GIFT OF 
 
AUG 17 I 
 
 REASONS AND REMEDIES FOR OUR 
 BUSINESS TROUBLES 
 
 AN ADDRESS 
 
 DELIVERED BEFORE THE COMMERCIAL CLUB AND THE 
 
 PITTSBURGH INDUSTRIAL DEVELOPMENT COMMISSION 
 
 AT PITTSBURGH, MAY 22ND, 1914 
 
 By 
 SAMUEL UNTERMYER 
 
 of New York 
 

REASONS AND REMEDIES FOR OUR BUSINESS 
 
 TROUBLES 
 
 It is useless to blink the fact that we are in serious trouble. 
 At the end of a long series of years of bountiful crops and 
 with a record-breaking harvest for the present year assured, 
 when optimism should be rampant, we are confronted every- 
 where by business contraction and depression. The New York 
 banks are overflowing, call money on Stock Exchange collateral 
 is a drug in the market, as is always the case when business is 
 languishing, and yet it is impossible to secure loans on improved 
 unencumbered real estate or investment funds for new enter- 
 prises on any terms. Capital is everywhere hoarding its re- 
 sources for some emergency and the small investor seems to have 
 disappeared. 
 
 Why? Until we have diagnosed the disease it would be 
 dangerous to attempt to apply the remedy. There are doubt- 
 less contributing world-causes but they are so remote as to 
 be almost negligible. There are such things as world cycles 
 of business and financial depression due to destructive wars, 
 widespread famine, panics brought about by over-straining the 
 world's capital resources and by over-speculation but no such 
 conditions confront us at the moment. 
 
 True, the Balkan War and the demands upon European cen- 
 tres for funds with which to refinance the Balkan States are 
 and will for some time continue to be a severe drain and will 
 divert European capital from us, as do the attractions of the 
 vast new enterprises in Russia, South America and the Far 
 East. 
 
 But we have accumulated wealth so rapidly that we are 
 year by year less dependent on the investment of new foreign 
 capital in our country, although it is still very important to 
 us that existing 1 investments shall not be withdrawn as they 
 have been recently, 
 
Our troubles do not however lie primarily in that direc- 
 tion. 
 
 Xor is the Tariff Bill to any appreciable extent responsible 
 for our plight. A downward revision was demanded by the 
 people and recognized as necessary by all parties. The change 
 lias been from an average of about 43% to an average of 
 about 20% and has been on the whole wisely distributed. It 
 is the first Tariff Bill enacted in our history that was unselfish 
 and uninfluenced by the demands of special interests, which 
 have heretofore dictated this class of legislation. If with that 
 percentage of protection we are unable to meet foreign com- 
 petition in our own country and stimulate our export busi 
 ness, we may as w^ell count ourselves "out of the game" in the 
 world's markets. 
 
 The statistics for the first eight months of the operation of 
 the new law show far less disturbance in the currents of tradt 
 than was fairly to be expected. We have been a shiftless, 
 prodigal and unscientific people in our methods of manufactur 
 ing and marketing our goods. The undue shelter of the Tarifi 
 and the elimination of home competition through the Trusts 
 and trade agreements have weakened our business virility, en 
 couraged extravagance, substituted bureaucracy for individ 
 uality in our Trust-controlled industries and have thereby 
 crippled our competitive power. With our superior labor and 
 vast natural resources we should be leading the world as an 
 export manufacturing nation instead of which we are in im- 
 minent peril of ceasing to be a factor. 
 
 If, as I believe, time shall demonstrate that with the return 
 to individuality in business and the practice of skill and econ 
 omy and with the resourcefulness that are ours we are able to 
 meet foreign competition with the aid of the generous pro- 
 tection we now enjoy, the struggle will have been wholesome 
 and stimulating. There is no basis for charging our present 
 conditions to the Tariff. 
 
 What then are the reasons assigned and where lies the 
 truth? 
 
 First and foremost, it is insisted in certain influential quar- 
 ters that the policies of the Administration are responsible. 
 Its economic program is simple to destroy the Trusts and 
 curb existing corporate abuses -which is said to be unsettling 
 business. Our newspapers are feeling the effect of business 
 
contraction and financial stagnation in their advertising col- 
 umns. In casting about for an explanation they have adopted 
 the views of the supposed financial experts, -whose interest. 
 it is to divert blame from themselves, especially when it offers 
 them the opportunity at the same time to fasten it upon an 
 Administration that is pledged to correct their excesses. And 
 so we have the great power of the press honestly, but I think 
 mistakenly, generally supporting the cry that the demoraliza- 
 tion is due to impending legislation. 
 
 If this is an erroneous view it is doing incalculable harm. 
 Like every treatment based upon a false diagnosis, the real 
 disease continues to develop and progress through neglect, 
 whilst the healthy organs are weakened by the irritation result- 
 ing from mistaken treatment. 
 
