These were as follows:
Control by Substantial Minority 16
Single Family
1.
Control by Substantial Minority 16
Single Family
1.
Lundberg - The-Rich-and-the-Super-Rich-by-Ferdinand-Lundberg
Before affluence, the result was a long, hard and usually indecisive fight with the interests or it was capitulation.
The new liberal, however, does not have to fight or switch.
60
The attraction of the Great Society for the wealthy, however, is the new opportunities it creates for making money on huge government contracts. In the area of defense there is a huge tax-supported military establishment making constant highly profitable demands--up to 40 and 50 per cent profit--on industry for complex new weapons. In urban renewal there is the vast profitable enterprise, replete with windfalls, of rehabilitating the commercial heart of the big cities. In slum clearance and school buildings there are vast slushy construction projects of low quality in the offing. And in the antipoverty program itself there is vast roadbuilding, as in Appalachia (which needs few roads), as well as opportunities for the local political machines.
As Dr. Hamilton remarks, "Large numbers of entrepreneurial types have recently discovered that 'there's money in poverty. '"
We have, then, as he notes, now developed "liberals of convenience" as contrasted with "liberals of conviction," and staunch Republicanism is no longer to be taken for
granted among the big wealthy, whatever their past history. For big wealth cannot afford to back political losers.
Everything about the Great Society as blueprinted spells lucrative contracts for someone. Hence the party of the Great Society now has special attractions for the wealthy that the Republican Party, fallen into the hands of dervishes of the cracker barrel, no longer has. The defections of the professional elite and leading mass media from the Republican cause in 1964, when a "true" Republican ran, clearly show the way the wind is blowing.
In point of fact, the Johnsonian Democratic Party is the new political rallying ground of big wealth, which is forced by circumstance suddenly to see some validity in the Democratic approach ("Me-Tooism"). The social programs of marginal rehabilitation and repair will go forward, but at a snug profit, provided the military can spare the money. And big wealth will continue to get its depletion allowances, tax cuts and big deduction writeoffs.
Lest we be carried away by the prospect of an early marriage of old-line Republicans with the Democratic Party we are reminded of difficulties by no less a personage than David Rockefeller, president of the mammoth Chase National Bank (1964 assets: $13 billion). Explaining in a television interview that he had "great admiration for the president [Johnson]," Mr. Rockefeller said he was nevertheless "disturbed by the Government's move in the aluminum price increase" that was rescinded after the government moved to sell stockpiled aluminum. In words that his grandfather would have unhesitatingly endorsed, the Chase bank chief said "the aluminum industry was the best judge of whether prices should go up" and added that he was "in disagreement with the attitude of Government that prices should be controlled. "
The problem of inflation should be dealt with through "natural economic forces within the capitalist system," the Times said he observed, without specifying just what these natural forces were and to what extent they included greed, which is certainly a sturdy, old reliable natural force. An assumption in his position, as in that of the early classical economists, is that if something is natural it is acceptable, which tenet would make tuberculosis or cancer acceptable. A further assumption was that if someone intervenes in any process, as in regulating industry or practicing surgery, there is something "unnatural" and to be condemned about it. Actually, whatever any human being does-- spit on the sidewalk, paint monstrosities on the walls, set fire to buildings, fornicate with lower animals, or regulate the actions of other people--is entirely natural. For if it weren't natural they couldn't do it. Mr. Rockefeller, like many others, reserves natural as a description of that of which he approves.
Said the Times report: "Mr. Rockefeller said the manner in which President Johnson handled the aluminum increase, even though he remained largely behind the scenes, was not appreciated by business [read. persons of wealth] anymore than President Kennedy's halting of a proposed steel increase. " 61
But the reason Democratic presidents must be sympathetic toward the big wealthy at all times, short of allowing them to upset the new synthesis, is simple: All these people, even if Republican, carry great weight in American affairs because of their intimate hereditary involvement through professional subordinates in complex enterprises penetrating into every comer of society. They may no longer be self-made they may have been sired by trust, testament or codicil out of holding company, foundation and monopoly-but they are independent power wielders. They aren't average citizens. And this is a political fact, not likely to be overlooked by any serious politician.
Any criticism of Presidents Kennedy and Johnson for the nature of their top appointments should face up to this question: Where should they look for Cabinet officers? Kennedy and Johnson looked for them where Eisenhower looked for them, and where Roosevelt looked: in the large financial and industrial organizations. These organizations belong to the wealthy. They are part of their plantation, which in its broadest sweep is the market place itself.
Experts of greater if not complete independence of judgment are to be had, to be sure, from the leading universities, and Franklin D. Roosevelt and John F. Kennedy both drew heavily upon them for certain tasks. But scholars have neither the habit of command nor is their authority apt to be recognized by men practiced in the arts of expedient manipulation--Plato's men of the appetites. Any president has to look to the big enterprises, selecting competent men who are least compromised by egocentric self- service.
To be sure, it is not the quintet of Du Ponts, Rockefellers, Mellons, Fords and Pews that alone has supported the Republican Party in its struggles to protect and nourish big wealth and is now playing around the edges at least of the Democratic Party. They have had many collaborators among groups of lesser wealth, most of them strong Republicans in the past as now, even though some of them seem inclined to take fright as latter-day woozy fanatics come to the fore in the Republican Party.
When, as and if they become Democratic the Democratic Party will have to become more tractable along the lines David Rockefeller suggests; it will have to become more Republican. This not too difficult process may take place gradually and stealthily. But the power of money is such that it can easily come about.
Five
THE INHERITORS: II
Approximately 200,000 households of the upper layer of American wealthholding assets of $500,000 or more own 22 per cent of the private wealth of the country and 32 per cent of the investment assets, while another 500,000 households (worth $200- $500,000) own another 13 per cent of wealth and 22 per cent of investment assets--54 per cent in all of investment assets for 700,000 households out of 57. 9 million households. Add another 700,000 households--those worth from $100,000 to $200,000--and one has accounted for 43 per cent of all private wealth and 65 per cent of all investment assets. * (*Board of Governors of the Federal Reserve System, Survey of Financial Characteristics of Consumers, Washington, D. C. , August, 1966; pp. 151,136. )
It is these huge percentages of ownership that give these relatively small groups their enormous leverage in the American political economy and justify our referring to the ownership as "leverage wealth. "
It should, therefore, be evident that the super-wealthy and big-wealthy are settled within a somewhat larger contingent of contemporaries who differ financially only in that their holdings are less extensive in the pyramidal hierarchy of property. Relating to this property there is an all-pervading cult, forming a large part of what some refer to as
the American ideology. The part of this ideology that relates to property is, basically, Standard Doctrine, heavily sugar-coated.
For preliminary guidelines to the big holdings, we can do no better than to turn to the compendious TNEC report, based as it was on official questionnaires filled out by the companies. 1 The data in them are as "hard" as government surveillance can make them.
Summarizing this valuable governmental study in a report to, Senator Joseph C. O'Mahoney, chairman of the TNEC, Sumner T. Pike, chairman of the Securities and Exchange Commission, under date of September 24, 1940, wrote:
Thirteen family groups-including these three (Du Ponts, Mellons and Rockefellers)-- with holdings worth $2,700,000,000, own over 8 per cent of the stock of the 200 [largest nonfinancial] corporations.
Only one-half of the large shareholdings of individuals in the 200 corporations are in the direct form of outright ownership, the other half being represented by trust funds, estates, and family holding companies. The study clearly shows the importance of these instrumentalities for perpetuating the unit of control over a block of stock held by an individual or the members of a family.
Each large interest group has shown a strong tendency to keep its holdings concentrated in the enterprise in which the family fortune originated. . . The branching out of the Mellon family into a dominating position in half a dozen important corporations in as many industries is rather unusual and not duplicated among the other interest groups controlling any of the 200 corporations. Many large family interest groups, however, have greatly expanded their industrial sphere of influence by indirect means, viz. , the acquisition of control over additional enterprises by the corporations which they control, such acquisitions being financed mainly out of undistributed profits.
