Evening star. [volume] (Washington, D.C.) 1854-1972, 1931-11-18
HOLDING COMPANY
CHANGES FORECAST
Pyramiding and InterIocking
Practices Are Believed
on the Wane.
BY GEORGE E. DoYING.

The complicated device in the public
utility field of pyramiding and inter-
locking holding companies is believed
here today to be on the wane, and sim
plification of the financial structure is
the new order Of the day.
That the holding company system
contains many elements OF good IS con-
ceded, but it Is equally obvious that II
has been proved to be susceptible OF
manipulation to the disadvantage OF the
properties involved and therefore to the
public served by such properties.
While it is the opinion Of some OBJ
servers that the process of sinplifica-
ton is natural evolution, there is
little doubt that the publicity resulting
from the methods revealed by the in
Vestigation of the Federal Trade Com
mission and the threats Of Federal
legislation for control of holding COM
panies have fastened the movement.
Simpler Management Policy.
The tendency today is to merge con-
tiguous operating companies and to
simplify corporate structures by ellml-
mating intermediate holding companies.
This is being done, according to Mat
thew S. sloan, president Of the New
York Edison Co., as a matter both OF
good business practice and good pubic
policy.
The stockholders of the International
Paper Co. have been called to meet De-
cember to approve the ultimate trans
fer of practically all OF the companyS
waterpower properties in the United
States, valued at $35, 000 900, to the
International Hydroelectric System, thus
segregating all the power properties
which are located on the upper Hudson
River and elsewhere in New York and
in New England. Both companies are
subsidiaries of the International Paper
& Power Co.
The Investment Bankers Association
of America considered the matter OF
eliminating the complicated devices IN
the public Utility financial structure at
a recent meeting.
1.-THE principles of simplicity should,
above all, be applied to holding COM
panies," said report by the assoc1a-
tons Committee on Public Service Se-
curities. 1T is unjust to the holding
company that it should be discredited
by absurdities Of corporate and f1nan-
cial involvement and pyramidlng, 10
which it occasionally has either oe-
liberately or thoughtlessly been sub
jected.
1T is grotesquely unnecessary that
sometimes six, seven, even eight cor
porate entities should continue to exist
piled one on top of another till respon-
Sibility is well nigh lost in the con-
fusion, however logical each may have
been individually at the time of its
creation.
Readjustment Favored.
"The different levels of securities that
the public is asked to buy, the tmpossi-
bility in not a few instances OF fol-
lowing their relative liens or obligations,
the practical impossibility of pursuing
some of them to ultimate account and
settlement result in a market uncer-
tainty about them and public crltl-
cism of them that has been but TOO
apparent and that has done much TO
prejudice underlying worth.
1.-The strength and stability OF the
utility security markets depend in no
small degree on simplicity Of corporate
and financial structureS-not as hope,
but as a fact. Conspicuous holding
companies are now simple or are In
process of becoming so, while, unfor-
tunately, others are apparently obliV-
1ous of the need"
Leaders in the public utility field in
sist that the tremendous advances
made by the industry could not have
been accomplished without the holding
company device, but the more far
seeing executives are rapidly reaching
the conclusion that in at least some
instances the system Is in need OF
adjustment.
(Copyright, 193i.)