The Millionaire's Peril

THE modern millionaire may not be exactly the “amoosing cuss” that. Artemus Ward called his Kangaroo, but he is an object of considerable interest to every healthy young American, and of a good deal of “cussing” to the general. There are a good many of him, and we have no dukes to divert us.

No one in the community seems less in need of sympathy or protection. His private watchman saunters beneath his windows; his chauffeur hangs about his front door; the captain of his yacht is at the other end of his telephone; his private secretary wards off the too pressing public; his doctor is at his command; while his barber, his manicure, and his tailor, “the butcher, the baker, and the candlestick maker,” throng his servants’ entrance.

For all that, his lot is far from easy. His latest fad, the automobile, is eloquent of his troubles. If he is not using it to escape process-servers, hurrying through backways from one state to another, he is being pelted with melon rinds, or running over somebody, or being haled into court for fast driving.

The trouble with the poor man is that he is in new conditions. He has not been a millionaire very long, — the few who were born so are still young, — and the American people have not become thoroughly used to millionaires. Perhaps we ought to be. It is a full hundred years since Wordsworth wrote, —

But that was written in London in 1802. In our community life we do not yet know exactly how to take one another. Inside the sacred pale, or out, we none of us understand very clearly conditions which still to us are new. The new powers we all see and appreciate, the limitations we know very little about, and the perils, particularly to the man himself, we know less.

The millionaire is generally in business, always in a corporation, and usually in a trust. See what has happened. The State in creating the corporation has at once hidden from sight the men who compose it. The company alone is in evidence. It conducts the business, it deals with the public, it has relations with employees , it appears in court, and has agents in the legislature. Meanwhile our millionaire friend and his associates are discharged of all individual responsibility, at least so far as the business is concerned. They are put in the wray of becoming very rich, often are made so at once; for the new conditions created by the act of incorporation often give to existing powers a new scope of widely enriching possibilities. These men find themselves immensely stimulated; they can do so much more business; they have become “captains of industry,” and “magnates;” they are in demand as “directors;” and all the time they have the new consciousness that while their personality, their opinions, their will, their presence, never counted for so much as now, their individual responsibility has disappeared. Outside their own board of directors, and often within it, they have an entirely free hand.

Then the new temptation begins. There is sure to be some man on the board more ambitious, greedier, less scrupulous than the rest. He presses schemes. The company has its counsel who must commend himself by the skill with which he shows how these schemes can be carried through, and kept within the law’, or what legislation is necessary to make them practicable. The lawyer’s opinion becomes largely the decisive judgment of the board. Why should the native compunctions of our millionaire be assertive? It will be the board’s action, not his. He is not the company, indeed in the affairs of the company he does not exist individually; at most he is but an officer and a stockholder; and under the general law as it now is, at least in New York, the stockholders have practically surrendered all power when they have created a board of directors.

What follows is natural, if not inevitable. The company finds, perhaps, most profitable business in connection with some egregious public corruption, or even some widespread and flagrant vice, as in the case of the Western Union and the pool rooms. It is in the regular course of business; it is immensely profitable; no one challenges it. What more natural than that even a board of gentlemen of the highest respectability and the most unquestioned character should be oblivious? In time, when because of some incidental publicity public opinion is centred upon it and they are individually challenged, their sluggish consciences are awakened and spurred to action. The prompt and specious and pitiful pleas put forth by their administrative officers are the already worn and ill-smelling phrases with which they have been accustomed to argue with themselves, or to meet feeble demurring within the privacy of the executive offices. The vigor of public denunciation now arouses the men of strongest conscience within the board, and before long official action follows. Happily, there generally are men of conscience, and through them public opinion wins the victories which keep it alive.

Who of us would do right if it were not for the support of the law, and the sharp repressive function of penalty and public opprobrium ? These men are simply human. The point to be observed is that in the normal circumstances of their present business life they are in an abnormal situation. Conscience is by no means dead; it is suppressed. The man believes himself still righteous, but he shares the profits of unrighteousness. I know one elderly gentleman who insisted that “the boys ” should not tell him what was to be done with the money for which he drew his cheque for his share in a shady transaction which he much desired to go through.