In the case of about 40 percent of these 200 largest corporations, one family, or a small number of families, exercise either absolute control, by virtue of ownership of a majority of voting securities, or working control through ownership of a substantial minority of the voting stock. About 60 of the corporations, or an additional 30 per cent, are controlled by one or more other corporations. Thus, a small group of dominant security holders is not in evidence in only 30 percent of the 200 large corporations. [Emphasis added. ]
[Note: Although the TNEC confined itself to nonfinancial corporations, approximately the same pattern of ownership is shown by informal inquiry into purely financial enterprises such as banks and insurance companies. The same people own these that own the industrial corporations: Rockefeller, Du Pont, Ford, Mellon and others. ]
The financial stake of officers and directors in their own corporations is relatively small. [Note: This is because they, like workers lower down, are merely employees, subject to dismissal. The largest holdings of officers, said the report, are in the hands of those who represent dominant or controlling family groups. ]
The 20 largest shareholdings in each of the 200 corporations account, on the average, for nearly one-third of the total value of all outstanding stock. In the average corporation the majority of the voting power is concentrated in the hands of not much over 1 percent of the stockholders. [Emphasis added. ]
As the study showed, the value of the twenty largest record holdings in 208 common stock issues as a percentage of total value was:
Per Cent
Manufacturing companies 26. 7
Railroads 24. 9
Electric, gas and water utilities 45. 3
Others 17. 3
The relatively small percentage in the fourth category is accounted for by the fact that it included AT&T with its widely dispersed comparatively small shareholders.
But for the twenty largest stockholders to own such large percentages, on the average, of the leading companies testifies to the extremes of concentrated ownership in the American economy.
Most of the millions of individual stockholdings in the hands of a variety of run-of- the-mill people made up only 6 per cent of the ownership and voting power. The general anonymous stockholders, although up to twenty million by count in 1965, all together own very little and have as much to say as the Russians have over their rulers in the Kremlin.
"The great bulk of the 8 to 9 million domestic stockholders own only small amounts of stock and the dividends they receive represent but a minor proportion of their total income. About half of all stock-holders have an annual dividend income of less than $100 and holdings worth less than $2,000. The group which depends economically to a large extent on the dividends from corporate stocks or the market value of these stocks is very small and probably numbers not much more than 500,000 people.
"The ownership of the stock of all American corporations is highly concentrated. For example, 10,000 persons (0. 008 percent of the population) own one-fourth, and 75,000 persons (0. 06 percent of the population) own fully one-half, of all corporate stock held by individuals in this country. " 2
Foreign investors, it was pointed out, own more than 6 per cent of the common and nearly 4 per cent of the preferred stock of these companies, and "Foreign ownership exceeds 10 per cent of total stock outstanding in about one-tenth of the 200 corporations. " [Note: These foreign holdings are held by comparable individual large European interests. ]
These patterns persist down to the present, as shown conclusively by the Lampman, University of Michigan, Federal Reserve and many other studies, and also in what I shall refer to as The Dartmouth Study: Corporate Concentration and Public Policy, by Professors Martin L. Lindahl and William A. Carter of Dartmouth College.
Noting that the patterns persist does not mean that the position of the owners has remained stationary. Although the percentage of ownership in the economy may conceivably be no greater than the concentration of control, owing to the steadily increasing concentration of assets, it is unquestionably greater now than it ever was before. The only dropouts from the upper strata of ownership have been produced by the ending of a family line. None of the big fortunes pinpointed in the TNEC study has gone bankrupt. Under the impetus of economic and technical change, of course, some of the minor big fortunes have lost ground relative to the leaders; but as other elements have thrust their way forward, the essentials of the panorama have scarcely changed.
While it might be of some interest to pinpoint changes for the better or the worse within some fortunes, it is not within the scope of this exposition to make such an attractive digression. We may, therefore, be spared the details of who is worth $100 million more or less. The Ford Motor Company is reported to have taken a $250 million loss on its unsuccessful Edsel model, but the Ford family remains in the leading quartet of wealth. These big fortunes can afford to take big losses, and they do have their ups and downs. What they lose one day in one place they make up another day in another place. What permits them to do this is: heavy reserves, affording maneuverability.
The TNEC study broke itself down into types of control, either by family or corporation, as follows:
a. By majority ownership b. By predominant majority c. By substantial minority d. By small minority
But in most cases control of one corporation by another saw the controlling corporation itself under single or multiple-family control.
The Thirteen Largest TNEC Family Interest Groups
As measured by market or calculated value at the end of 1937, the thirteen wealthiest family interest groups, led by the Du Ponts, Mellons, Rockefellers and Fords, also included the following: 3
Family
McCormick (Chicago)
Hartford (New York)
Harkness (New York)
Duke (North Carolina)
Pew (Philadelphia)
Pitcairn (Pittsburgh)
Clark
Reynolds (North Carolina)
Kress (New York)
Main Corporations
International Harvester
Great Atlantic & Pacific Tea
Standard Oil (New Jersey)
Standard Oil (Indiana)
Standard Oil of California and
Socony Vacuum Oil
Duke Power, Aluminum Co. of America
Liggett and Myers Tobacco
Sun Oil
Pittsburgh Plate Glass
Singer (sewing machines)
R. J. Reynolds Tobacco
S. H. Kress (variety stores)
To be sure, as the study warned, "Many members of these groups undoubtedly had stock investments in one or more of the 200 corporations which did not appear among the 20 largest record shareholdings. . . . Many also had investments in other corporations, particularly in large financial corporations which are not covered by the study, and investments in other forms such as corporate bonds, tax-exempt securities, real estate, and bank deposits. It is quite possible that for some groups these outside investments had a larger aggregate value than their identified holdings in the 200 largest corporations. " 4
A point never made by the TNEC study is that this same pattern of concentrated ownership and control extends below the 200 largest companies to the 500 largest, the 1,000 largest, the 10,000 largest, etc. What is remarkable about the TNEC showing is not that there were shown ownership and control by such tiny groups but that there were such concentrated ownership and control over such mammoth corporate entities, which standard propaganda insists are widely owned by the rank-and-file citizenry as stockholders. As enterprises get smaller and smaller there is even less public participation in their ownership than in the biggest companies until one soon runs into the 100 per cent family-owned or individually owned closed corporation. It is no exaggeration to say that all money-making enterprises of whatever size, including the widely owned AT&T, are owned by a very small class of proprietors, Whatever property is scattered among nearly 90 per cent of the populace is mostly nonrevenue- producing: much-used cars, TV and radio sets, furniture-in brief, chattels.
The Standard Oil branch of the Harkness family, now with few surviving members and its once vast funds largely distributed, mainly to leading educational institutions, was found to be among the twenty largest stockholders in no fewer than 24 of the 200
largest companies, apparently a record. 5 While this particular ownership is no longer concentrated, the fact that it recently existed shows what is possible within the system.
Single
Family
1. Dorrance
2. Duke
3. Ford
4. Hartford
5. James
6. Kress
7. Mellon
8. Mellon
9. Mellon
10. Pew
Multiple
Family
1. Anderson-Clayton
Main
Corporation
Campbell Soup
Duke Power
Ford Motor
Great Atlantic & Pacific 100
Western Pacific RR 61. 18
S. H. Kress 79
Gulf Oil 69. 5
Koppers 52
Pittsburgh Coal 50. 9
Sun Oil 69
Anderson, Clayton 94-plus
(Houston)
Family Control by Majority Ownership 6
2. Clarke-Bourne-Singer Singer 50-plus
3. Pbillips-Olmsted- Long Island Lighting 47-plus
Childs
4. Bell-Darby-Cooper American Cyanamid
Biddle-Duke etal.
88. 77
A peculiarity about this last holding was that while most of the Class A voting stock
was owned by eight senior officers-almost 29 per cent by W. B. Bell, president-most of
the equity was represented by the Class B nonvoting stock. The twenty-two leading
stockholders, with three tied for twentieth place, held 88. 77 per cent of the voting stock. 7
The holdings of the Hartford family in the Great Atlantic & Pacific Tea Company, which does more than 6 per cent of all retail grocery business in the United States, are not precisely ascertainable now on the basis of the TNEC report. The Hartfords owned at least 61 per cent of the old preferred stock, exchanged for three shares of common in the recapitalization of 1958, and all of the voting common, exchanged for one share of new common. In the old arrangement there were 935,812 shares of nonvoting common, also exchanged share-for-share for new common, but because the TNEC did not inquire into the Hartford ownership, if any, of this stock, its possible present ownership position (assuming no sales or purchases) cannot be completely deduced.
But, assuming the Hartfords owned none of the nonvoting stock and retained all their other stock in the exchange, they would now own very close to 70 per cent control of the company. At the end of 1964 all its outstanding common had a market value of $936,850,025, leaving the Hartford share at about $650 million. At the end of 1959, 33. 98 of this outstanding stock was held by the John A. Hartford Foundation. I conclude, then, that the Hartford family through nominees still retains majority controlling ownership of this huge company by a wide margin.