 It is therefore of the highest importance that w^e get at the 
 actual facts. Our National prosperity is involved in reaching 
 the right answer. Party spirit and party advantage should 
 play n part in such an inquiry. In the interest of the coun- 
 try as well as for our own sakes let us be absolutely fair in 
 seeking the solution. Nothing is to be gained and much will 
 be lost if we are diverted to false leads. 
 
 I am aa ardent admirer of our Chief Magistrate, but not a 
 blind worshipper or follower of his or any other man's policies. 
 Like all of us his judgment is fallible, but he has shown him- 
 self exceptionally responsive to the public will and has made 
 surprisingly few if any mistakes in dealing with the stupendous 
 problems that have been thrust upon hirn and in carrying out 
 the program that he was commissioned to execute. 
 
 In fourteen months of power the party has been confronted 
 with more grave and sudden International and National emer- 
 gencies than have come to previous Administrations in as 
 many years. The President has met the situations as they 
 arose with candor, courage and splendid judgment and has 
 grown day by day in the confidence and affections of the coun- 
 i i y. I believe in his high ideals of public duty and in his 
 Intense patriotism ; but he has no monopoly of those virtues. 
 They hare characterized every President in the history of our 
 Nation. That is our proud boast and the fact that it is true 
 is the best proof of the success of Kepublican institutions. 
 
 Let us briefly analyze what the Administration has thus far 
 done and what it is proposing so that we may determine 
 
whether there is any basis for the charge that it is to any extent 
 accountable for the present distressing business unrest and 
 uncertainty. 
 
 Its critics claim that our Mexican policy has been wavering 
 and provocative of war ; that we should either have recognized 
 Huerta at the outset and thus assisted him to restore order in 
 his country or have intervened in short order to that end with 
 the prospect of a long and bloody conflict that would have 
 confirmed and concentrated upon us the suspicion and hatred 
 of our South American neighbors whose confidence and friend- 
 ship we are anxious to secure. 
 
 When the history of the events that preceded the present 
 Administration is written and the story of wholesale assassi- 
 nation, treachery and chicanery by which Huerta secured and 
 maintained power, and his savage disregard of the decencies 
 necessary to diplomatic intercourse in his dealings not only 
 with us but with the representatives of all the Powers is told, 
 it will be seen that quite apart from the fact that we were 
 asked to encourage on our borders a Government founded on 
 assassination it would have been for many other reasons im- 
 possible to have diplomatic relation with that sort of Dicta- 
 torship. 
 
 Posterity will in my judgment give high praise for the splen- 
 did evidence furnished by this incident of the depth of sincerity 
 of our desire for world peace, as evidenced by our rare patience 
 and self-abnegation. We have at last made our neighbors re- 
 alize that we shall never wage a war of conquest. The lesson 
 we have taught by our attitude under intolerable provocation 
 that a giant nation need not use its strength as a giant is well 
 worth the price. We are about to witness the triumph of a 
 new diplomacy on this Continent that will render war hereafter 
 well-nigh impossible and will advance the cause of humanity 
 by centuries. No greater service was ever performed. Our 
 Xation will head the roll of honor in the cause of universal 
 peace. 
 
 The situation was in any event unavoidable. It was a legacy 
 to the present Administration from its predecessor. There is 
 nothing in it to account for the troubles Ave are IIOAV discussing. 
 They were with us before the Mexican crisis arose and have 
 not been altered by it. War should stimulate rather than de- 
 press business, temporarily at least. So we may dismiss that 
 consideration and take up in order the domestic causes that 
 
5 
 
 are assigned; all of which are based on the past accomplish- 
 ments and present proposals of the Administration by way of 
 legislation. 
 
 Apart from the Tariff Bill and yet a part of it, there has 
 been enacted the Income Tax Law. Surely none will deny the 
 wisdom of that legislation . or contend that it has tended to 
 impair confidence or unsettle business. It was a cruelly long- 
 delayed act of justice to the toiling masses upon ivhom all the 
 burdens of government had been laid. Let us hope that the 
 ]> resent law is only an entering w^edge. I believe the time is 
 not far distant when the revenues of the Government from that 
 source will develop our vast natural resources, convert our 
 deserts into rich agricultural gardens, widen and deepen our 
 rivers and harbors, maintain an army and navy that will make 
 for universal peace, furnish prosperous employment for hun- 
 dreds of thousands of our people and inaugurate, with the co- 
 operation of employers of labor, a vast system of social reforms 
 that shall include old-age pensions and insurance against sick- 
 ness and unemployment. The enactment of this program will 
 be the answer of Capitalism to the impracticable theories of 
 Socialism. 
 
