Sinning by Syndicate
THOSE who contend that men are growing better, and those who insist that matters are growing worse, may both be right. “ Look at the amelioration in the lot of women, of children, of blacks, of convicts, of defectives,” flute the apologists. “Never were punishments more humane, manners milder, amusements cleaner, gifts larger, the rights of the weak better protected, the lower creatures more considered.” “But mark the ruthlessness of industry, the ferocity of business, the friction of classes, the stench of politics,” rasp the critics. “Never in our time were children so exploited, workers so driven, consumers so poisoned, passengers so mangled, investors so fleeced, public servants so tempted.” The key to the paradox is that while men are improving in their personal relations, the control of industry and business is becoming impersonal.
Take the face-to-face element out of a relation, and any lurking devil in it comes to the surface. In the old South there was a world of difference to the slaves between the kind master and the hard master. But these differences tended to disappear as the plantations grew big and the slaves came under the immediate control of overseers. The Irish found tenancy tolerable under a good landlord; but with absenteeism and the management of the estate by the agent, all that was oppressive in landlordism came out. It is noteworthy that the strife between employer and employee was never so bitter as it has become since corporations came to be the great employers. So, also, the tension between the railroads and the people has grown with the merging of lines locally owned into huge systems controlled by remote investors in the East or in Europe.
There is nothing like distance to disinfect dividends. Therefore the moral character of the stockholders makes very little difference in the conduct of the affairs of the corporation. Christian or heathen, native or alien, blue blood or plebeian, rich or poor, they all sanction much the same thing, and that is, the policy that promises the biggest dividends in the long run. To the directors their virtual mandate is, “Get results!” The directors pass this mandate on to the officers. The officers pass it on to the heads of departments, and these send it on down the line. Take one gas company formed by saints and another formed by sinners. The directors of the two companies will be more alike than the stockholders, the officers will be still more alike, and the men that come into contact with the legislature or the city council, or the gas consumers, will not differ by a shade. The saintly stockholders not only do not know what is going on, but so long as the dividends are comfortable they resent having inconvenient knowledge thrust upon them. The corporation, to be sure, has certain good points. The corporate owner — of course we are not speaking of one-man corporations, or of those whose officers follow their own sweet will — is not warped by race antipathy, or religious prejudice, or caste pride. Unlike the individual business man, its course is never shaped by political ambitions or social aspirations, or the personal feuds of its wife. It does not exact personal subservience, does not indulge itself in petty tyranny, is not held back from negotiation with its employees by aristocratic haughtiness. It does not feel angry or hold a grudge. If it ruins any one, it does so not from malice, but simply because he stands in the way. Let him meekly creep into the ditch, and it honks by unnoticing. The business man may be swerved by vindictiveness or generosity, by passion or by conscience, but the genuine corporation responds to but one motive. Toward gain it gravitates with the ruthlessness of a lava stream.
Nevertheless, if the corporate owner is free from the weaknesses of the individual, it escapes also his wholesome limitations. It feels not the restraints that conscience and public sentiment lay on the business man. It fears the law no more, and public indignation far less, than does the individual. You can hiss the bad man, egg him, lampoon him, caricature him, ostracize him and his. Not so with the bad corporation. The corporation, moreover, is not in dread of hell fire. You cannot Christianize it. You may convert its stockholders, animate them with patriotism or public spirit or love of social service; but this will have little or no effect on the tenor of their corporation. In short, it is an entity that transmits the greed of investors, but not their conscience ; that returns them profits, but not unpopularity.
In view of the psychology of the corporation, the fact that in a lifetime it has risen to the captaincy of more than half the active wealth of this country cannot be without bearing on our moral situation. A current manual describes 6700 companies (not including banking and insurance companies) with a capitalization of thirty-six billions of dollars, and an actual property estimated to be worth twenty-seven billions or sixty per cent of all the wealth of the United States outside of farm values and of city values in residences and in private businesses. Surely the misconduct of this giant race of artificial persons deserves consideration by itself.
More than other sinning, corporate sinning alienates social classes.
Thanks to the magic of limited liability, every year finds a greater distance between the corporate business and its absentee owners. Every year sees these owners more numerous, more scattered, more dominated by the big insiders. Every year sees savings banks, trust companies, and insurance companies coming between the corporate management and the millions who furnish the money, thereby making it harder for their conscience to reach and tincture that management. Moreover, the Big Men’s practice of watering a paying stock and unloading the infusion upon the investing public is marvelously potent in banishing humanity and decency from the corporation’s treatment of its labor, its patrons, or the public authorities. To doubt if stock-watering tightens the squeeze is to doubt if the bona fide investor, restless on the bare bench of a paltry three per cent per annum, will yammer harder for more dividends than one lounging luxuriously on the velvet of twelve per cent. The device of capitalizing and marketing the last turn of the corporation screw has a diabolic powder to convert the retired preacher or professor (who has exchanged his life’s savings for aqueous securities at par) into an oppressor of Tennessee miners, or Georgia operatives, or Kansas farmers, as relentless as an absentee Highland laird or a spendthrift Russian nobleman.