Predominant Minority Control 8
A predominant minority was defined in the TNEC study as consisting of the ownership of 30 to 50 per cent of the stock. 9
Single Family Corporation Percentage of
(approximate number of Ownership
income recipients)
Percentage of
Ownership
100 82 100
1. Du Pont
(about 250)
2. Mellon
(about 10)
Mellon
3. Cudahy
(about 32)
4. Deere (4)
5. Pitcairn
(4 or more)
6. Straus
(14)
7. Kresge (6)
Multiple Family 15
1. Field-Simpson-Shedd
E. 1. du Pont de Nemours
(controlling General
Motors by 23 per cent. )
Aluminum Co. of
America
Pittsburgh (Consoli-
dation) Coal
Cudahy
Deere
Pittsburgh Plate Glass
R. H. Macy
S. S. Kresge
Marshall Field
44
34. 4 50. 9 48. 71 10 34. 12 11 35. 34 12 38. 67 13 44. 24 14
2. Rosenstiel-Jacobi-Wiehe- Schenley Distillers
Schwarzhaupt-Gergross
3. Weyerhaeuser-Clapp-Bell- Weyerhaeuser
McKnight
The largest number of family interest groups was found to use the device of control by means of a substantial minority ownership of stock, which permits controlling positions to be taken in some cases in a wide spectrum of big companies.
These were as follows:
Control by Substantial Minority 16
Single Family
1. E. I. du Pont de Nemours &
Co. (family controlled)
2. Crane
3. Colgate
4. Firestone
5. Gimbel
6. McCormick
7. Hanna
8. Palmer
9. Rockefeller
10. Levis
11. Mellon
12. Rosenwald
13. Avery
14. Du Pont
15. Williams
Multiple Family
Corporation
General Motors
Crane
Colgate-Palmolive-Peet
Firestone Tire & Rubber
Gimbel Brothers
International Harvester
National Steel
New Jersey Zinc
Ohio Oil (now
Marathon Oil)
Socony Vacuum Oil Co.
(now Socony Mobil Oil)
Standard Oil of Calif.
Standard Oil (Indiana)
Standard Oil (New Jersey) case
Owens-Illinois
Pullman
Sears, Roebuck
U. S. Gypsum
U. S. Rubber
North American Co. (since
dissolved into constituent
public utility operating
companies)
10
to
30
per cent
in
each
1. Walters-Jenkins-Newcomer
2. Stone-Webster
3. Davies-Woodward-Igleheart
4. Block-Ryerson-Jones
5. Rand-Watkins-Johnson-
Peters
6. Widener-Elkins-Dula-
Ryan
7. Hillman-Shouvlin-Chalfant
S. Miller-Volkman-Schilling
9. James-Dodge-Hanna
10. Procter-Gamble-
Cunningham
11. Lynch-Merrill
12. Kirby-Woolworth-
Donahue-McCann
13. Hochschild-Loeb-
Sussman
Hochschild-Loeb-
Sussman
Small Minority Control 17 Family
1. Moore
2. Zellerbach
3. Crawford
4. Moore
5. Cornish
6. Du Pont-Phillips
7. Swift
S. Warner
Atlantic Coast Line RR
Engineers Public Service Co.
(since dissolved into constituent
operating units)
General Foods
Inland Steel
International Shoe
Liggett & Myers Tobacco
National Supply (oil
well supplies)
Pacific Lighting
Phelps Dodge
(copper)
10
to
30
per cent
in
each case
Procter and Gamble
(soap)
Safeway Stores (groceries)
F. W. Woolworth
Climax Molybdenum
American Metal
Corporation
American Can
Crown Zellerbach
Lone Star Gas
National Biscuit
National Lead
Phillips Petroleum
Swift
Warner Bros. Pictures
We have named fifty-seven single families and combined, cooperating multiple- family groups that exercise control of the largest corporations by majority, predominant minority, substantial minority and small minority ownership. There were thirty-seven single-family-control entities, although some of these, such as the Mellons, Du Ponts and Rockefellers, each controlled several big companies. There were sixty-four single families in the multiple-family groups named, although in some cases the names are not given in this text. Perhaps as many as 400 families composed the various multiple- control groups in the 200 largest corporations.
Some of these companies, as noted, have changed their modus operandi, notably the public utility companies. Some have changed their names, like the Ohio Oil Company. Others have gone out of existence by the merger route. It is neither necessary nor expedient to trace here each company through various subsequent permutations and combinations, for equities are what concern us.
Have the percentage positions of these families remained the same in all these companies? Probably not. In some cases they have undoubtedly increased their holdings, in others they are known to have decreased. Some may even have closed out their holdings. But, as pointed out earlier, if anyone has sold out in one place he has reinvested elsewhere, and possibly to better advantage. He is, therefore, still rich.
Less
than
10
per cent
Knowing the value of the property from the inside, all these groups know when the stock is overpriced and when to sell. As the income-tax returns since the war show, the higher income groups have been steadily taking capital gains, which are taxed at a maximum of 25 per cent, a bargain in relation to the upper income taxes. Wealthy holders usually show a strong tendency to sell some holdings in rising markets and to buy again in declines, thus increasing their percentile position (Standard Doctrine). So their percentages of ownership change from time to time. Sales would not necessarily show on the books of a company. For a man can always sell the stock short.
With the exception only of two as far as I have been able to ascertain, all these families are still extant and still highly solvent. The exceptions are the Harknesses and Arthur Curtiss James (1867-1941), who died leaving no heirs. James left his money to a foundation with the fairly unusual stipulation that the principal was to be distributed in twenty-five years, which was done. 18 Like James himself, the foundation is now defunct.
There remains the case of one big company holding control of another big company. (Control of scores to hundreds of smaller companies by many of the big companies is the common pattern now in the American economy. ) Nearly all of the 200 largest nonfinancial companies of the TNEC study, like most of the 500 industrials regularly featured by Fortune, are in fact holding companies, not operating companies at all. just about all the big companies that are familiar household words in the United States are holding companies, contrary to the general public belief. AT&T, for example, is a holding company.
Corporate Control by Majority Ownership 19
Holding Company
Armour (Illinois)
Cities Service
Royal Dutch Petroleum
AT&T
AT&T
Chesapeake & Ohio Ry
Reading Company
Atlantic Coast Line RR
(under multiple Walters-
Jenkins-Newcomer control)
Many public utility holding
Companies
Operating Company
Armour (Delaware)
Empire Gas and Fuel
Shell Union Oil
Pacific Telephone
& Telegraph
New England Telephone
& Telegraph
New York, Chicago &
Per Cent
100 100 64
78. 17
65. 31
57
St. Louis RR
Central RailRoad of N. J. 55
Louisville & Nashville 51
RR
Many public utility 100
operating companies
now cut loose
In many cases, particularly in railroads and public utilities, two corporations shared control.
A predominant minority as well as substantial and small minority control was exercised by many corporations, particularly in the railroad and electric utility fields. In this latter field, long subject to gross manipulative abuses, the companies holding widely scattered properties were finally dissolved by congressional decree and the equities in operating companies were distributed to individual stockholders.
Until very recently the most salient instance of a predominant minority control of one mammoth corporation by another was that of E. I. du Pont de Nemours and Company of the General Motors Corporation (discussed in Chapter IV).
While there were some cases where the big owners were under-represented in the management by reason of "youth, old age, sex, preoccupation with other financial or nonfinancial interests or other considerations" heavy representation or even overrepresentation was "much more common. " 20 Thus, although members of the Swift family owned only 5 per cent of the voting stock, the remainder of the stock being distributed mainly in slices of 100 to 500 shares each, the Swift family held six of the nine directorships. In the Crown Zellerbach Corporation the Zellerbach family, owning 8-1/2 per cent of the stock, provided the president, a vice president and three directors out of a board of thirteen. It is not necessary, then, for a family to own a majority or near-majority of stock to control a company and the disposition of its total weight. A small family block of stock and many small general stockholders are enough to secure control of the board of directors and officers.
Nor did the revelations to the TNEC in all cases show the true center of control, owing to a complicated network of company ownerships. An example is the Tidewater Associated Oil Company which as of December 15, 1939, the date of the TNEC questionnaire, was already well in the pocket of J. Paul Getty, although unknown to the world. The TNEC report shows that 3. 07 per cent of the common was owned by George F. Getty, Inc. , which in turn was 43 per cent owned by J. Paul Getty in person and 57 per cent as trustee for his children. But Pacific Western Oil Corporation owned 3. 93 per cent, and was in turn owned 67. 9 per cent by George F. Getty, Inc. , and 2. 62 by the Mission Corporation. Again, the Mission Corporation owned 16. 52 per cent, and was in turn owned 46. 53 by Getty's Pacific Western Oil Corporation and, observe, 7. 39 per cent by the Tidewater Associated Oil Company!
