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MAGAZINE

Volume 2.

APRIL, 1909

Number 10

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During the past few years criticism has been rampant in connection with corporations and corporation management. It is true that in some instances investi

gation has disclosed ir

regularities deserving of The Other Side

prompt and effective

correction, but as yet it has been found impossible to eliminate the weaknesses of human nature either in individual or corporate activities. The thoughtless, reader who has formed his opinions from the headlines of yellow newspapers has possibly come to a belief that a few individuals in the financial world, through combination and unscrupulous methods, are forging shackles of industrial serfdom for all time upon “the people.” The sensational space writer, the muck-raker and the politician with his affection for "the people," can certainly claim a degree of doubtful satisfaction in that they have brought about certain results, and it is well to consider who lias been affected thereby. The corporation has been found to be the most convenient form of business arrangement. Results are possible under combination which cannot be otherwise attained. Shareholders, busy in their own limited spheres of action, must of necessity entrust the investment of their accumulations to others. Two and onehalf million investors own the corporations of America. One-half the workers of this country whose compensation is received in the form of wages or salaries draw these incomes through organ

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Depreciation

San Francisco Chief. Municipal Ownership Again. American Tel. & Tel. Report.. Trial of Case by Telephone. Saving Time at Telephone. Portland Fire Telephone Statistics Women's Way Farmers' Telephones Suggestions to Managers.. Notes From the Divisions. Cupid's Corner Indian and Telephone. Good Use of Telephone. Short Circuiting of Balky Horse. Men Who Don't Succeed...

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Statement of Development. Collection Rating

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ized industries. The close competition of the business world, the demand for executive ability and economy of management render necessary a centralization of control, but statistics show that this means anything but a centralization of ownership. The so-called steel trust now distributes dividends to 110,000 investors, 27,000 of these being added in the panic year of 1907. The stockholders of the Pennsylvania Railroad increased in four years from 42,000 to 60,000. Seven large railroads of the country having 92,000 shareholders in 1904 have increased this number to 152,000, a gain of 65 per cent. Approximately 3000 additional stockholders have become partners in the operations of the American Telephone and Telegraph Company during the past year, there being now 26,370 shareholders with an average holding of 60 shares each. How often have we been told that this Company is a “Boston affair,” controlled by a financial coterie of that city, but the truth is that while there are a few heavy stockholders, mostly New Englanders, their combined holdings are only one-tenth as large as those of the other 26,000 investors in the Company's stock. There are over 70,000 stockholders in the entire Bell system. It is estimated that the ownership of the banks of this country is divided among 400,000 shareholders. Through the life insurance companies with their millions of policy holders and the banks with their millions of depositors, it is a safe assumption that over 15,000,000 people, not directly interested in corporate securities, are indirect participants in corporation profits on account of the investment of savings in these securities, which represent for the most part the accumulations of individual self-denial, thrift and enterprise, and which in great degree constitute the protection of the helpless and dependent.

It is the corporation which goes forward in the new country, and villages, homes, churches, schoolhouses and new

forms of employment follow. It is well to remember that corporations cannot carry out great improvements without the sale of their stock and bonds. Earnings are not sufficient for extensions of magnitude. Capital is timid and in the face of reckless or ill-considered legislative interference, actual or threatened. will avoid these securities. Continuous agitation retards development and removes iniative. Depression and idleness follow. Mr. Theodore P. Shonts is authority for the statement that contemplated improvements in railroad work involving the expenditure of hundreds of millions of dollars have been recently abandoned on account of the spirit which seems to have taken possession of those whose duty it is to carefully consider proposed legislation. Men will not undertake tasks involving ability, enterprise, resource and patience when at the end they have nothing to expect but harsh treatment thinly disguised as "regulation" amounting oftentimes to practical confiscation. There is no opposition to such regulation as the public welfare may require, but regulation should also mean protection of legitimate operations. It should not be a cloak for unwarranted legislative action which assumes that enterprise and the possession of property are crimes, and which in truth is but the reflection of the whims and jealousies of the envious, the lazy and the discontented. Publicity and not concealment is the policy of the intelligently managed corporation. The average citizen who gains his livelihood through the corporation or industries dependent upon its prosperity, or, being an indirect beneficiary from its operations, joins in the unthinking criticism of the ignorant or malicious, is in the same category as that intelligent individual who seated on the limb of the tree, sawed it off between himself and the trunk.

The policy of this Company in connection with the ideas herein suggested is set forth as follows in a late statement

by President l'ail: “It is not believed months, determined that a telephone that there is any serious objection to company should be allowed approxipublic control, provided it is independent, mately this amount for the same item. intelligent, considerate, thorough and There is another recognized item of just, recognizing that capital is entitled

depreciation in connection with the teleto its fair return, and good management phone business, this being the inevitable or enterprise to its reward."

limitation of the use of equipment in adWe are numbered among the 10,000 dition to wear and tear; that is, advance employees of a corporation the object of in development is so rapid that it is soon which is a reasonable return from a economical to replace apparatus rather legitimate business, and the attainment than continue the older type in use. of this result depends on our efficiency

The percentages given in the two and loyalty. Valuable elements in this

cities mentioned refer to situations where loyalty are a knowledge of the truth as

underground construction is extensive to the status of the Company in its eco

and depreciation, therefore, less. Under nomic relations and a willingness to de

all the circumstances it would seem that fend this truth against the sophistry of

ten per cent. is a fair basis of depreciathe demagogue and the attacks of the

tion, outside of the larger cities at least, ignorant, the irresponsible and the vi

in the territory of this Company. cious.