 The passage of the Currency LaAV is the other momentous 
 accomplishment of the Administration within its brief life. 
 ^Nothing more distinctively constructive and reassuring to busi 
 ness and nothing more necessary to its safety, stability and 
 independence has ever been accomplished. Its detractors have 
 been forced to recognize its value and have been converted into 
 unwilling champions in the face of their dire prophecies of 
 disaster. The rich harvests of the privileged few and the suffer- 
 ings of the many from financial panics are things of the past, 
 thanks to the courage and wisdom of this legislation. 
 
 Yet it is only a few months since our troubles were being 
 charged to the pendency of the Currency Bill and a formida- 
 ble movement was under way to postpone action upon it, for the 
 same reason that is now being urged for delaying the settle- 
 ment of the Trust Question. Would it have made for the bet- 
 terment of conditions if Currency legislation had been left 
 "hanging in the air" for another year? The same reasoning 
 applies in favor of now ending the agitation and uncertainty 
 over the problem now under consideration. 
 
 There is nothing revolutionary or unsettling in the pro- 
 posals embodied in the pending Trust Bills. The only just crit- 
 
6 
 
 icism is that in their present form they are too largely made 
 up of compromises weak, superficial, ineffective and innoc- 
 uous. They will not as they stand eradicate the intolerable 
 evils against which they are supposed to be directed. The 
 sub- Committee by which they were drafted and which has been 
 for months faithfully and industriously struggling with its 
 complicated problems has mistaken the boisterous activity of 
 a small, selfish, powerful group, working their now familiar 
 publicity campaign, for the voice of the business world and 
 has timidly surrendered to the outcry. The objections that 
 appear to come from the business community are genuine only 
 to the extent to which they too have been misled by this cam- 
 paign in which thy have been cleverly thrust forward as pawns 
 in the game that the Big Interests are playing under cover 
 of legitimate business. The protesting resolutions of Chambers 
 of Commerce against this, that and the other feature of the 
 Bill, with which Congress is being inundated are old acquaint 
 ances. We now know how they are engineered. They have 
 lost their terrors unless supported by reason. The article they 
 furnish is now recognized as the purchasable commodity of 
 a new but already well-organized industry that has been hap- 
 pily christened by one of its chief practitioners as the "accelera 
 tion of public opinion." 
 
 Comprehensive regulative laws, covering this entire field 
 are essential to the continued existence of small business and 
 to restore its independence. We are constantly being deluded 
 "by the cry that we have too many laws and that what we need 
 is a proper enforcement of those w^e have. This is not true 
 in the field under discussion. Our corporate form of business 
 has developed so rapidly and on such a vast scale that the laAvs 
 to regujate it have not kept pace with the growth and develop- 
 ment of corporate government. The absence of these restric- 
 tions is largely responsible for the corporate corruption from 
 which we are suffering, the evidences of which are gradually 
 coming to light. 
 
 The public has been for years warned of its existence and 
 of the necessity for relief by those who are familiar with the 
 facts and who have had the courage and public spirit to speak 
 out, but their voices have been drowned by the power of the 
 entrenched interests and they have been rewarded chiefly with 
 inspired abuse and misrepresentation of their motives. Nothing 
 
has boon disclosed within the past year that was not plainly 
 foreshadowed by the testimony and report of the Pujo Com- 
 mittee. The time has at last come when legitimate business 
 and the community that have so long victimized are begin- 
 ning to recognize the peril. Substantially all the pending legis- 
 lation is outlined in the Recommendations of the Report. 
 
 We need laws : 
 
 1. Prohibiting all forms of interlocking control of big 
 competitive businesses, of which interlocking directors is but 
 one of its many manifestations, but it is not necessary to in- 
 terfere with small business or to bring it under Federal regu- 
 lation. 
 
 2. Prohibiting holding companies that are in restraint of 
 competition. Here again small companies should be excluded 
 from the operation of the Act. 
 
 3. Regulating competition with a view of preventing the 
 practice of unfair business methods by Big Business to the 
 injury of small competitors. 
 
 4. Prohibiting the "dummy" director and all other forms 
 of secret control so that the responsibility for corporate ac- 
 tion shall be fixed upon those who in fact dominate and guide 
 the corporate policy and benefit by its lawless acts. 
 
 5. For the protection and proper representation of minority 
 stockholders. 
 
 G. Rigidly regulating and supervising the issue of corporate 
 securities through the agency of Federal Commissions and 
 requiring complete publicity of the purposes to which the pro- 
 ceeds are to be applied and of the profits of the bankers, pro- 
 motors and intermediaries. 
 
 7. Abolishing the "graft" of constituting private bankers 
 as the sole fiscal agents and depositaries of the funds of the 
 corporations whose policies they dictate and requiring that 
 their funds be placed in banks where they will be subject to 
 supervision. 
 
 8. Placing the operations of the Stock Exchange under Fed- 
 eral supervision so as to put an end to the long era of shame- 
 less manipulation of security prices through the use of the 
 machinery of the Exchange and to which dishonest practice 
 many of our vast fortunes may be traced. 
 
