The Richmond palladium and sun-telegram. [volume] (Richmond, Ind.) 1907-1939, 1913-06-23
Graft in Business, and Remedy

Road street builders permitted to use
cheaper materials than are specified, if portion
of the saving is given to the proper responsible
officials.
A city is to have park The officials,
who have charge of the project, decide on the To-
cation Before making it public, however, their
agent purchases for them, but in his name, ad-
joining property that will advance rapidly in
price when bordered by the park. Or the agent
may buy the very property that is to be
used for the park and sell it for the officials at a
handsome advance in price, to the city through
the self some officials.
These examples, plus hundred and fifty-sev-
other varieties, illustrate the workings of the
political graft system. Such system of over
paying falls just as heavily on the man who pays
no taxes the taxpayer. We must all have
shelter. When we own the house in which we
live we pay taxes directly. When rent, the
rent money necessarily is enough to cover the
taxes the landlord must pay.
That the same graft system prevails in the
business world is rarely recognized. That it is
one of the great underlying causes for high cost
of living and the consequent wide spread discon-
tent with and agitation against present business
conditions, is not often realized.
Many large concerns buy their raw materials
through their purchasing managers. Necessari-
ly, wide discretionary powers rest in these mems
hands. If they are faithful to the trust reposed
in them, they save every penny possible in pur-
chasing for the firm. If they are recreant to
their trust they demand commissions on purchas-
es from the firms they buy of. These commits
sons naturally are secret.
In the one case the concerns selling price is
based on bedrock raw material cost. In the
other, the selling price must the secret COM
mission paid the purchasing manager. The con-
sumner can readily see how his interests are
served favorably and adversely through these
two examples.
There have been cases where heads of large
corporations have been common grafters. In a
corporation capitalized at $25 100000, a chief ex-
ecutive officer holding 100000 of the stock does
not necessarily permit his dividends plus large
salary, keep him from yielding to the temptation
to profit through shady transactions.
Such an executive may appoint as the pur-
chasing managers of the corporation, men who
will faithfully share with him their graft in
commissions on purchases. He may allot con-
tracts for new buildings to contractors who
er commission for him in their bids. He may
order new machinery from firms that make their
prices high enough to pay him a secret COM
mission.
The board of directors may discover this
source of graft for their president If they are
Impractical idealists," they will discharge him.
If they are practical business men" and their
total stock holdings in the corporation are COM
paratvely small, they will simply force the
president to divide with them Or they may
even originally have elected as president one of
them to oversee the collection of this form of
graft and its distribution. Through this they
are able to vastly augment the returns on their
stock holdings at the expense of the great bulk
of unsophisticated and innocent stock holders,
who are widely scattered throughout the nation.
In corporation exercising monopolistic priv
ileges the greater cost of this graft falls on the
consumers of its products; the lesser portion
falls on the ordinary stock holders.
In a competitive industry there is far less
chance for such graft. Profits, governed by COM
petition, are smaller. Concerns are smaller and
are under the more watchful eyes of smaller
number of stock holders, who generally live in
the same city in which the business is located
When there is loss due to such graft the bur-
den of it must be born by the stockholders. The
consumers are protected the competition of all
the units of an industry determines prices If
only unit is honestly managed, it will be able
to undersell its competitors that are honev-
combed with graft. Therefore they will have to
discontinue grating their honest competi-
tor get their business.
The remedy? The supernatural will say So
cialism. Eliminate private ownership in indus
try, abolish profit, and graft will cease.
The editor, being radical, believes that
government monopoly will offer greater opportu-
mites to grafters than does private monopoly
Therefore, he advocates the very much simpler