Directly and indirectly J. Paul Getty at the time, undetected by the TNEC analysts, already owned 23. 52 per cent of the mammoth Tidewater enterprise. Actually, his percentage of control was somewhat higher than this because the South Penn Oil Company, of which Tidewater owned 17. 27 per cent, reciprocally owned 2. 77 of Tidewater. Mission Corporation was originally established to hold the interest of Standard Oil (New Jersey) in Tidewater but Getty, as he reports in his memoirs, talked John D. Rockefeller, Jr. , into selling him his Mission stock and then in a quiet campaign prevailed on other stockholders to follow the Rockefeller lead. At the time of the TNEC study Standard Oil (Indiana) owned 1. 05 per cent of Tidewater through the 98-per cent- owned Pan American Southern Corporation. 21
The TNEC made a supplemental study of 10 interesting large companies that were not included on the list of the 200 largest. Some of them were as follows: 22
Family
Dorrance family
(by trust indenture)
Woodruff-Nunnally-Stetson-
Candler-Illges
Twenty individuals
Mainly members of the Bell
family among twenty
stockholders
Haverneyer family, H. O.
Havemeyer estate, and the
Ossorio, Thatcher and
Boettcher families
Heinz family
Twenty individual stock-
Corporation Percentage
Owned
Campbell Soup
Coca-Cola International
(controlling Coca
Cola Co. )
Crucible Steel
General Mills
Great Western Sugar
H. J. Heinz
International Utilities
100
nearly 50
45. 55 20. 14
43. 34
82. 10 26. 71
holders, mainly invest
ment companies
Ajax Pipe Line
Rockefeller Foundation
Harkness-Flagler-Prentiss
(Rockefeller)-four other
individuals and 11 trust
companies and brokerage
houses for others
St. Regis Paper
(utility holding company)
American Superpower
J. P. Morgan & Co. , Brown
Brothers Harriman & Co. , and
16 brokerage houses and
investment firms
Standard Oil (Ohio)
Standard Oil (Ohio)
Standard Oil (Ohio)
United Corporation
United Corporation
United Corporation
24. 77
17. 63
10. 92
8. 332
6. 640 9. 846
The tenth company on this supplemental list was the Electric Bond and Share Company, then a utility holding company and now an investment trust. Its twenty-one largest stockholders were banks, brokerage houses and investment companies, and the names of the beneficial owners of the stock were not elicited.
Leading family names not yet mentioned that were strewn through the twenty largest stockholders in the 200 largest nonfinancial companies--in many cases appearing in more than one company-were as follows:
Adler, Astor, Cabot, Clapp, Doris Duke Cromwell, Cunningham, Doherty, Drexel, Fleischmann, Forstmann, Goelet, Goldman, Guggenheim, Hanna, Hearst, Hillman, Hutton, Jones, Laughlin (Jones and Laughlin Steel), Lynch, McClintic, Miller, Milbank, Palmer, Payson, Penney, Pillsbury, Rosenwald, Schott, Skaggs, Vanderbilt, Watkins, Whitney, Widener and Winthrop.
Names of wealthy families that did not appear because their stockholdings were not among the twenty largest and were probably widely distributed in smaller blocks, rentier-style, through many companies or were in real estate or bonds, were the following:
Baker, Bedford, Berwind, Curtis-Bok, Fisher, Frick, Gould, Green, Hill, Kahn, Lehman, Metcalf, Patterson, Pratt, Phipps, Taft, Timken, Warburg and others.
These omissions, not at all to be deplored, came about because the TNEC study was not directed to ascertaining the names of all wealthy families--what it gleaned here was a byproduct--but merely of determining who controlled the 200 largest nonfinancial companies. Anyone who was concentrated mainly in real estate, banking, insurance or in widely diversified, nonconcentrated investments the study necessarily missed. All the new Texas oil men were missing. Joseph P. Kennedy's name did not appear.
Even if one had before one an up-to-date list of all the largest income-taxpayers, names of some extremely wealthy people could readily elude us, such as anyone who, like Mrs. Horace B. Dodge, had converted all her holdings into tax-exempt state and municipal securities. One could, theoretically, own a billion dollars worth of these, drawing a tax-free income of $25-$30 million a year, and never show up on the income- tax list at all.
What the TNEC analysis made incontrovertibly clear was that the family, not the individual, is now the significant wealth-holding and wealth-controlling entity in the United States, a thesis I had antecedently asserted, for the first time as far as I know. 23 While the proposition may seem firmly established to some it is, curiously, often denied or blandly ignored even though the SEC continues to supplement the TNEC findings in
detail. One man may amass the fortune, as in the case of John D. Rockefeller, but if the fortune is to remain intact it must have heirs. Where the fortune-builder is a bachelor or fails to establish a family, the fortune simply disappears in a foundation or institutional grants. Heirs, then, are as important to a fortune as to a title of nobility. Most American fortunes, easily by a majority of 70 per cent, are in the hands today of heirs.
And, in saying that the family holds the fortune, one cannot suppose this to suggest that its members fend individually for themselves to all points of the compass. They must hold together, for their predecessors have in almost all cases entangled them in a network of trusts and family holding companies that assure unified action at all times.
No less than half of all these controlling corporate holdings were in "trust funds, estates, and family holding companies. " 24 Even if an heir wished to go away on his own, all be could take with him would be income; the holding itself would remain in a center, massed with other individual holdings and directed by some individual or small family committee. This circumstance puts all the holdings into a tight fist, generating power that is played out in the political and cultural arena. Anyhow, who would want to walk away from the goose that lays the golden eggs?
Family Holding Companies
There are thousands of personal and family holding companies, large and small, in the United States. In most cases their names have never been seen or uttered by 99. 9 per cent of the citizenry because these entities are private, are under no obligation to make any report to anyone except the tax authorities. No public compilation of them exists.
Their names usually only come to public attention through court proceedings or as the byproduct to certain government investigations, such as the TNEC inquiry. That particular inquiry did provide information about the existence of some extremely large family holding companies.
A family holding company may have a score or more participants of beneficial interest in it--infants, teen-agers, the superannuated, the mentally retarded, absent big game hunters, scholars and normal persons in the prime of life. But the slices of beneficial interest, apart from the income pay-out, are all managed as one entity by a single person or a family committee, which in turn is either adept in the management of large properties or has the benefit of expensive professional advice. An heir may seem deficient in business acumen to all who know him, but he may be the constant beneficiary of the best legal and investment advice available, perhaps even against his own wishes. He might prefer to take his stake and invest it in various attractive schemes, or spend it, but he is firmly deterred from this course by the family holding company. And it functions, up and down the line, according to Standard Doctrine.
We have already noticed, in connection with the Du Ponts, that the TNEC found a large role being played by the Christiana Securities Company and Almour Securities, Inc. , both family holding companies. But other huge family companies were also uncovered in the report.
There was, first, the Bessemer Investment Company, instrument of the Phipps (Carnegie Steel) family that included, among many persons named Phipps, such names acquired by distaff marriages as Douglas, Janey, Sevastopoulo, Martin, and Winston and Raymond Guest. In all, twenty or more Phippses were beneficiaries. All appeared to have the financial status of rentiers and were well known social registerites and polo players. Bessemer Investment Company was found to be a principal stockholder in New England Power Association, International Hydro-Electric System and International Paper Company, whatever else it held of lesser dimensions.
Oldwood, Inc. , was 66. 58 per cent owned by the Bessemer Investment Company and a group including the Chace, Gammack, Majes, Cox Brady and Phipps families. It was a leading stockholder, too, in the New England Power Association.
More than twenty Du Ponts had a participation large enough to list for Christiana Securities Company, which had among its stockholders other Du Pont family holding companies such as Delaware Realty and Investment Company, Archmere, Inc. , and Du Pont trust funds.
The Cliffs Corporation, the personal instrument of the Mather family, owned all the common stock of the Cleveland Cliffs Iron Company, which was among the principal stockholders of the Wheeling Steel Corporation and the Republic Steel Corporation.