 9. Releasing the grip of the handful of men constituting 
 the "Money Trust" over our great interstate railway and indus- 
 
8 
 
 trial systems by abolishing voting trusts, reforming our meth- 
 ods of appointing Receivers of insolvent corporations and by 
 placing Reorganizations under the control of the Courts and 
 of Federal Commissions. 
 
 10. For a systematic and impartial enforcement of the Anti- 
 Trust Law, which has never been and is not now being gener- 
 ally enforced. 
 
 11. Taking out of the hands of the Attorney-General and 
 furnishing the necessary legal and executive machinery for the 
 enforcement of the decrees of the Courts for the dissolution 
 of combinations that have been adjudged to be unlawful and 
 for actually disintegrating and keeping segregated such cor- 
 porations and thus ending the farce in which our Attorney- 
 Generals have been engaged and that is bringing the admin- 
 istration of justice into deserved contempt. 
 
 12. Giving to every party who is injured by the existence 
 of an unlawful combination the independent remedy to enjoin 
 the illegal acts or suing to dissolve the combination without 
 awaiting the slow, uncertain and spasmodic processes of the 
 Department of Justice. This right should however be safe- 
 guarded against abuse by allowing the Government to assume 
 control of any such action at its pleasure and by preventing any 
 settlement or other disposition of the action between the par- 
 ties without its consent. 
 
 These are the more urgent of the many subjects that it is 
 hoped to include in the pending program when perfected, as 
 it should be and as I have every reason to believe it will be. 
 
 It is not so formidable a program as would appear at first 
 glance, but the entire field is so highly technical and special- 
 ized that the opportunities to mislead are endless. There is 
 nothing in any feature of the program that should disturb or 
 unsettle legitimate business or finance; nothing that is not 
 distinctly wholesome and constructive. Its enactment will 
 protect and reassure honest investment and should give a new 
 impetus to independent enterprise. 
 
 In order to determine whether the pendency of this legisla- 
 tion is in fact injuriously affecting business, it might be worth 
 while to analyze briefly the objections that have been urged 
 against it. They are directed mainly against the prohibition 
 of interlocking directors and holding companies and they come 
 apparently from many sections of the country 
 
9 
 
 The necessity for this legislation was developed as the result 
 of the investigation of the Pujo Committee, from which it was 
 demonstrated that these were the most formidable instrumen- 
 talities through which the "Money Trust" obtained its grip 
 upon the finances of the country. Through the medium of 
 interlocking control many of the great banks, railway systems 
 and industrial combinations were welded together into a single 
 "community-of-interest" against which independent enterprise 
 found it impossible to contend and which still remains undis- 
 turbed. We shall never achieve industrial independence or 
 peace until it has been destroyed, root and branch. 
 
 It was through the agency of the holding company and the 
 supineness of the Department of Justice that the organization 
 of the great Trusts became possible. The idea of any cor- 
 poration being controlled by another corporation a puppet 
 moved at the direction of a power other than of its own gov- 
 erning body is repugnant to all conceptions of justice. It 
 was not intended that a corporation should ever be governed 
 by another corporation. That form of management involves 
 on its face a breach of trust toward the outstanding stock- 
 holders, who are entitled to have the benefit of the undivided 
 judgment of their managing trustees in the sole interest of 
 their own corporation and without regard to the interests of 
 any other agency. Under this system of government the man- 
 agement of the controlled company is necessarily conducted 
 primarily for the benefit of the controlling or holding com- 
 pany, which may be and often is opposed to the welfare of the 
 controlled company. 
 
 The claimed embarrassment to business that will result 
 from unlocking these interlocking interests is more fancied 
 than real, provided the operation of the law is confined, as 
 it should be, to the larger corporations. A reduction in the 
 number of Directors will answer the important purpose of 
 concentrating responsibility. The large corporations are man- 
 aged mainly by their Executive Committees. The Boards, con- 
 sisting of from 20 to 40 Directors, are unwieldy and a dis- 
 tinct impediment to effective administration. They are mere 
 registering machines for the Executive Committee. Thoir 
 names are advertised to the public as a guaranty of manage- 
 ment, which is in fact misleading and intended so to be. In 
 financial institutions they are meant to attract business with- 
 out attending to it. With the reduction of Boards to a work- 
 
10 
 
 able body the interest and activities of each, man will be cen- 
 tered in his own institution and we shall have a consequent 
 resumption of competition. 
 
 The disintegration of the holding company can be accom- 
 plished with still less friction or disturbance, by merely dis- 
 tributing the shares so held among the shareholders of the 
 holding company. The only "disturbance" to business that 
 would thus be involved would be to restore the competition 
 that has been thus restrained. If the stock-holdings involve 
 no restraint of competitive conditions the pending Senate Bill 
 offers complete relief through application to the Trade Com- 
 mission, or in the case of common carriers to the Interstate 
 Commerce Commission, which has power to permit holdings 
 of that character. 
 
