Evening star. [volume] (Washington, D.C.) 1854-1972, 1927-01-29
MEN AND MONEY
BY NJ. S. Rukeyser.
Copyright. 1927

ing financing plans, the Consolidated
Gas Co. of New York apparently
made no provision for retaining Gus
toner owners, who were invited four
years ago to buy participating pre-
ferred stock.
With a stroke of the pen the com
pany has decided TO call for redemp-
ton this relatively small good will Of
fering, and to issue in its place new
class of preferred stock, in addition TO
an increase in the common stock out
standing. The outstanding preferred
stock, which was originally sold at $50
a share, will be redeemed on May /
next at $56.25. The present common
shareholders who represent miscel-
laneous investors, will have special
rights to subscribe to the new com
mon and preferred shares.
The total new stock issues, which
will finance the expansion of the
metropolis leading public utility,
amounts to 1853 900 900. and the re-
tired preferred stock to only $16,375,-
600 The new preferred stock will no
doubt bear a lower dividend rate than
the outstanding issue and will be
bereft of the participating feature. In
any narrow business sense, the new
deal has been wisely conceived, but 1t
seems to me that the company Is un-
having IS 900 customer owners among
its shareholders. This friendly capital
will be released, and will no doubt be
reinvested In general securities or
spent for articles of consumption.
Customers Permanent Partners.
Public utility corporations should re-
gard their customer owners as perma-
nent partners, and should not take adj
vantage of technicalities to prevent
them from sharing in the prosperity
of corporation they helped to
finance. If corporations are sincere in
their original assertion that they en-
listed local capital for other than
purely financial reasons, they should
see the value of retaining associates.
One of the by-products of customers
ownership is the new understanding
that 1t creates between consumers and
utility corporations. The best way to
create a partnership interest in cor
poration is through common stock.
After the war, when the customer
movement ownership began, few of
the public utility corporations were
prosperous enough TO have created
new common shares which would have
been attractive.
Accordingly, 1t became fashionable
to make preferred stock the vehicle
for popularizing ownership. The Pa
cific Gas and Electric, a pioneer In
the whole customer ownership move
ment, was also the first important
utility to sell common shares directly
to customers. The new prosperity of
the utilities makes ii generally feasible
for the we'll intrenched compa MES to
sell common stock to their own Gus
toners. Perhaps more will attempt
to do SO.
Meantime, the Consolidated Gas Co.,
which made gestures of being inter
ested in these newer forms of hnanc-
ing in 1928, returns to old.fashioned
financing schemes, allowing the Gus
toners to make a small profit on the
transaction and to give up their par
ticipation.
When a public utility corporation
sells shares directly to the public 1t
has a special obligation to sell choice
issues only. It should also see the wis
dom Of retaining such a partnership
interest once II has been established.
1t seems TO me that in eliminating the
customer owners the Consolidated Gas
Co. is sacrificing intangible assets in
good will and friendship in order to
make bookkeeping gains.
Dreams sometimes do come true in
the workaday world, even Il the
realization of hopes is long delayed.
The late James J. Hill in 1901 visioned
great combination of railways in
the Northwest. His ambitions were
throttled by the popular clamor against
monopolieS and trusts. The Sherman
antitrust law stood as a barrier be-
tween Mr.. Hill and his goal.
Rail Mergers In Fire.
But in 1920 Congress virtually re.
pealed the Sherman act, in so far as
| the railroads are concerned. The
merger provisions of the new legisla-
| ton, however, are somewhat vague
| and need further classification. Those
bent on effecting consultations believe
| that under the law as II now stands
railroads must be joined through
leases instead of through physical con
| solicitations.
The joining of the Great Northern,
| the Northern Pacific and the Burling-
ton, which seems imminent, will be
| effected by new interests in these
former Hill roads, headed by Arthur
| Curtiss James. copper operator, who
is the largest single shareholder. Be-
| fore the plan can be effected II will
have to be submitted for approval TO
| the Interstate Commerce Commission.
] Meantime. the Van Sweringens of
! Cleveland are getting ready their re-
! vised program for unifying the Nickel
| Plate, the Erie. the Pere Marquette
the Chesapeake and Ohio and the
| Hooking Valley. Nearly q year age
the Interstate Commerce Commission
rejected the original Van Sweringen
proposal not on transportation
grounds, but because of the proposed
financial set-up.
Seven years after Congress reversed
itself on railroad mergers the period