The Coalesced Company was owned 50-50 by Paul Mellon and Ailsa Mellon Bruce, and in turn was among the top stockholders in Koppers United Co. , The Virginian Railway Co. , Pittsburgh Coal Company and General American Transportation Company.
The Mellon Securities Company, owned by Richard K.
The attraction of the Great Society for the wealthy, however, is the new opportunities it creates for making money on huge government contracts. In the area of defense there is a huge tax-supported military establishment making constant highly profitable demands--up to 40 and 50 per cent profit--on industry for complex new weapons. In urban renewal there is the vast profitable enterprise, replete with windfalls, of rehabilitating the commercial heart of the big cities. In slum clearance and school buildings there are vast slushy construction projects of low quality in the offing. And in the antipoverty program itself there is vast roadbuilding, as in Appalachia (which needs few roads), as well as opportunities for the local political machines.
As Dr. Hamilton remarks, "Large numbers of entrepreneurial types have recently discovered that 'there's money in poverty. '"
We have, then, as he notes, now developed "liberals of convenience" as contrasted with "liberals of conviction," and staunch Republicanism is no longer to be taken for
granted among the big wealthy, whatever their past history. For big wealth cannot afford to back political losers.
Everything about the Great Society as blueprinted spells lucrative contracts for someone. Hence the party of the Great Society now has special attractions for the wealthy that the Republican Party, fallen into the hands of dervishes of the cracker barrel, no longer has. The defections of the professional elite and leading mass media from the Republican cause in 1964, when a "true" Republican ran, clearly show the way the wind is blowing.
In point of fact, the Johnsonian Democratic Party is the new political rallying ground of big wealth, which is forced by circumstance suddenly to see some validity in the Democratic approach ("Me-Tooism"). The social programs of marginal rehabilitation and repair will go forward, but at a snug profit, provided the military can spare the money. And big wealth will continue to get its depletion allowances, tax cuts and big deduction writeoffs.
Lest we be carried away by the prospect of an early marriage of old-line Republicans with the Democratic Party we are reminded of difficulties by no less a personage than David Rockefeller, president of the mammoth Chase National Bank (1964 assets: $13 billion). Explaining in a television interview that he had "great admiration for the president [Johnson]," Mr. Rockefeller said he was nevertheless "disturbed by the Government's move in the aluminum price increase" that was rescinded after the government moved to sell stockpiled aluminum. In words that his grandfather would have unhesitatingly endorsed, the Chase bank chief said "the aluminum industry was the best judge of whether prices should go up" and added that he was "in disagreement with the attitude of Government that prices should be controlled. "
The problem of inflation should be dealt with through "natural economic forces within the capitalist system," the Times said he observed, without specifying just what these natural forces were and to what extent they included greed, which is certainly a sturdy, old reliable natural force. An assumption in his position, as in that of the early classical economists, is that if something is natural it is acceptable, which tenet would make tuberculosis or cancer acceptable. A further assumption was that if someone intervenes in any process, as in regulating industry or practicing surgery, there is something "unnatural" and to be condemned about it. Actually, whatever any human being does-- spit on the sidewalk, paint monstrosities on the walls, set fire to buildings, fornicate with lower animals, or regulate the actions of other people--is entirely natural. For if it weren't natural they couldn't do it. Mr. Rockefeller, like many others, reserves natural as a description of that of which he approves.
Said the Times report: "Mr. Rockefeller said the manner in which President Johnson handled the aluminum increase, even though he remained largely behind the scenes, was not appreciated by business [read. persons of wealth] anymore than President Kennedy's halting of a proposed steel increase. " 61
But the reason Democratic presidents must be sympathetic toward the big wealthy at all times, short of allowing them to upset the new synthesis, is simple: All these people, even if Republican, carry great weight in American affairs because of their intimate hereditary involvement through professional subordinates in complex enterprises penetrating into every comer of society. They may no longer be self-made they may have been sired by trust, testament or codicil out of holding company, foundation and monopoly-but they are independent power wielders. They aren't average citizens. And this is a political fact, not likely to be overlooked by any serious politician.
Any criticism of Presidents Kennedy and Johnson for the nature of their top appointments should face up to this question: Where should they look for Cabinet officers? Kennedy and Johnson looked for them where Eisenhower looked for them, and where Roosevelt looked: in the large financial and industrial organizations. These organizations belong to the wealthy. They are part of their plantation, which in its broadest sweep is the market place itself.
Experts of greater if not complete independence of judgment are to be had, to be sure, from the leading universities, and Franklin D. Roosevelt and John F. Kennedy both drew heavily upon them for certain tasks. But scholars have neither the habit of command nor is their authority apt to be recognized by men practiced in the arts of expedient manipulation--Plato's men of the appetites. Any president has to look to the big enterprises, selecting competent men who are least compromised by egocentric self- service.
To be sure, it is not the quintet of Du Ponts, Rockefellers, Mellons, Fords and Pews that alone has supported the Republican Party in its struggles to protect and nourish big wealth and is now playing around the edges at least of the Democratic Party. They have had many collaborators among groups of lesser wealth, most of them strong Republicans in the past as now, even though some of them seem inclined to take fright as latter-day woozy fanatics come to the fore in the Republican Party.
When, as and if they become Democratic the Democratic Party will have to become more tractable along the lines David Rockefeller suggests; it will have to become more Republican. This not too difficult process may take place gradually and stealthily. But the power of money is such that it can easily come about.
Five
THE INHERITORS: II
Approximately 200,000 households of the upper layer of American wealthholding assets of $500,000 or more own 22 per cent of the private wealth of the country and 32 per cent of the investment assets, while another 500,000 households (worth $200- $500,000) own another 13 per cent of wealth and 22 per cent of investment assets--54 per cent in all of investment assets for 700,000 households out of 57. 9 million households. Add another 700,000 households--those worth from $100,000 to $200,000--and one has accounted for 43 per cent of all private wealth and 65 per cent of all investment assets. * (*Board of Governors of the Federal Reserve System, Survey of Financial Characteristics of Consumers, Washington, D. C. , August, 1966; pp. 151,136. )
It is these huge percentages of ownership that give these relatively small groups their enormous leverage in the American political economy and justify our referring to the ownership as "leverage wealth. "
It should, therefore, be evident that the super-wealthy and big-wealthy are settled within a somewhat larger contingent of contemporaries who differ financially only in that their holdings are less extensive in the pyramidal hierarchy of property. Relating to this property there is an all-pervading cult, forming a large part of what some refer to as
the American ideology. The part of this ideology that relates to property is, basically, Standard Doctrine, heavily sugar-coated.
For preliminary guidelines to the big holdings, we can do no better than to turn to the compendious TNEC report, based as it was on official questionnaires filled out by the companies. 1 The data in them are as "hard" as government surveillance can make them.
Summarizing this valuable governmental study in a report to, Senator Joseph C. O'Mahoney, chairman of the TNEC, Sumner T. Pike, chairman of the Securities and Exchange Commission, under date of September 24, 1940, wrote:
Thirteen family groups-including these three (Du Ponts, Mellons and Rockefellers)-- with holdings worth $2,700,000,000, own over 8 per cent of the stock of the 200 [largest nonfinancial] corporations.
Only one-half of the large shareholdings of individuals in the 200 corporations are in the direct form of outright ownership, the other half being represented by trust funds, estates, and family holding companies. The study clearly shows the importance of these instrumentalities for perpetuating the unit of control over a block of stock held by an individual or the members of a family.
Each large interest group has shown a strong tendency to keep its holdings concentrated in the enterprise in which the family fortune originated. . . The branching out of the Mellon family into a dominating position in half a dozen important corporations in as many industries is rather unusual and not duplicated among the other interest groups controlling any of the 200 corporations. Many large family interest groups, however, have greatly expanded their industrial sphere of influence by indirect means, viz. , the acquisition of control over additional enterprises by the corporations which they control, such acquisitions being financed mainly out of undistributed profits.