 I agree however and have earnestly urged that these pro- 
 hibitions against interlocking directors and holding companies 
 should be limited to cases in which the interlocking of directors 
 or stockholdings would substantially affect the public interest 
 and that the smaller corporations be accordingly eliminated 
 from the provisions of the Bill. There is no reason for hamper- 
 ing small business. None of the perils sought to be avoided 
 lurk within its borders. The operations of the small corpora- 
 tions are not charged with a public use and do not affect the 
 public welfare in the sense that applies to the larger ones. 
 
 The suggestion for restricting the jurisdiction of the Trade 
 Commission in these respects has been embodied in the form 
 of proposed amendments, limiting the Bill to interstate corpor- 
 ations having $1,000,000 capital or $2,000,000 of gross assets 
 or $3,000,000 of gross annual business. Such an amendment 
 will confine the operations of the Bill to a comparatively few 
 cases. It will eliminate at least 90% of the corporations that 
 do an interstate business. 
 
 I cannot conceive why any business readjustment, embarrass- 
 ment or inconvenience would be involved in enacting any of the 
 other reforms that are now under consideration. The dummy 
 director and the secret and indirect control cannot be justified. 
 No defense of these practices has ever been attempted. No 
 one has the right to accept the benefits and attempt to escape 
 the responsibilities of corporate management through such 
 devices. 
 
11 
 
 Xor has th<>re ever yet been any justification attempted of 
 the failure to enforce minority representation in corporations 
 through cumulative voting. Some of the State (Constitutions 
 ef which those of Missouri and Pennsylvania are ready illus- 
 trations, make it compulsory to provide such representation, 
 as it should be in every State. If for instance a Board of 
 Directors is composed of nine members, there is no reason why 
 the owners of ^ach one-ninth of the stock should not be repre- 
 sented by one Director, which is automatically accomplished 
 through what is known as cumulative voting. The majority 
 would still control but the minority w T ould have the privilege 
 of knowing ^v\hat is being done, of protecting itself against 
 unlawful acts and of having its voice heard on questions of 
 business policy in which it is vitally interested. 
 
 The supervision of the issue of bonds and stocks of inter- 
 state corporations by Federal authority, which is now proposed, 
 Is still another of the Recommendations of the Pujo Committee. 
 It is a tardy recognition of the right of the public to be pro- 
 tected against exploitation through banking control or by the 
 sale of worthless and inflated securities, to secure an accounting 
 f corporate expenditures and to prevent the use of corporate 
 funds in the corruption of public officers and legislative bodies. 
 If these safeguards had been in existence in past years we 
 should have been saved the National scandals that are being 
 from time to time unearthed to the destruction of our credit 
 and reputation abroad and at home. 
 
 The Bill to require the incorporation of Stock Exchanges 
 and to place them under Federal supervision is an essential 
 part of any comprehensive program for corporate reform. No 
 legislation will be thoroughly constructive that omits to take 
 tb^s factor into account. Its overshadowing importance 1 is 
 unfortunately little understood by Congress. The manipula- 
 tion of securities through the machinery of the Exchange and 
 their wide distribution under cover of such manipulation has 
 Veen the most prolific incentive for the organization of Trusts. 
 It has cost the public more hundreds of millions than they have 
 suffered through any other of the many devices through which 
 fliey have been plundered. 
 
 The remaining provisions that are intended to secure the 
 general and impartial enforcement of the Anti-Trust Act, the 
 effective execution of the judgments of the Court and the rem- 
 
12 
 
 edies to individuals who are injured by violations of law, can 
 hardly be claimed as disturbing elements. If the Act as orig- 
 inally framed had secured to individuals aggrieved by its vio- 
 lation as it should have done the right to prevent the organ- 
 ization of unlawful combinations or to enjoin their operations, 
 the country would have escaped this vexatious problem. Few if 
 any of the Trusts would have been permitted to come into ex- 
 istence. Threatened private interests would have realized then 
 peril and would have been alert to protect themselves. The 
 Government stood idly by and by its silence lent consent and 
 encouragement. The sole remedy allowed by the Seventh Sec- 
 tion of the Anti-Trust Act to private interests, to recover treble 
 damages for such injury, has proven inadequate, as might have 
 been expected. The burden of conducting such litigation is in 
 itself prohibitive and the necessity of proving the damages 
 under our rules of evidence requiring that it must be the prox- 
 imate cause of the injury, renders relief impossible. 
 
 The only reason that has ever been assigned for not permit- 
 ting an aggrieved party to sue in equity to enjoin or dissolve the 
 combination, that it would give rise to blackmailing suits, has 
 never seemed to me a sufficient answer. Anybody can be sued 
 without cause and must defend himself. Corporations as well 
 as individuals are now subject to suit on every other conceivable 
 ground. Why should the Courts have been so solicitous to pro- 
 tect them against attack on this particular ground in which the 
 public is so vitally interested when it is notorious that the De- 
 partment of Justice has never attempted to enforce the law 
 except in a comparatively few spasmodic cases of conspicuous 
 corporations out of the thousands of known open violations? 
 It would be physically impossible for the Department to enter 
 upon any general enforcement of the law even if it were dis- 
 posed to do so and it has never shown any such disposition. 
 
