price,
although all these motives played
part No great improvement has been
made in processes or in management
by the new corporation. But the dom
inant motive was to buy out Mr. Car
negie. 1t was personal motive rather
than what may be called public mo-
tive. 1t was not the Improvement of
the industry nor primarily the protec-
ton of the owners of these great mills,
but promoters reasons.
In the organization of it definite,
conservative values were not set on
the property. On the contrary, it was
valued at its earning capacity in pros
porous times-its maximum earning ca
pacity. Much more than half its capt.
taliZed value was fictitious. The whole
amount of its common stock-S500,-
000,0O0-was water. 1t represented no
real, tangible value, but a calculated
value based on earnings at the very
maximum rate in prosperous times.
But the purchasers of this stock
were not plainly informed of this fact.
Every man had to dig this informa
ton out for himself and calculate for
himself the chance of its permanent
or possible value. But the inference
was, since honorable men We're at the
head of the company, that there was a
reasonable expectation of continuous
dividends on the common stock.
1t soon came out that enormous
sums were required as fees for the un-
derwriting syndicate. In other words,
the promoters took heroic profit for
their risk and trouble. Promoters do
not work without pay, nor do great
bankers take heavy risks for nothing
truly, but from the beginning of the
world no such promoters profits as
these had ever been heard of.
Making great organizations is an ex-
citing game. Few men have heads
cool enough to resist such excitement.
The president of the great company
soon lost his head. He was soon buy
ing and selling great steel plant on
his own account at fabulous profit.
But the business of the great company
went on in prosperous way, and IT'S
millions of dividends were paid quar-
terly Then plan was made to con-
vert some Of its stock into bonds, leav-
ing the rest of the stock, of course, at
a disadvantage. Was this an intima-
| ton that time might come when the
stock would receive lessened dividends
or no dividends at all? The public be-
gan to be suspicious, and the stock be-
gan rapidly to fall in the market.
| The iron and steel trade has fallen
Off somewhat, not greatly. 1t is pros
porous yet. But the high tide of the
last two years is receding. When the
time for declaring dividends comes the
dividend on the common stock is cut in
two-one-half Of per cent per quarter
is declared instead of per cent on the
common stock.
There were some time ago more than
25.OOO persons who had bought this
common stock alone-bought 1t because
they were led to believe that it had
good chance to continue to pay per
cent dividends year. Now they are
told truly that the directors are con-
serving their property by cutting the
dividend in two, and they are remind
ed at the same time that they were
very simple dupes ever to buy this
stock with the expectation of any div
idends at all, which also is true.
The greatest corporation in the world,