In the case of about 40 percent of these 200 largest corporations, one family, or a small number of families, exercise either absolute control, by virtue of ownership of a majority of voting securities, or working control through ownership of a substantial minority of the voting stock. About 60 of the corporations, or an additional 30 per cent, are controlled by one or more other corporations. Thus, a small group of dominant security holders is not in evidence in only 30 percent of the 200 large corporations. [Emphasis added. ]
[Note: Although the TNEC confined itself to nonfinancial corporations, approximately the same pattern of ownership is shown by informal inquiry into purely financial enterprises such as banks and insurance companies. The same people own these that own the industrial corporations: Rockefeller, Du Pont, Ford, Mellon and others. ]
The financial stake of officers and directors in their own corporations is relatively small. [Note: This is because they, like workers lower down, are merely employees, subject to dismissal. The largest holdings of officers, said the report, are in the hands of those who represent dominant or controlling family groups. ]
The 20 largest shareholdings in each of the 200 corporations account, on the average, for nearly one-third of the total value of all outstanding stock. In the average corporation the majority of the voting power is concentrated in the hands of not much over 1 percent of the stockholders. [Emphasis added. ]
As the study showed, the value of the twenty largest record holdings in 208 common stock issues as a percentage of total value was:
Per Cent
Manufacturing companies 26. 7
Railroads 24. 9
Electric, gas and water utilities 45. 3
Others 17. 3
The relatively small percentage in the fourth category is accounted for by the fact that it included AT&T with its widely dispersed comparatively small shareholders.
But for the twenty largest stockholders to own such large percentages, on the average, of the leading companies testifies to the extremes of concentrated ownership in the American economy.
Most of the millions of individual stockholdings in the hands of a variety of run-of- the-mill people made up only 6 per cent of the ownership and voting power. The general anonymous stockholders, although up to twenty million by count in 1965, all together own very little and have as much to say as the Russians have over their rulers in the Kremlin.
"The great bulk of the 8 to 9 million domestic stockholders own only small amounts of stock and the dividends they receive represent but a minor proportion of their total income. About half of all stock-holders have an annual dividend income of less than $100 and holdings worth less than $2,000. The group which depends economically to a large extent on the dividends from corporate stocks or the market value of these stocks is very small and probably numbers not much more than 500,000 people.
"The ownership of the stock of all American corporations is highly concentrated. For example, 10,000 persons (0. 008 percent of the population) own one-fourth, and 75,000 persons (0. 06 percent of the population) own fully one-half, of all corporate stock held by individuals in this country. " 2
Foreign investors, it was pointed out, own more than 6 per cent of the common and nearly 4 per cent of the preferred stock of these companies, and "Foreign ownership exceeds 10 per cent of total stock outstanding in about one-tenth of the 200 corporations. " [Note: These foreign holdings are held by comparable individual large European interests. ]
These patterns persist down to the present, as shown conclusively by the Lampman, University of Michigan, Federal Reserve and many other studies, and also in what I shall refer to as The Dartmouth Study: Corporate Concentration and Public Policy, by Professors Martin L. Lindahl and William A. Carter of Dartmouth College.
Noting that the patterns persist does not mean that the position of the owners has remained stationary. Although the percentage of ownership in the economy may conceivably be no greater than the concentration of control, owing to the steadily increasing concentration of assets, it is unquestionably greater now than it ever was before. The only dropouts from the upper strata of ownership have been produced by the ending of a family line. None of the big fortunes pinpointed in the TNEC study has gone bankrupt. Under the impetus of economic and technical change, of course, some of the minor big fortunes have lost ground relative to the leaders; but as other elements have thrust their way forward, the essentials of the panorama have scarcely changed.
While it might be of some interest to pinpoint changes for the better or the worse within some fortunes, it is not within the scope of this exposition to make such an attractive digression. We may, therefore, be spared the details of who is worth $100 million more or less. The Ford Motor Company is reported to have taken a $250 million loss on its unsuccessful Edsel model, but the Ford family remains in the leading quartet of wealth. These big fortunes can afford to take big losses, and they do have their ups and downs. What they lose one day in one place they make up another day in another place. What permits them to do this is: heavy reserves, affording maneuverability.
The TNEC study broke itself down into types of control, either by family or corporation, as follows:
a. By majority ownership b. By predominant majority c. By substantial minority d. By small minority
But in most cases control of one corporation by another saw the controlling corporation itself under single or multiple-family control.
The Thirteen Largest TNEC Family Interest Groups
As measured by market or calculated value at the end of 1937, the thirteen wealthiest family interest groups, led by the Du Ponts, Mellons, Rockefellers and Fords, also included the following: 3
Family
McCormick (Chicago)
Hartford (New York)
Harkness (New York)
Duke (North Carolina)
Pew (Philadelphia)
Pitcairn (Pittsburgh)
Clark
Reynolds (North Carolina)
Kress (New York)
Main Corporations
International Harvester
Great Atlantic & Pacific Tea
Standard Oil (New Jersey)
Standard Oil (Indiana)
Standard Oil of California and
Socony Vacuum Oil
Duke Power, Aluminum Co. of America
Liggett and Myers Tobacco
Sun Oil
Pittsburgh Plate Glass
Singer (sewing machines)
R. J. Reynolds Tobacco
S. H. Kress (variety stores)
To be sure, as the study warned, "Many members of these groups undoubtedly had stock investments in one or more of the 200 corporations which did not appear among the 20 largest record shareholdings. . . . Many also had investments in other corporations, particularly in large financial corporations which are not covered by the study, and investments in other forms such as corporate bonds, tax-exempt securities, real estate, and bank deposits. It is quite possible that for some groups these outside investments had a larger aggregate value than their identified holdings in the 200 largest corporations. " 4
A point never made by the TNEC study is that this same pattern of concentrated ownership and control extends below the 200 largest companies to the 500 largest, the 1,000 largest, the 10,000 largest, etc. What is remarkable about the TNEC showing is not that there were shown ownership and control by such tiny groups but that there were such concentrated ownership and control over such mammoth corporate entities, which standard propaganda insists are widely owned by the rank-and-file citizenry as stockholders. As enterprises get smaller and smaller there is even less public participation in their ownership than in the biggest companies until one soon runs into the 100 per cent family-owned or individually owned closed corporation. It is no exaggeration to say that all money-making enterprises of whatever size, including the widely owned AT&T, are owned by a very small class of proprietors, Whatever property is scattered among nearly 90 per cent of the populace is mostly nonrevenue- producing: much-used cars, TV and radio sets, furniture-in brief, chattels.
The Standard Oil branch of the Harkness family, now with few surviving members and its once vast funds largely distributed, mainly to leading educational institutions, was found to be among the twenty largest stockholders in no fewer than 24 of the 200
largest companies, apparently a record. 5 While this particular ownership is no longer concentrated, the fact that it recently existed shows what is possible within the system.
Single
Family
1. Dorrance
2. Duke
3. Ford
4. Hartford
5. James
6. Kress
7. Mellon
8. Mellon
9. Mellon
10. Pew
Multiple
Family
1. Anderson-Clayton
Main
Corporation
Campbell Soup
Duke Power
Ford Motor
Great Atlantic & Pacific 100
Western Pacific RR 61. 18
S. H. Kress 79
Gulf Oil 69. 5
Koppers 52
Pittsburgh Coal 50. 9
Sun Oil 69
Anderson, Clayton 94-plus
(Houston)
Family Control by Majority Ownership 6
2. Clarke-Bourne-Singer Singer 50-plus
3. Pbillips-Olmsted- Long Island Lighting 47-plus
Childs
4. Bell-Darby-Cooper American Cyanamid
Biddle-Duke etal.
88. 77
A peculiarity about this last holding was that while most of the Class A voting stock
was owned by eight senior officers-almost 29 per cent by W. B. Bell, president-most of
the equity was represented by the Class B nonvoting stock. The twenty-two leading
stockholders, with three tied for twentieth place, held 88. 77 per cent of the voting stock. 7
The holdings of the Hartford family in the Great Atlantic & Pacific Tea Company, which does more than 6 per cent of all retail grocery business in the United States, are not precisely ascertainable now on the basis of the TNEC report. The Hartfords owned at least 61 per cent of the old preferred stock, exchanged for three shares of common in the recapitalization of 1958, and all of the voting common, exchanged for one share of new common. In the old arrangement there were 935,812 shares of nonvoting common, also exchanged share-for-share for new common, but because the TNEC did not inquire into the Hartford ownership, if any, of this stock, its possible present ownership position (assuming no sales or purchases) cannot be completely deduced.
But, assuming the Hartfords owned none of the nonvoting stock and retained all their other stock in the exchange, they would now own very close to 70 per cent control of the company. At the end of 1964 all its outstanding common had a market value of $936,850,025, leaving the Hartford share at about $650 million. At the end of 1959, 33. 98 of this outstanding stock was held by the John A. Hartford Foundation. I conclude, then, that the Hartford family through nominees still retains majority controlling ownership of this huge company by a wide margin.
