The Washington times., 1935-02-09

Chiefly LOT IL ~
nancial control, 81
and to avoid W
various Govern ~ -
m ent regula- Lewis Hane"
tons and liabilities. Such cases
as Electric Bond and Share, the
insult organization, the Allegheny
Corporation, and the Guardian
Detroit Union group, illustrate the
type.
There are hundreds of large
holding companies in all kind OF
business.
A "holding company" 1 have
defined in my book on Bust
ness Organization and COmbi-
nation as follows: A corporation
created for the purpose of COM
bining other corporations by
owning a controlling amount of
their stock. A partial or tenn
porary consolidation is thus eS-
tabliShed.
Some of the more recent So
called holding companies, how
ever, have been more inter.
ested in merely financing their
subsidiaries, and making money
on such operations. Others are
chiefly interested as investors
I'm the stocks of other companies
for income.
We should note, too, that not
all holding companies exist to
combine competing subsidiary
companies. Sometimes the sub
salaries are in different stages
of an industry, such as ore. coke,
pig iron and finished steel, and
are not competitors.
But they all have similarity
IN form, being corporations which
hold" the stocks of other COM
panies.
The advantages of the holding
company are largely, though net
entirely private, and of interest
to business men. Thus it provides
the cheapest and easiest way to
get control over a number of
companies - Just to buy up
enough of their stocks to control
them.
In this way, a little capital can
swing a very large amount. Also.
widely scattered properties of all
sorts can be brought under one
general management.
1t would probably be impossible
to build up such huge business
organizations as we now have,
under any other known form of
organization.
This suggests the disadvan.
tages, for I am strongly of the
opinion that some of Our bust
ness organizations are much too
large for efficiency. The holding
company has encouraged organi-
cations which are too large to
allow personal attention and
direct supervision in sufficient
detail.
Equally important is the fact
that it has allowed business
power far in excess of respon-
sibility
AS a result, subsidiary COM
panies have been "milked" by ex-
ceSsive charges for Services" Sc
curities have been manipulated
and pyramided' Laws, both State
and Federal, have been circum.
vented.
In my judgment, the holding
company may be a good thing,
though a dangerous one. 1t
requires especial care in its use,
and should be subjected to spe-
cial regulation. But it should
not be smashed or abolished.
Nor do 1 see any reason for
Singing out the utility bust.
ness in adopting such regula-
tons. Industrial, railway, and
financial holding companies,
have been no better.
The chief steps should be to
safeguard the public from the
possible abuse of this form, and
these steps can be taken through
revisions in our corporation law,
and enforcement of our anti.
trust laws. (The Clayton Act
Of 1914 provides a basis.)
Special publicity covering all
phrases of holding company or
ganization should be provided.
The general principles should
be that CD actual holding" con-
troll makes the company and it's
subsidiaries practically one or
ganization. with responsibility in
the holder"
90 Control over subsidiaries in
different States makes the hold
ing company an interstate affair,
and it should be required to be
licensed by the Federal govern.
ment.
NJ