It is, of course, recognized that it is

impossible to prescribe a given routine to These are the days of assessments and be followed in tax matters, in view of many managers no doubt are completing varying laws and regulations and the arrangements with various assessors in

different methods and procedure of pubtheir territory looking to an adjustment lic officials, each case being necessarily of valuations for taxa

governed by its own peculiar circumtion purposes.

In this

stances. Depreciation

It is the object and policy of connection there is one

this Company to bear its just share of consideration which is

the tax burdens in the communities sometimes overlooked and that is the

wherein it operates and to that end facilfact of depreciation in physical proper

itate adjustments fair to public bodies ties. The proposition of the results of

and its own interests, and it will be wear and tear is in no line of business

found in many instances that the item enterprise more marked than in the

of depreciation is one deserving of conplants of public service corporations, and

sideration. it is receiving constant and increasing recognition by municipal bodies and the courts.

He “Answered" Any telephone man, with but limited experience, knows the necessity Some time ago a Los Gatos office boy, for constant replacement and renewals. answering the telephone for the first time In 1908 in proceedings directed by the in his life, and not knowing how to use City Council of Minneapolis, indepen- it, was told that when the bell rang, he dent accountants reported that the rate was to answer it. When, therefore, he varied from 2 to 121.9% and that an av

heard it ring, he picked up the receiver erage rate of 7% per annum was a very

and shouted: moderate figure to be allowed for depre- “Halloa! Who's there?” ciation in a telephone plant. In the year The answer

came back: “I'm one previous the City Council of Chicago, hundred and five." after an investigation by its own experts “Go on” said the boy, “It's time you which covered a period of eighteen were dead."

The rehabilitation of telephone service in San Francisco has been the subject of commendation both from those who have appreciated technically the

magnitude of the work San Francisco's

involved and from the Chief public which has been

convenienced thereby. We reproduce this mo:ith the photographs of three telephone men to whom in great measure this credit is due.

Mr. F. L. McNally is the City Manager of San Francisco and has been in the employ of this Company and its predecessors since January, 1886, at which time he began as helper in the constructio: department. His promotion through various grades of service has been rapid and deserved, and his record in his present position since the reorganization of August 1st, 1908, has but added to his reputation.

Mr. O. R. Cole, City Plant Chief of San Francisco, has been engaged in construction and maintenance work in different capacities with various Bell Companies in the United States since 1897. After the San Francisco fire of 1906 he was given the difficult position of City Wire Chief and when we compare the present exchange of nearly 60.000 subscribers with the dismantled plant of the days after the disaster, the results accomplished by his department can be appreciated.

Mr. H. T. Parkinson, City Traffic Chief, after an extended service with easter) companies, commenced work with The Pacific Company in 1905. His first employment was in the Puget Sound Division, where he remained until transferred to his present position under the reorganization of August, 1908. The remarkable showing made by the departments of Mr. McNally and Mr. Cole has been due in great measure to the cooperation of Mr. Parkinson in his prompt and effect

ve solutions of the many traffic difficulties inevitable in reconstruction work.

Municipal Ownership Again Municipal ownership may be all right, but municipal operation is generally an expensive failure. There are many reasons for this, but the main one is that men do more work for a private employer than for a municipality. They are more obliging as a rule, because complaint to a private owner is more direct and more effective than complaint to a public official, who may need the service of the offender in some other direction. The question of municipal ownership as distinct from operation is a question of expense. In all public utilities where electric power is used plants become obsolete quickly and must be replaced at large expense. When this is necessary a private corporation bonds its assets for more money, thus adding to its fixed charges. This distributes the cost over a large number of contributors and for a long term of years. The municipality runs the old plant longer, thus providing poorer service, and then adds to the public burden either by a special item in the tax budget or for an issue of bonds. The net result is the same, with the addition of inefficient service on the part of the municipally operated plant. One of the latest object lessons in this direction has been furnished by Manitoba. There the agitators went to and fro seeking whom they might fool, telling of the immense profits made by the telephone monopoly and insisting that rates would be lowered and the service improved if the Province owned the telephones. The company managers and stockholders licked their lips, but made no remarks. Later the service passed into public ownership and added $4,200,000 to the bonded debt. The plant was not kept up; the employes working for the government were less careful; the service depreciated and rates were raised to pay for repairs. The net result of “the step in advance" has been a very substantial debt with robust interest demands, a wornout or wearing out plant, poor service and higher rates.

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