 It must have been manifest from the beginning that if the 
 enforcement of the law was really desired the only way to se- 
 cure it would be to permit it to be done by private individuals 
 who are affected by its violation. 
 
 The proposed amendment meets the objection that has been 
 made, in that H requires any individual who sues in equity, to 
 join the Government as a party so that the suit cannot be dis- 
 continued pr dismissed by agreement between the parties with? 
 
13 
 
 out the consent of the Govern incut. The latter is given the 
 right also to assume the prosecution of the case at any stage 
 of the proceedings, or to withdraw from the suit and is not to be 
 bound by the judgment unless it assumes the prosecution and 
 continues in it to the end. 
 
 Is there anything in these provisions that should be distn rh- 
 ino- to business? Or in the further requirement that the new 
 Trade Commission shall be consulted and its approval obtained 
 in determining the manner of dissolving unlawful combinations 
 and the form of the decree and that it shall see to the proper 
 execution of that decree? These requirements will doubtless 
 be very disturbing to certain classes of business, especially to 
 the Trusts that have been declared unlawful, have been decreed 
 to be dissolved and that are still nourishing as though nothing 
 had happened. It may also prove somewhat disconcerting to 
 the public officials who have frittered away th'e practical results 
 of hard-earned Government victories through meaningless de- 
 crees of dissolution. It is high time that we did away with these 
 performances. I venture to predict that if this amendment is 
 passed the Trade Commission will find a way of securing an 
 actual dissolution of the Standard Oil Company and of numer- 
 ous other violations that have been dissolved in form but not 
 in fact. 
 
 If, then, it be true that the pending legislation involves no 
 disturbance of legitimate business, we return to the inquiry 
 as to the reason for the existing unsettlement and depression. 
 
 There has never been any doubt in any mind as to the true 
 reason. 
 
 It is due to the lawlessness and corruption in the manage- 
 ment of our great corporations and to the destruction of the 
 confidence of our home and foreign investors following the ex- 
 posures of a few of the many instances that have characterized 
 the conduct of our corporate affairs in the past. There is noth- 
 ing exceptional or that should be considered surprising about 
 the disclosures with respect to the management of the New 
 Haven road that have recently been engaging public attention. 
 In this particular instance the investigation thus far has barely 
 scratched the surface. It relates mainly to a single phase of 
 the New Haven road and involves the diversion of only about 
 $11,000,000 out of a total of over $200,000,000 that will have to 
 
14 
 
 be accounted for some day, provided the comatose shareholders 
 will ever awaken and have the sense or can summon the courage 
 to assert their rights. If the investigation of the Interstate 
 Commerce Commission is extended into the other transactions 
 so as to include the vast purchases of comparatively worthless 
 competing properties at fabulous prices for the purpose of de- 
 stroying competition, the dimensions of the offenses committed 
 against the stockholders of that Company will be of a character 
 to render the exposures incident to the French Panama Canal 
 scandal as a moonlight silhouette compares to a volcanic erup- 
 tion. 
 
 I do not mean to suggest that the bankers or the body of dum- 
 my directors have been guilty of or actively privy to any actual 
 dishonesty or that they have personally profited by the transac- 
 tions in any illegitimate way. I do not believe that they have. 
 But in the final analysis the reckless waste of corporate funds 
 for unlawful purposes has brought about the same result so far 
 as concerns the shareholders. 
 
 I believe also it will be found that if the affairs of a number 
 of other equally or still more prominent railway systems that 
 might be mentioned ever come under the scrutiny of an executive 
 or legislative investigation or of a Court pf Justice, we shall 
 find facts far more startling than anything that has been or 
 will be exposed in the investigation of the New Haven road. 
 
 It is however to be hoped that the Government will not em- 
 bark upon any such general crusade. Our credit and reputa- 
 tion have already suffered sufficiently from the mere suggestion 
 of the general corruption that lies underneath the surface of 
 past corporate management. These are things of the past that 
 should be prevented for the future. The country seems suffi- 
 ciently aroused to the realization of its disgrace to offset the 
 machinations of the interests that w r ould ordinarily be able to 
 prevent reformatory legislation and it is not worth while to 
 further disturb confidence by turning up any more of the hor- 
 rible facts. We know in a general way enough of the evils to 
 be able to apply the remedy. 
 
 None of these things could have happened under proper Fed- 
 eral supervision, nor if we had laws as in other civilized coun* 
 tries prohibiting Directors from dealing with themselves or 
 lining their pockets at the expense of their ^shareholders or 
 
15 
 
 "rigging" the stock markets in their own securities or gambling 
 on inside information. 
 
