TWO and a half million investors own the American corporations. Twenty million thrifty Americans are indirect partners in corporate ventures. These two dry-as-dust statements of cold fact contrast strangely with the highly colored figures of speech of certain yellow purveyors of written misinformation, and with the fantastic fairy-tale pictures of the yellow cartoonists. The car-seat student of American affairs. who assimilates pseudo-political economy from head-lines and cartoons, has been led to believe that a few “Magnates” own the railroads, the industries, and the banks of the country, and that they are leagued together to enslave “the common people.” But the cold figures, as revealed in the stock books of the corporations, tell a very different story.
The widespread ownership of the corporations is striking evidence of the faith the great body of industrious, thrifty Americans have in corporate enterprise, despite all recent disclosures of the misuse of corporate power by the unscrupulous. This faith was shown, as it never had been before in our history, in the recent disastrous financial panic, when hundreds of thousands of small investors came into the market place with their savings to take railroad, industrial, and bank shares off the hands of thoroughly frightened speculators and capitalists.
The popular fallacy regarding the ownership of the corporations has been in part due to a very natural misconception. The rapid growth of industrial “trusts” and railroad combinations in the past ten years has centralized control, and the careless observer has mistaken
this for centralized ownership. But the centralization of control has been accompanied by the spreading out of ownership.
The steel corporation concretely illustrates this among the industrial combinations. Before the formation of the steel “trustlets” of the nineties, many of the mines, mills, and furnaces were privately owned. A few rich men owned these independent industries. The public did not participate in the profits, except in the form of wages. Now, with centralized control, 110,000 investors are partners in the steel business and participate in the profits. A good many investors, it is true, paid high prices for their interest, but as many more, who had the patience to wait their opportunity, paid very low prices—witness the 27,000 new partners who joined the enterprise in the panic of 1907.
Southern Pacific is a good illustration among the railroads. When this was an independent property under the control of the Huntingtons, it did not have 3,000 shareholders. Now that it is part of Mr. Harriman’s railroad empire, the bulk of its stock is divided among 15,000 investors, and 15,000 more Union Pacific shareholders participate in the earnings of the big block of its stock held for their benefit. Tn a word, 3,000 partners received no dividends in the days of the Huntington ownership, and 30,000 investors now divide v$i7,ooo,ooo a year under Harriman’s control.
The figure—two and a half million partners in corporate enterprises—is an approximation. It is probably too small. Four years ago, when the Interstate Commerce Commission made its report
on railroad shareholders, the railroads had 350,000 owners. Since then the Pennsylvania list has increased from 42,100 to 59,200; Atchison, 17,500 to 25,000; New York Central 11,700 to 22,000; Southern Pacific, 4,400 to 15,000; Great Western, 5,900 to 10,500; Erie, 4,300 to 10,000; St. Paul, 5,800 to 10,000. These seven roads had 92,000 shareholders in 1904; now they have 152,000, an increase of 65 per cent. The other roads only have to show an increase of 35 per cent, to bring the total up to 500,000, a conservative figure. These half million railroad owners divide $300,000,000 a year in dividends, an average for each owner of $600—just about the average earnings of the 1,500,000 railroad employes.
Seven of the big industrial combinations have 200,000 owners on their books: Steel, 110,000; Telephone, 25,-
000; Sugar, 20,000; Copper, 18,000; Pullman, 13,500; Smelters, 9,400; Oil, 5,500. These account for only 1,600,000,000 of industrial stock, a minor fraction of the country’s total. It is conservative to estimate the number of other owners of industrial shares at several hundred thousand. How many people own mining stock in proven properties can only be conjectured. The Lake mines have 30,000 owners; one new silver mine has 13,500 owners, a new Western property has 12,000, another 5,000. Taking no account of “wildcat” companies—for we are talking about investors—the mines of the country must have several hundred thousand shareholders.
And then there are the banks. The last report of the ownership of the national banks (1904) showed that 318,000 investors owned the 8,800,000 shares of the 5,400 national banks, an average of only 28 shares to each holder. The popular fallacy is that a few thousand rich men own all the banks, but the truth is that as many thrifty Americans own bank shares as railroad shares. Since 1904 the number of national banks has increased 1,500, and it is fair to estimate that upward of 400,000 people now own these institutions. This takes no account of the twelve thousand trust companies, State banks, and private banks, whose owners make up another great army of investors.
Through the banks with their 15,000,000 depositors, the life insurance companies with* their 25,000,000 policyholders, and the fire, accident, and guarantee companies with millions more, it is safe to say that 17,500,000 people, not direct owners of corporation securities, are indirect partners in corporation profits through the investment of their savings in these securities. So the whole American people—all thrifty Americans—have a pecuniary interest in corporate ventures.