Predominant Minority Control 8
A predominant minority was defined in the TNEC study as consisting of the ownership of 30 to 50 per cent of the stock. 9
Single Family Corporation Percentage of
(approximate number of Ownership
income recipients)
Percentage of
Ownership
100 82 100
1. Du Pont
(about 250)
2. Mellon
(about 10)
Mellon
3. Cudahy
(about 32)
4. Deere (4)
5. Pitcairn
(4 or more)
6. Straus
(14)
7. Kresge (6)
Multiple Family 15
1. Field-Simpson-Shedd
E. 1. du Pont de Nemours
(controlling General
Motors by 23 per cent. )
Aluminum Co. of
America
Pittsburgh (Consoli-
dation) Coal
Cudahy
Deere
Pittsburgh Plate Glass
R. H. Macy
S. S. Kresge
Marshall Field
44
34. 4 50. 9 48. 71 10 34. 12 11 35. 34 12 38. 67 13 44. 24 14
2. Rosenstiel-Jacobi-Wiehe- Schenley Distillers
Schwarzhaupt-Gergross
3. Weyerhaeuser-Clapp-Bell- Weyerhaeuser
McKnight
The largest number of family interest groups was found to use the device of control by means of a substantial minority ownership of stock, which permits controlling positions to be taken in some cases in a wide spectrum of big companies.
These were as follows:
Control by Substantial Minority 16
Single Family
1. E. I. du Pont de Nemours &
Co. (family controlled)
2. Crane
3. Colgate
4. Firestone
5. Gimbel
6. McCormick
7. Hanna
8. Palmer
9. Rockefeller
10. Levis
11. Mellon
12. Rosenwald
13. Avery
14. Du Pont
15. Williams
Multiple Family
Corporation
General Motors
Crane
Colgate-Palmolive-Peet
Firestone Tire & Rubber
Gimbel Brothers
International Harvester
National Steel
New Jersey Zinc
Ohio Oil (now
Marathon Oil)
Socony Vacuum Oil Co.
(now Socony Mobil Oil)
Standard Oil of Calif.
Standard Oil (Indiana)
Standard Oil (New Jersey) case
Owens-Illinois
Pullman
Sears, Roebuck
U. S. Gypsum
U. S. Rubber
North American Co. (since
dissolved into constituent
public utility operating
companies)
10
to
30
per cent
in
each
1. Walters-Jenkins-Newcomer
2. Stone-Webster
3. Davies-Woodward-Igleheart
4. Block-Ryerson-Jones
5. Rand-Watkins-Johnson-
Peters
6. Widener-Elkins-Dula-
Ryan
7. Hillman-Shouvlin-Chalfant
S. Miller-Volkman-Schilling
9. James-Dodge-Hanna
10. Procter-Gamble-
Cunningham
11. Lynch-Merrill
12. Kirby-Woolworth-
Donahue-McCann
13. Hochschild-Loeb-
Sussman
Hochschild-Loeb-
Sussman
Small Minority Control 17 Family
1. Moore
2. Zellerbach
3. Crawford
4. Moore
5. Cornish
6. Du Pont-Phillips
7. Swift
S. Warner
Atlantic Coast Line RR
Engineers Public Service Co.
(since dissolved into constituent
operating units)
General Foods
Inland Steel
International Shoe
Liggett & Myers Tobacco
National Supply (oil
well supplies)
Pacific Lighting
Phelps Dodge
(copper)
10
to
30
per cent
in
each case
Procter and Gamble
(soap)
Safeway Stores (groceries)
F. W. Woolworth
Climax Molybdenum
American Metal
Corporation
American Can
Crown Zellerbach
Lone Star Gas
National Biscuit
National Lead
Phillips Petroleum
Swift
Warner Bros. Pictures
We have named fifty-seven single families and combined, cooperating multiple- family groups that exercise control of the largest corporations by majority, predominant minority, substantial minority and small minority ownership. There were thirty-seven single-family-control entities, although some of these, such as the Mellons, Du Ponts and Rockefellers, each controlled several big companies. There were sixty-four single families in the multiple-family groups named, although in some cases the names are not given in this text. Perhaps as many as 400 families composed the various multiple- control groups in the 200 largest corporations.
Some of these companies, as noted, have changed their modus operandi, notably the public utility companies. Some have changed their names, like the Ohio Oil Company. Others have gone out of existence by the merger route. It is neither necessary nor expedient to trace here each company through various subsequent permutations and combinations, for equities are what concern us.
Have the percentage positions of these families remained the same in all these companies? Probably not. In some cases they have undoubtedly increased their holdings, in others they are known to have decreased. Some may even have closed out their holdings. But, as pointed out earlier, if anyone has sold out in one place he has reinvested elsewhere, and possibly to better advantage. He is, therefore, still rich.
Less
than
10
per cent
Knowing the value of the property from the inside, all these groups know when the stock is overpriced and when to sell. As the income-tax returns since the war show, the higher income groups have been steadily taking capital gains, which are taxed at a maximum of 25 per cent, a bargain in relation to the upper income taxes. Wealthy holders usually show a strong tendency to sell some holdings in rising markets and to buy again in declines, thus increasing their percentile position (Standard Doctrine). So their percentages of ownership change from time to time. Sales would not necessarily show on the books of a company. For a man can always sell the stock short.
With the exception only of two as far as I have been able to ascertain, all these families are still extant and still highly solvent. The exceptions are the Harknesses and Arthur Curtiss James (1867-1941), who died leaving no heirs. James left his money to a foundation with the fairly unusual stipulation that the principal was to be distributed in twenty-five years, which was done. 18 Like James himself, the foundation is now defunct.
There remains the case of one big company holding control of another big company. (Control of scores to hundreds of smaller companies by many of the big companies is the common pattern now in the American economy. ) Nearly all of the 200 largest nonfinancial companies of the TNEC study, like most of the 500 industrials regularly featured by Fortune, are in fact holding companies, not operating companies at all. just about all the big companies that are familiar household words in the United States are holding companies, contrary to the general public belief. AT&T, for example, is a holding company.
Corporate Control by Majority Ownership 19
Holding Company
Armour (Illinois)
Cities Service
Royal Dutch Petroleum
AT&T
AT&T
Chesapeake & Ohio Ry
Reading Company
Atlantic Coast Line RR
(under multiple Walters-
Jenkins-Newcomer control)
Many public utility holding
Companies
Operating Company
Armour (Delaware)
Empire Gas and Fuel
Shell Union Oil
Pacific Telephone
& Telegraph
New England Telephone
& Telegraph
New York, Chicago &
Per Cent
100 100 64
78. 17
65. 31
57
St. Louis RR
Central RailRoad of N. J. 55
Louisville & Nashville 51
RR
Many public utility 100
operating companies
now cut loose
In many cases, particularly in railroads and public utilities, two corporations shared control.
A predominant minority as well as substantial and small minority control was exercised by many corporations, particularly in the railroad and electric utility fields. In this latter field, long subject to gross manipulative abuses, the companies holding widely scattered properties were finally dissolved by congressional decree and the equities in operating companies were distributed to individual stockholders.
Until very recently the most salient instance of a predominant minority control of one mammoth corporation by another was that of E. I. du Pont de Nemours and Company of the General Motors Corporation (discussed in Chapter IV).
While there were some cases where the big owners were under-represented in the management by reason of "youth, old age, sex, preoccupation with other financial or nonfinancial interests or other considerations" heavy representation or even overrepresentation was "much more common. " 20 Thus, although members of the Swift family owned only 5 per cent of the voting stock, the remainder of the stock being distributed mainly in slices of 100 to 500 shares each, the Swift family held six of the nine directorships. In the Crown Zellerbach Corporation the Zellerbach family, owning 8-1/2 per cent of the stock, provided the president, a vice president and three directors out of a board of thirteen. It is not necessary, then, for a family to own a majority or near-majority of stock to control a company and the disposition of its total weight. A small family block of stock and many small general stockholders are enough to secure control of the board of directors and officers.
Nor did the revelations to the TNEC in all cases show the true center of control, owing to a complicated network of company ownerships. An example is the Tidewater Associated Oil Company which as of December 15, 1939, the date of the TNEC questionnaire, was already well in the pocket of J. Paul Getty, although unknown to the world. The TNEC report shows that 3. 07 per cent of the common was owned by George F. Getty, Inc. , which in turn was 43 per cent owned by J. Paul Getty in person and 57 per cent as trustee for his children. But Pacific Western Oil Corporation owned 3. 93 per cent, and was in turn owned 67. 9 per cent by George F. Getty, Inc. , and 2. 62 by the Mission Corporation. Again, the Mission Corporation owned 16. 52 per cent, and was in turn owned 46. 53 by Getty's Pacific Western Oil Corporation and, observe, 7. 39 per cent by the Tidewater Associated Oil Company!