Of course all consciences cannot be put to sleep. The business world as a whole was probably never more honest than it is to-day, and, within certain lines at least, never more scrupulously trustworthy. The important fact is that we have created conditions of strong soporific tendency even for honest consciences. Doubtless many are strong enough to withstand them, and now and then a disturbed man breaks out; but Americans can endure almost any one better than a man who “makes a fuss.” The president of the telephone company in a distant city, discussing business morals with me a while ago, said that he had had to protest to his board that he should resign if a proposition was approved to pay $30,000 to obtain some municipal privileges which the company wanted to secure, and which were perfectly proper, but for which they were to be held up. The board was not to know who got the money or how it was managed. I asked him how it turned out. His only reply was a smile and the remark, “I am not president now.”

But even when there is no direct challenge to wrong-doing, see how our friend is placed with his new corporation. At the outset there is the question of the capitalization. “Good-will” is to be expressed in dollars; “economies” are to be determined in advance and “written down in the bond; ” above all, exemption from competition becomes a valuable asset, and increase of business is sure; manifestly the present appraised value of the business, or plants, or constituent companies, has no relation to the face value of the securities that in one form and another are to be issued. Their number depends upon the “nerve ” of the promoters, or the preparedness of the public to digest them. A recently organized industrial trust embraced twenty-four mills, on which an average valuation of $500,000 would have been wildly extravagant, and promptly issued forty-one millions of securities of various kinds. The United States Ship-Building Company organized with three thousand dollars subscribed capital, and in a few months issued $69,500,000 of securities. These covered various properties which, apart from the Bethlehem Steel Company, for which $7,246,871 in cash and five millions in stock were paid, were appraised soon after by competent men at $12,441,518.

Of course, what appears an excessive watering of stock may in exceptional cases be justified by the actual earning capacity of the business. In one trust organized some time ago with twenty millions of stock and a large amount of bonds, to represent a business that had stood at about seven millions of dollars, the chief owner took as his share the entire issue of stock and no bonds, so assured was he of the real value. But the temptation to stretch capitalization to all that the public will buy, when one is juggling with millions, at the cost of no further effort than guiding a pen, is so novel that, even with old heads and well-tried consciences, it has to be reckoned with. “Bicycle” and “Asphalt” and a host of others will not soon be forgotten. United States Steel stands now at fourteen hundred millions, a sum approximately one half larger than the entire indebtedness of the United States government.

When the securities are issued they become a snare to a multitude of very respectable people, including other millionaires. Enormous commissions, written also in millions, can be well afforded as pay for their distribution. The courts have just sustained a claim for one million dollars against the president of the company that managed the deal in a seven-million-dollar transaction, based on the promise of the president to pay that amount to an agent he employed, out of the commission he received. The great underwriters take the securities in block, and undoubtedly incur risks for which large compensation is due; but the whole financial machinery of the country is employed in marketing them. Quiet investors have everywhere to be informed of the new opportunity to get higher rates for their money. Thousands of old-fashioned conservative securities are brought out and exchanged for the new and much advertised creations, sometimes, perhaps, to the advantage of the investors, but very often sadly to their ruinous loss. Doubtless there are bank officers who will advise wisely even when large commissions are involved, just as there may be life insurance agents who give candid counsel concerning change of policies; but the important fact is that under present conditions wherever these securities go they carry the trail of the serpent with them. They are a measure of the effect, if not of the nature, of our millionaire’s temptation.

“Get out of my office! You are getting too d—d near my price,” was the final reply of a congressman who was being approached in Washington with a steadily advancing bid for his services. We none of us know just what is “our price” until we are tried; and this deluge of watered securities is washing out the underpinning of not a few. How sensitive careful investors are to such influence is illustrated in a recent instance. An elderly gentleman, meeting on the street a friend of large wealth, asked him what securities he would advise for a small investment he had to make. He received his answer, and, going to his broker, gave his order. When the securities were handed to him the next day, he noticed that they were endorsed for transfer by the man who had advised their purchase. Instantly he passed them back to the broker with orders to sell. His quick apprehension detected a personal interest in the advice, which, however justified it might be in itself, was for him at once vitiated and untrustworthy. Unfortunately, the small, investor is not in a position to detect the real situation, and there are many sorrowful tales to-day all over the land.

