The Barre daily times. (Barre, Vt.) 1897-1959, 1903-11-03
THE LESSON OF
THE STEEL TRUST
Facts About the Largest In
dustrial Corporation.
OBJECT OF ITS ORGANIZATION.


Have Been Calculated and Not
TnnsibIe-whnt tho Public May
Learn From Its Promotera' 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 inanciers and
promoters in the world. It is the lar
gest industrial corporation ever organ
ized. 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 a great steel and iron business
not so as to prevent, but surely 20 as 70
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 adj
mirable ana attractive For one thing,
1t 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
~ take advantage Of the economies Of
consolidation ana 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,
It's first president was a man in tie
full yigor Of youth who had had a re-
markabIe career III this business. The
great company was launched as no 9th
er ever was.
But 1t 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 steel
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
negle 1t was d personal motive rather
than what may he called a public mo-
tive 1t was not the improvement Of
the industry nor primarily the protec
ton of the owners Of these great mills, I
but promoters reasons.
In the organization of il definite,
conservative values were not set Oh
the property. On the contrary. it was /
valued at its earning capacity in pros
porous times It's maximum earning ca
pacity. Much more than half its capt. /
talized value was fictitious The whole |
amount of its common stock $780, /
000,000-was water. 1t represented no I
real, tangible value, but 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 were at the j
head Of the company, that there was a /
reasonable expectation Of continuous !
dividends ON the common stock.
It soon came out that enormous /
sums were required as fees for the I'M
derwrlting 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 1t fabulous profit.
But the business of the great company
went ON in d prosperous way, and its
millions Of dividends were paid quar-
terly. Then a 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-
tion that time might come when the
stock would receive lessened dividends
or no dividends 1t ana The public be-
gan to be suspicious, and the stock be-
gan rapidly to fan in the market.
The iron and steel trade has fallen
of somewhat not greatly It is pros
porous vet. But the high tide ct the
last two years is recedmg. When the
time for declaring dividslds 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 ag0 more than
$4,000 persons who had bought this
common stock alone bought it because
they were led to believe that 1t had a
good chance to continue to pay 4 per
cent dividends a year Now they are
told truly that the directors are con
serving their property BY cutting the
dividend IN two. and they are remind