These developments tend to bring to the headship of certain big businesses — especially public-service enterprises — men akin to the steward on a feudal estate or the agent of an Irish landlord. With growing remoteness and anonymity of ownership, the railroad, gas, or traction manager who aims to develop his properties, to prosper through the prosperity of the community instead of at its expense, to respect local sentiment, the rights of others, and the law of the land, is dropped. Quietly, but relentlessly, the popular man of local antecedents and attachments, who calls his men “Bill” or “Jim,” is discarded for the imported man with “nerve,” who “does things,” who “gets results” — no matter how. The owners fête and cheer the “efficient” railroad president who has increased the net earnings “520 per cent in eight years,” heedless that he lets the trestles rot till cars full of sleeping passengers drop through them, overworks his men till people are hurled to destruction in daily smash-ups, and denies sidings for the swelling traffic till his trainmen pay death a heavier toll than soldiers in the field.
Now, the stockholders for whom all these iniquitous things are done do not consciously stand for them. They do not will that children should be worn out, workmen maimed, consumers defrauded, the ballot polluted, or public men debauched. They seem to demand such conduct only because they fail to realize what they are doing when they exact the utmost penny. However harmless their intentions, their clamor for fat dividends inevitably throws the management of quasi-public — and some other — businesses into the hands of the domineering-arrogant or the suave-unscrupulous type. The manager represents just one side of the shareholders, namely, their avarice. In other respects he is no more typical of them than the company doctor is typical of physicians or the corporation attorney is typical of lawyers.
The million or million and a half owners of corporation stock in this country are not as a rule law-despising, unpatriotic, or hardhearted. They are inoffensive American citizens who probably love their country and their fellow men as much as the brakemen or miners or farmers under the corporation harrow. But their amiable traits are not likely to reflect themselves in the officers and managers of their property. What, then, is more natural than that those in contact with these agents should take them as representative, should estimate the owners by them, and should accordingly foresee an irrepressible conflict between a lawless, anti-social capitalist class and the masses ? Thus springs up the delusion of progress by class war, and the mischievous policy of appealing solely to the class interests of workers instead of chiefly to that sense of right and justice which is found at every level and in every quarter of society, and which is the only power that can settle things so that they stay settled. For you cannot sharpen class consciousness without whetting class hatred and loosening social bonds. The only hatred that is wholesome and social and propulsive is the hatred of the righteous for the willfully unrighteous, A reform that follows this line does not breed a reaction.
Aggressive corporation men put in a wrong light not only capitalists, but their opponents as well. In excusing the troubles their arrogance provokes, they pass along to owners biased versions which, by misrepresenting the claims of patrons and laborers, root capitalists generally in the notion that the masses are uppish and heady, and inspire in them a “last ditch” sentiment as foolish as it is dangerous.
Now, the corporation cannot mend itself. More and more it is impersonal and non-moral. More and more the faraway manager is rated as a profit conveyor, and the conduit with the bigger flow is always preferred. It has become a machine, and Mammon is its master. Reform, therefore, will not come from the inside. Those who supply the capital cannot mold it to their better will. But they can change its spirit if they will join with their fellow citizens in restraining the corporation by public opinion and by statute. If the reaction of organized society upon the Gradgrind type of manager is so severe that he cannot make so much money for his stockholders as a more reasonable and representative type, he will give way to the better man, and one cause of the needless alienation of classes will be removed.
In resenting corporate sins we must follow the maxim, “Blame not the tool, but the hand that moves the tool.”
The savage beats the stone he has stumbled over without inquiring who left the stone in his way. Early law punishes brutes for the harm they do, and the domestic animal that hurts a human being is deodand. Law now looks farther back, but the public in its shortsightedness is like a stricken animal biting at the arrow in its flank instead of charging on the hunter.
In view of the pressure they are under, what folly to mob the spade men who set telephone poles where they have no right to be, rather than the manager in a downtown office who gives these men their orders! Why execrate the dozing operator, or the forgetful engineer, rather than the superiors who exact the long hours that incapacitate for duty ? Why lynch the motorman for running over the baby, when he is on a schedule that obliges him to violate the municipal speed ordinance or lose his job ? When powder firms or armor-plate companies are detected giving aid to the enemies of their country by furnishing bad plates or poor powder, what childishness to be satisfied when the employees who plugged the blow-holes or “switched the samples” are dismissed with a great show of virtuous indignation, while the instigators go unpunished!