 These mentors of the business and financial world sternly 
 admonish us that every attempt to expose or correct these evils 
 is "disturbing" business. Until that kind of business was dis- 
 turbed and destroyed by exposure and by the legislation that 
 is needed to punish it as it deserves, we would not have and 
 have no right to expect the return of public confidence. There 
 is one aspect in which the shareholders of these corporations and 
 the public deserve just the kind of treatment they have been 
 receiving at the hands of the men who dominate these corpora- 
 tions solely by reason of the supineness of the real owners. 
 If they know how to protect their rights they have never given 
 any indication of it. 
 
 Here again the case of the New Haven is only one of a hun- 
 dred striking illustrations of the criminal inertia of stockhold- 
 ers. When the trouble first arose they sat aimlessly by and saw 
 a highly respectable decoy "Protective" Committee organized 
 apparently in protection of the management to ward off real 
 investigation. 
 
 What has become of that Committee? If there was any mem- 
 ber upon it who really represented the true interest of the stock- 
 holders why was nothing ever done to uncover the recklessness 
 of the management? If they made an examination of the ac- 
 counts why did they not report the existing conditions to the 
 stockholders? Why did they permit the investing public to go 
 011 buying the shares in ignorance of the facts? Why have the 
 stockholders never organized and elected their own representa- 
 tives to protect their rights and to secure restitution? What is 
 the matter ( with these people who have had the intelligence and 
 frugality to amass these interests that they lack the common 
 instinct of self-preservation? They have been told that over 
 f G0,000,000 in unearned dividends have been paid ; that a huge 
 corruption fund has ben used to procure franchises for a worth- 
 less property and that there has been more corrupt politics than 
 there has been of railroading ; that a large part of $200,000,000 
 that has been expended has been devoted to the buying of com- 
 peting properties at fabulous prices in violation of law and that 
 almost every crime in the calendar against Corporate manage- 
 ment has been perpetrated under the very eyes of their Trustees. 
 
16 
 
 Thousands of these stockholders acquired their interests in re- 
 cent years upon the faith of the inducement of the dividends that 
 were being paid and of the representations contained in the 
 annual statements to the effect that the earnings were 
 in excess of these dividends. What right have these men 
 and women who are idly standing by with knowledge of these 
 facts to expect sympathy or consideration? If they have no 
 regard for their own investments they have at least a public 
 duty to perform which none of them seem willing to under- 
 take. 
 
 For years past our leaders in the financial world have been 
 educating the public to the belief that every attempt to un- 
 cover corporate rottenness or enforce accountability for 
 the sacred trusts reposed in the officers and directors of these 
 corporations was a "strike" or an attempt at blackmail. No 
 stone has been left unturned to crush and disgrace the few 
 men of courageous spirit who have tried to protect the share- 
 holders and the public. When Mr. Louis D. Brandeis led the 
 assault upon the New Haven management and tried to open 
 the eyes of the stockholders to the situation, when he told 
 them that they were being deceived, that the dividends were 
 not being earned, he was denounced and traduced as an enemy 
 to society. Almost every Representative from his State in 
 Congress and prominent men in public life from adjoining 
 States banded together, largely through the influence of the 
 New Haven road, to prevent him from securing an entrance 
 into public life in the position which he would have been 
 of inestimable aid to the Nation and which he would have 
 graced and honored by his acceptance. It has been notorious 
 that for decades the New Haven road has practically owned 
 the Legislature of certain of the New England States. It re- 
 garded these exhibitions of its power to punish enemies and 
 reward its friends with high public office as essential u.r.d it 
 has never hesitated to give such object lessons whenever occa- 
 sion presents itself. 
 
 I repeat that we are getting just the kind of corporate man- 
 agement we deserve and that so long as this spirit is permitted 
 to pervade the public mind we shall continue to get that sort 
 of management and none other. 
 
 And yet we continue to permit ourselves to be beguiled ns 
 to the cause of our present troubles. Is it any wonder that 
 
17 
 
 the investors of other nations have been throwing our securi- 
 ties buck upon us at any price they can get for them, glad to 
 be rid of us on any terms? Or that we are unable to sell any 
 more securities abroad? Or that our markets are depressed 
 and we find difficulty in financing the requirements of the 
 maturing obligations of our public service corporations? Why 
 should the small investor entrust his hard-earned savings to 
 the men who have mercilessly exploited and betrayed him 
 whilst moralizing in public upon the importance of character 
 as the essential to success, to the chorus of a worshipping press 
 led by their chosen press bureaus? 
 
