Daily Kennebec journal. [microfilm reel] (Augusta, Me.) 1870-1975, 1904-03-23

j NAAAt VIII VI llclIlSciNtS HILL
and control them?
! That is the precise question for con-
sideration, tonight.
| Ihese Industrial combinations rest
upon three theoretical propositions:
| FIRST; That they will diminish tie
administrative expenses.
Second: That the cost to the con-
sumner need not be increased.
] Ihlrd: That the securities of the
combination will earn a larger diyi
dehd and meet with d ready sale in the
market.
| Such is the theory, but there are
certain business laws as permanent
ana irresistible as the laws of nature
and these laws have been left out of
consideration by the promoters. Like
the law of gravitation however. they
are ceaselessly at work. Take these
theories one by one and view them in
the light of actual experience.
i.-Iheoreticai Reduction of Expenses.
| This seems plausible. If there is :,
colnpihatlon of 80 different mills stu
ated In dozen different states, it
would seem as if such REORGANIZATION
might be effected as would consolidate
the various heads of departments and
cuftail to great extent the current
expense. One president and one treas
urer would take the place of so: ono
superintendent would oversee IL dozen
inllls instead OF one; one office force
would do the work of many. In theory
TINS seems reasonable and sound. To
certain extent it is so, but here come
III certain other elements that were
not anticipated.
L. The salaries paid to the officers,
of the new organization are enormously
| eXtravaSant, and out of all proportion
to services rendered.
When Mr.. SChwab attempted to earn
his salary of 100000, it drove him into
nervous prostratiOn. And the same
scale of wages is made to prevail
among all the officers from top to bot
tom. -
,. Expenditures in all other lines
become eXtravagant. A small corpo-
| ration with Il small treasury looks at
given expenditure, even along the
line of repairs or improvements quite
differently from mammoth combine
with its missions.
3. Frequently there is a change in
e''N wv 'ii SStlitlll lcll WIG nav G
started the business i'm particular
town. who have grown up with it and
devoted the best years of their life to
it are supplanted by strangers sent
from the general office. They may be
relatives of some influential director
and thoroughly incompetent, or they
may be trained to the work and COM
pctert. In either event they can hardly
be expected to carry on the business;
as the founder and foster of it has
done.
l have in mind a man who, born in
Scotland, came to this country when
boy and after years of struggle start
ed factory in town not many miles
from here. 1t grew and rrospcred and
he made it almost Il part of himself.
He knew every operative by name and
the people of the town We're his per-
sonal friends. He joined Il trust and
i'm less than two years his place was
taken by a stranger.
have in mind another nearer home
whose father had started the business
ana he himself had grown up into it
and knew it in every detail. He Joined
Il trust and in less than one year hi,
place was taken by n stranger.
The result i'm such case is appar-
ent. There is the lack of the personal
element. Instead of Il man working for
himself. he is Il pat of Il great mil
chine, working for 40 other mills as
well as his own. Small economies are
forgotten the local cooring is lost, the
close relation between the mill and the
town is gone ana the theoretical reluc-
ton in expense is more than counter
balanced.
ii. No contemplated increase of cost
to the consumer
This is the theory. 1t would not do
to increase prices because that would
encourage competition and one object
of the trust IS to discourage it. What
are the facts that destroy the theory?
l. The component properties are put
into the trust at Il large valuation and
that necessitates a large capitalization.
In some cases they are put in at Il val
uation warranted by their earning ca
pacity. In others at valuation large
" exceeding that and the much talked
of watered stock is the result. The fig
ure is bound to be Il high one it may be
extravasantly high and that means IL
large issue of stock upon which divi-
dcnds must be earned in some way.
?. But there is another element that
WIS not counted on by the promoters
and that is the expense involved in
getting rid of the outside parties in or
der to make the monopoly more COM
plete. They cannot be bought, except
at Il figure many times in excess of
their true valuation. Have you followed
this gas company litigation in Boston
where they are asccrtaining the cost of
that great combination? Did you see
where the promoters paid Mr.. Lawson
$4,000? For what? For property sold
toe the combination? Not at all. but
simply to keep his hands off and allow
the deal to go through. Did you read of
the other thousands which were scat
tered right and left for similar pur-
poses? Now, where does all that money
come from" From the new born trust
and it must be represented by stock.
The result il OvercapitaliZation. What
! does that mean? That some method
must be devised to earn dividends on
the overcapitalized stock and that
method il. contrary to their original