The Minneapolis journal. [volume] (Minneapolis, Minn.) 1888-1939, 1905-06-29
The Frick Report.


It is unfortunate that the length of
I the Frick report on the affairs OF the
Equitable prevents more general pub
E LEGATION than it has received. A more
sane or moderate document, or one
{ in which the essential features of good
life insurance are contrasted with
vicious and reckless practices, could not
have been devised. The directors of the
Equitable would have honored them
selves by, adopting the report and acting
upon its recommendations. They Ger
tainly violated their trust when they
rejected it and went on in the course
which made necessary a supplementary
and much more savage attack upon
them by the state superintendent of in
surance.
1t is commonly believed in New York
financial circles that the Prick report
was rejected because E. H. Hartman
was on the committee. The Hyde dunn
my directors were informed that they
must vote it down because it was part
of a plan to compel Hyde to sell his
stock to Hartman. It was perhaps I'M
fortunate for the interests of the policy
holders that Mr.. Hartman was mem
Der Of the committee. But this excuse
for rejecting the report is entirely in
sufficient, and if the majority of the
directors had not been dummies they
would not have listened to it for a
moment.
The Frick report filed fifteen news
paper columns Of meaty truth not only
for the Equitable, but for all life in
surance companies. It stated as a pre-
liminary the fundamental proposition
that life insurance in it's purity has but
two Objects:
First-To furnish absolutely perfect
5protection. IA n
Second-To furnish that protection at
the lowest possible cost.
The committee at the outset treasured
the policy holders on the first point
The Equitable does still furnish perfect
protection. Its members are absolutely
certain of the fulfllment Of their con.
tracts.
{ On the second head the committee
went deeply into the affairs Of the com
pany to show where it had departed
widely from the second characteristic
of ideal life insurance The Elowest
possible COST Of life insurance haC
been departed from in two Ways-frst
by an exorbitant and rapidly increasing
expense rate; second, in dwindling rev
enues from investments.
On the first point the report says
tsThere were in 1905 thirteen execu
tive officers who held the same posi-
tions in 1900. In 1900 these thirteel
executive officers received salaries az
gregating $279,O0O. In 1905 the SAM
officers received salaries aggregat
ing $44S,500, an increase Of over 6
Der cent. The increase in the salarie
of six Of the thirteen officers aver
aged Sc per cent. The salary of tn
vice president, which in 1900 was $50
900, was advanced to $4,000 in 100
and to 100000 in 1908. The salar,
of the secretary to Vice President Tai
bell in 1900 was $4,000. In 1905
was $4,000, an increase Of 1876 pc
cent. ''The rapidity of these increaS
esq says the committee, els not onl
unusual, but there can be no warran
for them in the inability Of the con
pany to retain the services Of thes
persons at a lower rate of compenss
tion.'
The total payroll of the society il
creased between 1900 and 1904 fro1
$77O,2S2 to $1,177,501 or So per cen
During the same years the total incom
of the company increased but SO pc
cent. ssg
Meanwhile, the committee finds, tn
revenues of the company were runnin
down, not because it had no money t
invest, but because the surplus We
tied up with the subsidiary companit
fostered by the directors for their ow
enrichment and which paid the motht
company but meager interest on il
deposits with them. While the ECU
table had an abnormal surplus in cas-
it was unable to take advantage of tt
opportunities to invest its funds
good loans because they were pledge
to the subsidiary companies of whi(
the Equitable owned the majority
stock. The policy holders were recei
ing 2 per cent interest and dividends {
the stock Of these concerns, making
total rate of income about 2.3 per cen
while the company for lack Of funds
was passing by good investments at
and per cent.
The committee concluded with
Recommendation, that the work Of i
vestigation be continued further, b
that the company should be immediat
II mutualized in accordance with
charter, and that Hyde, Alexander al
B Tarbell be requested to resign.
The dummy directors rejected I'll
report, fouted its recommendation
ieered the chairman personally and