Directly and indirectly J. Paul Getty at the time, undetected by the TNEC analysts, already owned 23. 52 per cent of the mammoth Tidewater enterprise. Actually, his percentage of control was somewhat higher than this because the South Penn Oil Company, of which Tidewater owned 17. 27 per cent, reciprocally owned 2. 77 of Tidewater. Mission Corporation was originally established to hold the interest of Standard Oil (New Jersey) in Tidewater but Getty, as he reports in his memoirs, talked John D. Rockefeller, Jr. , into selling him his Mission stock and then in a quiet campaign prevailed on other stockholders to follow the Rockefeller lead. At the time of the TNEC study Standard Oil (Indiana) owned 1. 05 per cent of Tidewater through the 98-per cent- owned Pan American Southern Corporation. 21
The TNEC made a supplemental study of 10 interesting large companies that were not included on the list of the 200 largest. Some of them were as follows: 22
Family
Dorrance family
(by trust indenture)
Woodruff-Nunnally-Stetson-
Candler-Illges
Twenty individuals
Mainly members of the Bell
family among twenty
stockholders
Haverneyer family, H. O.
Havemeyer estate, and the
Ossorio, Thatcher and
Boettcher families
Heinz family
Twenty individual stock-
Corporation Percentage
Owned
Campbell Soup
Coca-Cola International
(controlling Coca
Cola Co. )
Crucible Steel
General Mills
Great Western Sugar
H. J. Heinz
International Utilities
100
nearly 50
45. 55 20. 14
43. 34
82. 10 26. 71
holders, mainly invest
ment companies
Ajax Pipe Line
Rockefeller Foundation
Harkness-Flagler-Prentiss
(Rockefeller)-four other
individuals and 11 trust
companies and brokerage
houses for others
St. Regis Paper
(utility holding company)
American Superpower
J. P. Morgan & Co. , Brown
Brothers Harriman & Co. , and
16 brokerage houses and
investment firms
Standard Oil (Ohio)
Standard Oil (Ohio)
Standard Oil (Ohio)
United Corporation
United Corporation
United Corporation
24. 77
17. 63
10. 92
8. 332
6. 640 9. 846
The tenth company on this supplemental list was the Electric Bond and Share Company, then a utility holding company and now an investment trust. Its twenty-one largest stockholders were banks, brokerage houses and investment companies, and the names of the beneficial owners of the stock were not elicited.
Leading family names not yet mentioned that were strewn through the twenty largest stockholders in the 200 largest nonfinancial companies--in many cases appearing in more than one company-were as follows:
Adler, Astor, Cabot, Clapp, Doris Duke Cromwell, Cunningham, Doherty, Drexel, Fleischmann, Forstmann, Goelet, Goldman, Guggenheim, Hanna, Hearst, Hillman, Hutton, Jones, Laughlin (Jones and Laughlin Steel), Lynch, McClintic, Miller, Milbank, Palmer, Payson, Penney, Pillsbury, Rosenwald, Schott, Skaggs, Vanderbilt, Watkins, Whitney, Widener and Winthrop.
Names of wealthy families that did not appear because their stockholdings were not among the twenty largest and were probably widely distributed in smaller blocks, rentier-style, through many companies or were in real estate or bonds, were the following:
Baker, Bedford, Berwind, Curtis-Bok, Fisher, Frick, Gould, Green, Hill, Kahn, Lehman, Metcalf, Patterson, Pratt, Phipps, Taft, Timken, Warburg and others.
These omissions, not at all to be deplored, came about because the TNEC study was not directed to ascertaining the names of all wealthy families--what it gleaned here was a byproduct--but merely of determining who controlled the 200 largest nonfinancial companies. Anyone who was concentrated mainly in real estate, banking, insurance or in widely diversified, nonconcentrated investments the study necessarily missed. All the new Texas oil men were missing. Joseph P. Kennedy's name did not appear.
Even if one had before one an up-to-date list of all the largest income-taxpayers, names of some extremely wealthy people could readily elude us, such as anyone who, like Mrs. Horace B. Dodge, had converted all her holdings into tax-exempt state and municipal securities. One could, theoretically, own a billion dollars worth of these, drawing a tax-free income of $25-$30 million a year, and never show up on the income- tax list at all.
What the TNEC analysis made incontrovertibly clear was that the family, not the individual, is now the significant wealth-holding and wealth-controlling entity in the United States, a thesis I had antecedently asserted, for the first time as far as I know. 23 While the proposition may seem firmly established to some it is, curiously, often denied or blandly ignored even though the SEC continues to supplement the TNEC findings in
detail. One man may amass the fortune, as in the case of John D. Rockefeller, but if the fortune is to remain intact it must have heirs. Where the fortune-builder is a bachelor or fails to establish a family, the fortune simply disappears in a foundation or institutional grants. Heirs, then, are as important to a fortune as to a title of nobility. Most American fortunes, easily by a majority of 70 per cent, are in the hands today of heirs.
And, in saying that the family holds the fortune, one cannot suppose this to suggest that its members fend individually for themselves to all points of the compass. They must hold together, for their predecessors have in almost all cases entangled them in a network of trusts and family holding companies that assure unified action at all times.
No less than half of all these controlling corporate holdings were in "trust funds, estates, and family holding companies. " 24 Even if an heir wished to go away on his own, all be could take with him would be income; the holding itself would remain in a center, massed with other individual holdings and directed by some individual or small family committee. This circumstance puts all the holdings into a tight fist, generating power that is played out in the political and cultural arena. Anyhow, who would want to walk away from the goose that lays the golden eggs?
Family Holding Companies
There are thousands of personal and family holding companies, large and small, in the United States. In most cases their names have never been seen or uttered by 99. 9 per cent of the citizenry because these entities are private, are under no obligation to make any report to anyone except the tax authorities. No public compilation of them exists.
Their names usually only come to public attention through court proceedings or as the byproduct to certain government investigations, such as the TNEC inquiry. That particular inquiry did provide information about the existence of some extremely large family holding companies.
A family holding company may have a score or more participants of beneficial interest in it--infants, teen-agers, the superannuated, the mentally retarded, absent big game hunters, scholars and normal persons in the prime of life. But the slices of beneficial interest, apart from the income pay-out, are all managed as one entity by a single person or a family committee, which in turn is either adept in the management of large properties or has the benefit of expensive professional advice. An heir may seem deficient in business acumen to all who know him, but he may be the constant beneficiary of the best legal and investment advice available, perhaps even against his own wishes. He might prefer to take his stake and invest it in various attractive schemes, or spend it, but he is firmly deterred from this course by the family holding company. And it functions, up and down the line, according to Standard Doctrine.
We have already noticed, in connection with the Du Ponts, that the TNEC found a large role being played by the Christiana Securities Company and Almour Securities, Inc. , both family holding companies. But other huge family companies were also uncovered in the report.
There was, first, the Bessemer Investment Company, instrument of the Phipps (Carnegie Steel) family that included, among many persons named Phipps, such names acquired by distaff marriages as Douglas, Janey, Sevastopoulo, Martin, and Winston and Raymond Guest. In all, twenty or more Phippses were beneficiaries. All appeared to have the financial status of rentiers and were well known social registerites and polo players. Bessemer Investment Company was found to be a principal stockholder in New England Power Association, International Hydro-Electric System and International Paper Company, whatever else it held of lesser dimensions.
Oldwood, Inc. , was 66. 58 per cent owned by the Bessemer Investment Company and a group including the Chace, Gammack, Majes, Cox Brady and Phipps families. It was a leading stockholder, too, in the New England Power Association.
More than twenty Du Ponts had a participation large enough to list for Christiana Securities Company, which had among its stockholders other Du Pont family holding companies such as Delaware Realty and Investment Company, Archmere, Inc. , and Du Pont trust funds.
The Cliffs Corporation, the personal instrument of the Mather family, owned all the common stock of the Cleveland Cliffs Iron Company, which was among the principal stockholders of the Wheeling Steel Corporation and the Republic Steel Corporation.
The Coalesced Company was owned 50-50 by Paul Mellon and Ailsa Mellon Bruce, and in turn was among the top stockholders in Koppers United Co. , The Virginian Railway Co. , Pittsburgh Coal Company and General American Transportation Company.
The Mellon Securities Company, owned by Richard K.