There is no work so dirty or dangerous but that it will attract volunteers pleading wife and babes to support. An economic constraint, more or less harsh, binds the ordinary underlings of a corporation and obliges us, in quest of the one to blame or punish, to turn to “the men higher up.” Nor is it easy to find the right place to stop. Whom shall we blame when orders for automatic signals put in by superintendents of railroads on which heartrending collisions have occurred, have been turned down by the Wall Street owners? The company claim-adjuster who, by playing on the ignorance, fears, and necessities of the injured, “bluffs” them out of their lawful indemnity, insists with truth that, if he did not cheat the victims, another man with fewer qualms would be given his place. The attorney who fights all claims, just as well as unjust, to the last court in order to intimidate claimants, pleads that his corporation will wear them out anyway, and he might as well hold the job as some one else.
Ought we, indeed, to flay the legislator who, under pain of losing the renomination, votes as he is told on corporation matters, or the bureau chief who winks at crooked land entries because he feels at the back of his neck the chill of the axe ? He is no hero, to be sure, who eats dirt in order to keep his berth; but if he refuses he will become a martyr, and it is doubtful if we have the right to require martyrdom of anybody. The society that allows its enemies to run the party conventions, or lets unclean hands wield the official axe, has only itself to blame for what follows.
In all such cases the blame meted out should correspond to the degree of actual — not formal — freedom enjoyed by the agent. Society may call upon a man to renounce his champagne and truffles for the right’s sake sooner than his cake and jam; to quarrel with his cake and jam sooner than with his bread and butter; to sacrifice his own bread and butter sooner than the bread and butter of his children. In general, as we ascend from the track-layers who grab a street over night to the foreman of the gang, to the superintendent, to the general manager, accountability broadens and the tale of stripes should increase. Still, even the man high up may act under duress. For example, in a certain city a cotton mill wanted a new street opened and larger water-mains laid. The city council tabled the request, but an inquiry showed that $15,000 would “fix” the council. The manager, who “did n’t believe in doing business that way,” held out for over a year. Meantime the mill suffered financially. The directors became restive, investigated, and found that a manager with a Scotch conscience was standing between them and their profits. They dismissed him for a more “practical” man.
In the corporation the men who give orders, but do not take them, are the directors. They enjoy economic freedom. If their scruples cost them a reëlection, their livelihood is not jeopardized. In the will of these men lies the fountain head of righteousness or iniquity in the policies of the corporation. Here is the moral laboratory where the lust of an additional quarter of a per cent of dividend, on the part of men already comfortable in goods, is mysteriously transmuted into deeds of wrong and lawlessness by remote, obscure employees in terror of losing their livelihood.
The anonymity of the corporation can be met only by fixing on directors the responsibility for corporate sinning.
In enforcing the rules of the game the chief problem is how to restrain corporations. The threat to withdraw the charter alarms no one, for corporations know they are here to stay. Fine the law-breaking officers, and the board of directors by indemnifying them encourages them to do it again. Fine the corporation, and, if its sinning is lucrative, it heeds the fine no more than a flea-bite. Never will the brake of the law grip these slippery wheels until prison doors yawn for the convicted officers of lawless corporations. Even then you cannot fasten upon the officers legal responsibility for much of the iniquity they instigate. For example, to deceive the state insurance commissioners the president of a culpable insurance company directs the actuary to make up a report of such and such a character. He hands it to the treasurer and the auditor who, as required by law, swear that “to the best of their knowledge and belief” it is true. The high officials who screen their mismanagement with this false report have not been obliged to perjure themselves by swearing to it. The law has no hold upon them.
Again, a rich corporation desires legislation favorable to its own interests. The president engages an eminent attorney to draft a bill to that effect. He then takes it to a great law firm versed in practice of a legislative character. “I want you gentlemen to use all proper and legitimate means to secure the passage of this measure. Send the bill to me.” The firm gets the measure introduced and then engages the service of a great lobbyist. The lobbyist seeks to influence men who are under obligations to him for financial help in getting elected. If some needed legislators stand out demanding money, he engages the services of small lobbyists, or sends an intermediary with a bribe. Thus the chief offenders protect themselves by working through accomplices, in many cases so remote from them that they are not even aware of the accomplices’ existence.
