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conferred such voluntarily accepted but compulsorily main
tained relations to one another and to all others that as
an autonomous, self-sufficient and self-renewing body they
may determine and enforce their common will, and in the
pursuit of the ir private interest may exercise more effi
ciently social functions both especially conducive to
public welfare and most appropriately exercised by associated persons."
In its inception, then, the corporation legally exist
ed primarily for the public welfare and had only those
powers specially delegated to it in its charter of incorpo
As such it was and is a potent force in the
velopment of this country.
But it was not long before the
corporation managers and directors were able to give the
"pursuit of private interest" precedence over that of the
They were protected, too, by our political institu
tions and theories of the time according to which the activity of the state was strictly limited. I yet such was
the demand for canals, railways and other public utilities
as well as the demand for many other factors of industrial
and commercial progress that it "appeared in the minds of
men to justify prodigality in the concession of public
1. Introduction, by Henry C. Adams of University of Michigan, to Dixon's State Railroad Control, pp. 4-9.
powers to corporations."
Our policy of laissez faire had
now become a doctrine of paternalism fostering capitalism.
Public service. companies were vested with the rights of
eminent domain, gas and water-works companies were given municipal monopolies, railroads and canals received land
grants and credit subsidies, industrial corporations were
in many cases fostered by the erection of tarifi walls.
Thus aided and encouraged the modern captains of
industry grew bolder.
The massing of capital with its
resultant increase in the size of the factory or the plant
had taught them the advantages of large scale production.
The reduction of transportation rates making possible the broadening of markets and the invasion of the territory of
one manufacturer by the products of another had produced intense competition and a material reduction of profits." From this latter force they sought means of protection.
Hence combinations of the capitalists within a given
industry resulted ,- first in the form of working agreements,
then in agreements for the division of territory and next
3 in agreements for division of earnings. Under these three
forms of agreement the parties still maintained their sepa
Davis, Corporations: Their origin and Development, Vol. II., p. 268.
Volumes I (p.9) and XIII (p.V) of the Report of the U.S. Industrial Commission, 1900, 1901, both give excessive competition as the chief cause of the formation of combinations.
3. Nolan,Combinations, Trusts and Monopolies,pp.35-38.
rate existence, and divided management of the constituent properties. To make the combination more efficient, to
produce from the capitalist's standpoint the unit of great
est industrial efficiency, it was proposed to place the
control of the separate properties in the hands of a few
persons or trustees to be managed for the benefit of all,
the proprietors of the constituent companies to receive
trust certificates in proportion to the value of the property contributed to the #trust.2 Under such an arrangement
the Standard Oil Trust, organized in January 1882, came
3 into existence as the first modern trust.
It was not, however, until about 1888, with the report of the Bacon committee of Congress and the investigations of New York5 and Canada
dao that the
that the public seriously realized
1. Nolan, Combinations ,Trusts and Monopolies, p.39
3. Report of Bacon Committee of Congress, July 30th, 1888, contained in House Reports, First Session 50th Congress, 1887-1888, Vol. IX.
4. Ibid. See also Report of U.S. Industrial Commission, 1900, vol. II., p. 3.
5. Report of the committee on general laws on the investigation relative to trusts. Transmitted to the legislature, March 6, 1888. Documents of the Senate of New York, 1888, vol. 5, No. 50.
Also report of committee on general laws relative to combinations commonly known as trusts, May 9, 1889. Majority and minority reports. New York Senate Document Ito. 64, Albany, 1889.
6. Report of U.S. Industrial Commission, 1900, Vol.11.,