Furthermore, there is the temptation that comes to our friend the millionaire in the simple possession of unlimited power. Competitors are not easily disposed of. Some are so unreasonable as not to be willing either to come in, or to sell out. They have to be fought, and, it. maybe, crushed. They must be put out of the way; the interests at stake are too large to be jeopardized. Legislatures must be dealt with; courts must be approached; paths must be cleared that are often willfully encumbered. Then reports are to be issued and dividends determined, on the basis of which the stock market rises and falls. One large industrial company, I am credibly informed, after recently letting its annual report stand six months or more, issued a correction to the, extent of an “error” of $800,000, on the news of which its stock fell sixty points; and its president is openly accused of having unloaded at the higher price to buy back at the lower.

Investigations are threatened, and must be checked; too inquisitive reporters are to be shut up, and too loquacious newspapers silenced. What wonder that our friend has his hands full, if not in caring for himself, then in protecting his friends. He cannot be too scrupulous in regard to the methods of his agents. He may have to send a man to Europe; how can he tell what he is doing there, or with what sort of men he is dealing ? Imagine it being written of him under such conditions, though

A quiet citizen of my acquaintance recently found himself shadowed by a detective. He said nothing, but employed another detective agency to shadow the shadow. He quickly learned that the detective was reporting daily at the office of a great corporation which was seeking to call off an investigation that was threatened, and with which he was known to be connected.

These men cannot be happy. They are constantly at swords’ points with one another. The country watches the battle royal over a “merger,” or a voting trust, or a pool, and then turns to other things; but the personal relations involved are far from those of the Kingdom of Heaven. Men in a group,however select, cannot be comfortable when all are carrying knives for one another.

The rich men are often the great benefactors; many of them are the finest flower of our modern life; there are some of whom the country may well be proud; but as a class they represent a constant peril to character. The lawyer becomes the servant of the great corporation; the doctor cultivates his rich patients; the shopkeeper is obsequious to his rich customer; the rich man bows before the richer one; the whole community is thoroughly conscious of this power of wealth, which is so new to us because it is now so widely extended and so vast.

Sir Henry Maine some time ago announced the law that the movement of human society is “from status to contract; ” that is, that during a long period there has been an advance from fixed conditions to freer ones. But writing more recently, Herbert Spencer shows that conditions have changed. While the old coercive arrangements of human society have relaxed, new coercive arrangements are being unobtrusively established. The steady development of the machinery of society, in the State and in business, is working a reversal of the process that Sir Henry Maine observed. The immense development of all forms of public administration, with its growing system of industries carried on under state regulation or control, coupled with the vast array of business of all kinds organized into great corporations in which individual responsibility disappears and unseen hands direct, is working a corresponding subordination of the citizen; a new tyranny, which, he says, will “eventually lead to new resistances and new emancipations.” As yet we are only noting the change; society has still to deal with the outcome. “Human nature,” says Spencer, “must be much better than it is at present, before a higher civilization can be established.”

But, after all, the chief danger from wealth is to the possessor. The old word as to the difficulty of the rich man’s entering the Kingdom of Heaven still stands. The millionaire is himself the man whose sensibilities are dulled, whose heart is most, exposed to corrosion. He is compelled to live in a world of his own, where standards are artificial, ideals are low, restraints are few and feebly applied, conventionalities control, and truth is rarely spoken to his ears. He knows little of the discipline of the man

Consequently it can seldom be written of him: —

It is a daily wonder if his children turn out well. They have none of the advantages of ordinary boys and girls in the discipline or even the common intercourse of life, and few of the incentives; they are a class by themselves, courted for their money and dreaded for their influence, as to-day in our schools and colleges; and when the son of a millionaire makes a man of himself, or a daughter turns out to be a gracious, unselfish, and lovable woman, a wife to gladden the heart of a man, how universal is the comment!

On the whole, our millionaire friend is not so much to be envied as he is to be better understood. Then he will be happier, and the community more at peace.