 This only begins to tell the story of the callousness and 
 stupidity of our people. Not even when their eyes have been 
 opened against their wills and in the face of their resentment 
 at the exposure of the faithlessness of their chosen trustees, 
 do they begin to see or act. They go on permitting and en- 
 couraging these same men to manage the trusts they have be- 
 trayed. The powers behind the throne that have named the 
 presidents and trustees of the looted corporation proceed to 
 lecting another man, always of previous untarnished reputa- 
 discipline their tools by removing the chief untarnished reputa- 
 tion, but always pliant to their will, in his place, not even taking 
 the trouble to change the minor puppets. At the next election 
 of shareholders the proxies are gathered with the same ease 
 by the same people and the old order of things is continued 
 "without even a semblance of change, except in the nominal 
 directing head, but subject to the same mysterious control. 
 
 We had a like disheartening experience following the expo- 
 sure of Life Insurance corruption in 1906. The nominal 
 heads were deposed but the power behind the throne and the 
 old disciples remain. Yet none of these men had or has had 
 a single dollar of actual investment in the companies. 
 
 As indicating the close relations of the operations of the 
 various departments of the "Money Trust" to one another, T 
 call your attention in this connection to a few significant facts. 
 Prior to the insurance upheaval Mr. George F. Baker was 
 the Chairman of the Finance Committee and the dominating 
 spirit in the Mutual Life Insurance Company. He is now 
 more firmly than ever in control. Mr. Baker is and has been 
 for many years a partner of Mr. Morgan in all of the great 
 
 OFTHC 
 
 UNIVERSITY 
 
 OF 
 
18 
 
 enterprises. They together dominate or control the Equitable 
 Life Assurance Society, the First National Bank, the National 
 Bank of Commerce, the Bankers Trust Company, the Guar- 
 anty Trust Company and numerous other great financial in- 
 stitutions. When Mr. McCurdy was forced to resign as the 
 result of the Life Insurance exposures there was placed in 
 the Presidency of that Company with $500,000,000 and more 
 of assets the law partner of Mr. Baker's uncle who was in- 
 cidentally Mr. Baker's private Counsel and the Counsel for 
 his bank. The Mutual Life held 35,640 shares of New Haven 
 stock. The law passed in 1906 as the result of the scandal re- 
 quired them to dispose of all their stocks within five years, 
 which they subsequently had extended for a further term of 
 five years, to the disgrace of our Legislature. The New 
 Haven stock, which is now selling at $68 per share, could 
 readily hare been marketed during those years at $200 of 
 thereabouts. The Company has not parted with a share. The 
 difference in price means a loss of over $4,000,000 to the pol- 
 icyholders of the Mutual Life Insurance Company, but this 
 large block of stock is important to Messrs. Baker and Morgan 
 in their control of the New Haven road and it is steadily voted 
 from year to year as they direct. 
 
 But I have digressed. 
 
 With a few exceptions the Presidents of these roads and 
 great industrial organizations and all the Directors are named 
 by the same authority. The shareholders have no real voice 
 in their selection. 
 
 The Interstate Commerce Commission is doing the 
 right thing in ripping the lid from this nest of corrup- 
 tion to the extent necessary to guide Congress in leg- 
 islating to correct these evils, even though it involves immunity 
 to the chief puppet of the men who guided the destinies of the 
 Company. I am not so sure that it is necessary or advis- 
 able to extend the immunity further or that any valuable re- 
 sults will come from so doing, but the inaction of the Depart- 
 ment of Justice has been so exasperating and its purposes so 
 unfathomable that everyone has despaired of results in that 
 direction. 
 
 With such conditions surrounding us we ought not be sur- 
 prised to find these men "advising" us that if we seek to cor- 
 rect the evils for which they are responsible and which have 
 
19 
 
 destroyed public confidence the Administration will be chas- 
 tised by the "business" community for which they assume to 
 speak. The proposition that we continue to permit ourselves 
 (o be guided by them is so staggering in its temerity that one 
 is at a loss for words to characterize it. 
 
 The remedy is simple. Public confidence in corporate man- 
 agement must be restored. The existing legal machinery 
 does not assure responsibility and punishment for the mis- 
 deeds of Big Business. The enactment of the pending Bills 
 properly strengthened will help accomplish that result. Ours 
 is a rich country. Our wealth is fairly well distributed, not- 
 withstanding the many hundreds of millions that have been 
 confiscated by these man in one way or another by way of 
 tribute or through gross neglect. A fraction of it can still be 
 recovered by the shareholders if they will stand together in 
 each of these great corporations to enforce , restitution and pro- 
 tection for the future. 
 
 If the lessons of the past have taught them to manage their 
 own affairs hereafter it will have been worth the fearful cost. 
 When they are able to do that as in former years, when these 
 great properties were built up and operated by their real 
 owners, and not until then, the investing public here and abroad 
 will again interest itself in our enterprises. Meantime we can 
 do our share toward reassuring the civilized world that we 
 are not a Nation of freebooters and that we have sufficient 
 of the capacity for self-government left to end the recklessness 
 and lawlessness of High Finance so that capital will hereafter 
 T)e as safe with us as in other countries. 
 
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