The “man in the street” speaks of “the Havemeyers” and the Sugar Trust as though they were interchangeable names, but the ownership of no “trust” is so widely distributed. So, too, Smelters and “the Guggenheims” are used in conversation in Wall Street with the same meaning. The man who has sold a mine to the American Smelting & Refining Company says: “T have sold a
mine to the Guggenheims.” But all of the Guggenheim brothers and their families own only a minor minority interest in the company they organized and developed. The 10,000 shareholders, if they were agreed that the Guggenheims were mismanaging their property, could throw them all out of the directorate. The carttail orator pictures the Telephone “trust” as a composite monster made up of Alexander Graham Bell and a few Boston plutocrats. It is true that there are forty rich men, mostly New Englanders, who own large interests in Telephone, but their combined holdings are only one-tenth as large as those of the 25,000 small investors in the company’s stock. The New England newspapers picture the New Haven railroad as even a worse monster than the Telephone “trust,” but the New Haven ownership is so widely scattered that the average shareholder’s certificate represents only 39 shares. The Manhattan Elevated in New York is always spoken of as a family affair, but a recent inspection of its books showed only a small fraction of its shares in the Gould family, and only six holders with more than 5,000 shares, with the majority ownership absolutely in the hands of 3,000 small investors. Even Standard Oil, the most closely owned of all the big corporations, is owned by investors
who never sit at the council table at 26 Broadway. That Standard Oil shares are distributed among 5,500 owners, despite the fact that they cost in the neighborhood of $600 each and cannot be traded in on any exchange in the world, is convincing proof that “the people own the Trusts.” The elder Rockefeller owns a quarter of his company’s capital, and there are fifteen Standard Oil capitalists whose combined holdings are a fifth of the capital. So all the “big men” in Standard Oil own quite a bit less than half the stock.
Looking over the stock books of the railroads one is impressed by the large proportion of women shareholders. The Georgia Railroad has many more individual women owners than men. This is true of most guaranteed stocks, which are favorite investments for women, whose sole thought is security of income. But the big railroads also show a surprisingly large proportion of women owners. When the last detailed examination was made of the Pennsylvania’s books, at the beginning of the year, 26,471 of the 57,226 shareholders, or 46 per cent., were women. During the panic of 1907 the number of women shareholders increased 7,189. One reason for the large proportion of women railroad owners is . that many husbands speculate in their own names, but invest in their wives’ names. A man who trades in a thousand shares of Union Pacific on margin and makes a turn of $3,000 on a threepoint rise may put the profits into twenty-five shares of Pennsylvania for his wife. The proportion of women holders of industrial stocks is not as high, because very few industrials are considered desirable as women’s investments. Bank stocks are /dvorites with women. Of the 318,000 owners of national bank stocks four years ago, 104,000 were women, who held ore-fifth of the national bank capital of the country. Since then the number of banks has increased a fifth, and it is fair to estimate that 125,000 women now own $200,000,000 of national bank capital.
On the Stock Exchange anything less than 100 shares is dubbed an “odd lot.” The purchase of an “odd lot” isn’t registered on the ticker tape—it’s too small a financial transaction to be noticed in the speculation in a million shares a day. But the average investor’s ownership in American railroad and industrial enterprises is an “odd lot,” and without the two million “odd lot” partners commercial progress in this country would still be at the mercy of foreign bankers, as it was years ago before we found ourselves. The “odd lot” investors are the bulwark of American corporate finance. Thirty thousand shareholders of the Pennsylvania Railroad own less than ten shares of stock each. Four-fifths of the shareholders of Illinois Central are “odd lot” owners. Nearly all the Old Colony shareholders are “odd lot” investors. Tens of thousands of steel shareholders have one, two, or three shares each.
But many thrifty Americans do not know that they can buy one share of Steel or Pennsylvania, or Union Pacific, or Standard Oil. They have an idea that there is no market place for the man who wants to invest a few dollars in a prosperous corporation. But there is—and it’s a big market. More than a score of Stock Exchange houses, with nearly sixty board members (an investment of $4,000,000), make a specialty of “odd lot” orders. One house, with eight board members, employs ninety clerks to handle the odd-lot business. And still, the newspaper reports of the activities of Wall Street rarely mention the “odd lot” investors. The man who buys one share of Union Pacific receives his engraved certificate of stock, his reports of earnings, his annual reports, his quarterly dividend checks, his notices of shareholders’ meetings which he is privileged to attend ; he has his proportionate share of all “rights” and extra dividends—in a word, the one-share owner of Union Pacific, or any other corporate stock, is on exactly the same footing as the owner of 1,000 or 10,000 shares.
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