Until the courts recast their definitions of legal evidence and legal responsibility, much of the control of corporations must devolve upon some agent free from the pedantries and Byzantisms of the law. Public opinion, however, is impotent so long as it allows itself to be kept guessing which shell the pea is under, whether the accountability is with the foreman, or the local manager, or the general manager, or the president, or the directors. How easily the general wrath is lost in this maze! Public indignation meets a cuirass of divided responsibility that scatters a shock which would have stretched iniquity prone. Till the law lifted its mailed fist, how futile were the agitations against grade crossings, link couplers, and fenderless cars! Instead of playing hide-and-seek in the intricacies of the corporate structure, public opinion should strike right for the top. Let it mark the tactics of the Philadelphia mothers who, after vain appeal to underlings to put in a gate at a railroad crossing their children must make on the way to school, stormed the office of the president of the road.
The directors of a company ought to be individually accountable for every case of misconduct of which the company receives the benefit, for every preventable deficiency or abuse that regularly goes on in the course of the business. Hold them blameless if they prove the inefficiency or disobedience of underlings, but not if they plead ignorance. Consider the salutary side-effects of such severity. When an avalanche of wrath hangs over the head of the directors of a sinning corporation, no one will accept a directorship who is not prepared to give a good deal of time and serious attention to its business. Strict accountability will send flying the figurehead directors who, when the misdeeds of their protégés come to light, protest that they “did n’t know.” It will bar buccaneering insiders from using a group of eminent dummies as unwitting decoys for the confiding investor or policy holder. It will break up the game of operating a brigand publicservice company (owned by some distant “syndicate”) from behind a board of respectable local “directors” without a shred of power.
Let it be understood that a man’s reputation may be blasted by scandal within his corporation, and we shall not see men directors on a score or two of boards. In New York city one man is found to be director of forty-five railroads, another of forty-two, others of thirty-seven, thirty-five, twenty-eight, twenty-two roads. Fifteen men are in sixteen or more railroads, thirty-four are directors of from ten to fifteen roads. Forty-eight are directors of seven roads or more. Those on the boards of from two to six roads are almost innumerable. Seventy-six men, holding among them about sixteen hundred directorships, are said, on high authority, to control fully one hundred of the greatest railroad, industrial, and banking corporations, with a capital equal to one fifth of the national wealth! Now, stricter accountability would greatly enlarge this directing personnel, and perhaps rid it of some of that plutocratic arrogance which is inseparable from filling boards of directors with Wall Street bankers and speculators and a few men of enormous wealth. By enlisting more men with an interest in the technical side of the business, or in the community it serves, the evils of financial directorates would be mitigated.
In one state, newspapers have been required to print in every issue the name and place of business of the publisher or proprietor, in order that the responsibility of the paper may be certain. It ought likewise to be customary to print along with the news of exposure of corporation misconduct the names of the directors, in order that the public indignation may not explode without result, but find rather a proper target; for just indignation is altogether too precious a thing to be wasted.
Make it vain for a director to plead that he opposed the wrong sanctioned by the majority of his colleagues. If he will keep his skirts clear, let him resign the moment he is not ready to stand for every policy of his board. In the board of directors, as in the cabinet of parliamentary countries, the principle of joint responsibility should hold. It ought to be as inevitable for the entire board of directors of a railroad company caught systematically stealing mineral lands or oppressing coal operators along its line, to resign, as now it is a matter of course for college trustees to resign when they have been caught unloading bad securities on the college funds.
The trust practice of cross-checking, setting off plant against plant, and one department in a plant against corresponding departments in all the other plants, while keying up technical efficiency, drives the superintendents and foremen under this staccato rivalry to bear hard on labor. The public conscience wall not long tolerate such ruthless exercise of corporate might, especially when the workers are women, or children, or unskilled. Let directors become habituated to full responsibility, and a reputable man will decline to stand for the treatment of labor under modern systems of cost accounting, unless he is protected by a “labor commissioner” or “welfare manager” responsible directly to a committee of the directors. It would be the duty of such an officer to limit the pressure of foremen on the workers, and to standardize at the level of the moral sentiment of the time such matters as hours, night-work, pay for overtime, safety provisions, accident indemnity, the conditions surrounding women and children, and the treatment of company customers or tenants.
Corporations are necessary, yet, through nobody’s fault, they tend to become soulless and lawless. By all means let them reap where they have sown. But why let them declare dividends, not only on their capital, but also on their power to starve out labor, to wear out litigants, to beat down small competitors, to master the market, to evade taxes, to get the free use of public property ? Nothing but the curb of organized society can confine them to their own grist and keep them from grinding into dividends the stamina of children, the health of women, the lives of men, the purity of the ballot, the honor of public servants, and the supremacy of the laws.