In the second kind of combination, the so-called "vertical combination," or "integrating combination," or corporation, the constituent members have often not been competitors in the same line of work before the combination was made, though they each seek a share of the value of the final product. Instead of being competitors in the same line of business, they have been producers of different products at different stages in the same industry. For example, the Federal Steel Company was a combination of several companies that were not competitors. The Minnesota Iron Company owns iron ore property, also the Duluth and Iron Range Railroad Company, which connects its mines with Lake Superior at two points. It owns ore docks and also twenty-two steel lake vessels that can carry a large proportion of its products each year. The Federal Steel Company bought all its stock. It also bought all of the stock of the Lorain Steel Company, which manufactures chiefly steel rails for street railways, although some steel billets. It bought all the stock of the Johnson Company, which is engaged chiefly in manufacturing frog switches and crossings for street railroads, as well as electric motors. Another company, all the stock of which it purchased, is the Illinois Steel Company with several plants, which produce pig iron, steel rails, steel billets, steel plates, etc. This company is also the owner of the stock of the Chicago, Lake Shore and Eastern Railway, which connects its plants in the neighborhood of Chicago, and also gives these plants an outlet to the general market over all of the railroads in the country. It also owns large tracts of coal property on which it manufactures coke used in its plants.

From this statement it will be seen that the Federal Steel Company by its formation lessened only to a very slight extent, if at all, the competition in the same lines which had existed before. Its purpose was different. Through the combination the mines are furnished with a sure customer, provided they need one, for a large part at least of their output; while, on the other hand, the Illinois Steel Company, in its manufacture of steel rails, billets, etc., is assured of a steady supply of ore for the carrying on of its manufacture. In this way contracts can be taken for a long period of time in advance with perfect certainty of their being carried out on time without any excessive losses that might otherwise come from possible changes in the price of ore. Before the organization, of course, each of these separate companies tried to get the largest share possible of the value of the finished product. Now, while the contest may be the same, the motive has been weakened. The profit which the mine foregoes, may be made by the rolling mill or the fleet of transports. It is, of course, true that the business of each one of these separate companies is managed independently; it is still further true that at times the mining company can sell its ore to better advantage to outside manufacturers than to the other constituent members of the Federal Steel Company, they in turn buying their ore to better advantage from some other mine. But, while the work can be ordinarily and is ordinarily carried on independently, and while at times each of the separate constituent companies deals largely with outsiders, this perfect union in management enables them to be secure at all times as regards the supply of raw material on the one

hand, and a proper sale of the raw product on the other, advantages that can by no means be lost sight of.

Some other companies without any formal organization were managed in largely the same way. For example, the American Tin Plate Company, the National Steel Company, and the American Steel Hoop Company in their earlier days while entirely independent in their organization, had nevertheless to a considerable extent the same men as large stockholders and as directors. Here, as in the case of the various Standard Oil Companies, while there was a difference in formal organization there was a real "community of interest." While each one could thus work independently, and while legally each one did so work, there was to a considerable extent the same knowledge and the same harmonious working that was found among the constituent companies of the Federal Steel Company, of the Distilling Company of America, and of others that united through the holding of the stock of the constituent companies by one parent company.

Of course, in 1917, the largest and most complete example of the "integrating company," is the United States Steel Corporation, of which the Federal Steel Company and the other steel companies mentioned together with many more have become subsidiary members. But the integrating idea still remains, each company having largely its separate field, whether it be the steel rails, or tin plate or wire or ships, and each is rather supplemental than competitive in nature. Of course the idea of a community of interests through common stockholders is widely extended and often in

cludes institutions as widely separated as banks and ships and mines and factories.

Whatever the form of organization, however, the 'one essential requirement is efficiency and an opportunity for saving any of the waste that might come if the different corporations or companies were working independently. It is desirable, of course, from the one point of view that this efficiency be used to serve the public in the way of better goods and lower prices. On the other hand, from the standpoint of the combination itself, the efficiency points simply to the cheaper cost of production and the more efficient control of the processes of manufacture and sale, whereas the service to the public in the way of cheaper prices is of course a secondary consideration, and is sometimes even contrary to the wish of the corporation.

The form of organization will naturally determine to a considerable extent the method of management of one of these combinations. Ordinarily there is no difference in appearance between the management of a large corporation called a Trust and any ordinary corporation. Any student of corporation law, upon reading the charter and by-laws, can readily tell from the power that is put into the hands of the directors whether they are in a position to manage the corporation in their own interests as against those of the stockholders, or whether the stockholders are given not only final but active power of control.

If one may judge from the fluctuations of the shares of several of these larger corporations on the Stock Exchange, it would seem that the power at any rate is given to the directors so to manipulate the stock that

they as individuals, by buying and selling at suitable times, may make large individual profits at the expense of the majority of the stockholders—a most dangerous power.

In many cases the stockholders are prevented by the by-laws from having access to the books of the corporations, except under the most extreme circumstances. The directors make no reports to the stockholders that give them any clear insight into the methods of management of the business, and the public who may be intending to invest in the stock have no means of judging what the financial condition of the corporation is. When the charter and by-laws thus enable a board of directors to conceal absolutely from the stockholders the condition of the business, one may at least be justified in the opinion that if the affairs of the corporation are not managed for speculative purposes by the directors, it is because they are men above temptation of that kind.

In some instances, also, the Boards of Directors are so classified and the terms of their office so arranged that those who are first put into control as directors by the organizers of the company may keep that control for a period of years without any possibility of being ousted by the shareholders, unless their methods of management are so palpably fraudulent that the courts will order their removal. Under those circumstances the directors and officers are in a position of strong temptation to manage business in their own interests with comparatively little danger of being found out for a considerable length of time. Here, again, an investor who sees in the articles of incorporation and by-laws