corporation put into the hands of some few trustees or possibly of a trust company the voting power of the stock, with specific instructions in certain instances as to the way in which this stock is to be voted and the affairs of the corporation carried on. In other cases the power is left to the trustees to carry on the business of the corporation as seems to them wise in accordance with a certain general line of policy laid down beforehand. The individual shareholders may then pledge or sell or dispose of their stock in whatever way seems to them best, but the voting power remains in the hands of the trustees. The purpose of such a voting Trust is, of course, to secure continuity of the policy, which, for whatever reason, the stockholders prefer. In some cases it may be that the majority of the stockholders of the original corporation think it desirable to devote all the earnings for a specific period to the improvement of the property instead of to the payment of dividends. It might be impossible to continue such a policy with a shifting body of stockholders, many of whom might wish to receive annual dividends. If, however, the stock can be transferred, but the voting power remain in a few hands, the policy can be carried out consistently for a fixed period of years.

In the case of the Pure Oil Company and other competitors of the Standard Oil Company, it was thought desirable to place the majority of the stock in the hands of a few trustees, because many stockholders felt that otherwise the Standard Oil Company might in time buy from individual stockholders a controlling number of shares, and thus succeed in absorbing more or less completely one of its chief rivals. It is claimed by the man

agers of the Pure Oil Company that, owing to experience with some other companies, they had reason to believe that this was the purpose of the Standard Oil Company, and, in consequence, the Pure Oil Company had its stock placed in the hands of a voting Trust.

It will be noticed that in all of these cases the difference between this last form of voting Trust and the original Trust as seen in the case of the Sugar Trust, is that in the later cases provision is made simply for the management in a specific way of the affairs of some one corporation, whereas in the other case the intention of the Trust was to unite many different corporations under a single management and possibly in certain cases to secure a virtual if not a complete monopoly of the output.

After the dissolution of the old Trusts, the form of organization into one great corporation that should own the separate plants, became most common. Under that form, as, for example, in the case of the organization of the American Tin Plate Company or of the National Steel Company, each one of the separate corporations sold its plant outright to a new corporation and the original corporation then dissolved. When the combination was completed, there remained in existence only the one great corporation owning the plants that had belonged before to the separate corporations or to individual partnerships or owners. In no essential particular did the legal aspect of the single new corporation differ from that of the separate corporations which had preceded it.

The form of organization that seemed to have become most common in later years is that of the "holding

company," a form closely allied to the old Trust form in its essential character. In this case, when a combination is about to be perfected, a new corporation is formed whose purpose it is to buy up all, or at least a controlling share, of the stock of all of the separate corporations that are to come together. The different corporations then maintain their separate legal existence, but their stock is held by the one company. The officers of the great corporation having thus in their hands the control of the stock of all of the separate corporations, and voting that stock as they see fit, elect, of course, from year to year the directors of all of the corporations, and thus by this absolute control of the officers, direct the affairs of the different corporations. In some cases the "parent corporation" (so called, though born from the others), besides owning the stock of the individual corporations, owns also independently some properties of its own; but in other cases the parent corporation owns only the stock of the separate ones which have entered into the combination. The profits of the individual corporations are made, of course, as before; their dividends are declared; and these dividends are the chief source, or possibly the only source of profit of the parent corporation.

While this form of combination probably doubles the total capitalization in par of stocks, it should be noted that there is no increase in capital, and that there need be no stock watering-although there often has been. Neither need there be any more speculative securities created. This fact is often overlooked by those who are appalled by the huge capitalization of industries during the past few years. While new com

panies have formed, old ones have died that they might live, or the constituent companies pay all their dividends to the parent company to enable it to pay its bills. In this way the earnings of the separate corporations are pooled as effectively as they were in the old Trust. The management is kept as effectively in the hands of the officers. The only difference seems to be a legal one. The parent corporation now owns the stock of the different corporations. In the other case a Board of Trustees held this stock in trust without themselves having any separate legal corporate organization. These new corporations are, it is true, amenable to the courts in a somewhat more direct way than were the former trustees; otherwise there seems to be no essential difference between these two forms of combination. this later form of combination the constituent companies have their separate boards of directors, their separate officers, and carry on their business independently, managing it, however, under the general direction of the officers of the parent company. It follows of necessity that the work of all the different corporations is carried on harmoniously. Some one of them may have its plants closed for a time in order to suit the supply of product to the demand; on the other hand it may even be that prices will be fixed by the officers of the several companies; but in case of need they can always be readily controlled.

In

One of the leading decisions, the Northern Securities Co. case,* decided in 1904, made it clear that the holding company was not a form of organization that would necessarily produce monopoly or an unreasonable re

*Northern Securities Co. v. U. S. 193 U. S. 197.

straint in trade. But, believing that the intent of the formation of that company was to hold the stocks of the Great Northern and the Northern Pacific Railways in order to prevent competition and thereby restrain trade, the Court declared the company illegal, ordered its certificates destroyed, and the stocks of the two roads distributed among the certificate holders pro rata. This may have satisfied the law, but the community of interests secured common action as before. As one observer expressed it, "under the Securities Company the management and rates were fixed by the direction of the Board of Directors, now they are fixed by the direction of Jim Hill." The principle of United Action holds under all these forms. The acts of legislation and courts have simply tended to drive the form of organization into a more closely merged amity of control, as the great companies more and more have the parent company build and buy separate plants instead of controlling them by agreements, trusts or common stockholding.

It should be noted that among these various forms of combinations there are two kinds, as was indicated earlier in Chapter II, essentially different in nature. The first is made up of companies that have been active competitors before the combination was made, as in the case of the original Sugar Trust and Whiskey Trust. In these cases the combination was sought for the special purpose of lessening competition, together with the elimination of the competitive wastes. The combination simply took different competitors out of the market and enabled the price of the product to be fixed by the central organization.