Steel

The United States Steel Corporation has never cut a melon, although it has more than half a billion dollars in surplus. Many common stockholders yearn for this usufruct of 25 years' waiting which Judge Elbert Henry Gary, chairman of the Board, has placidly withheld. Men had tried to tease the Judge into resigning at the April stockholders meeting. They had urged that he was an old man turned 80, had been with U. S. Steel since its inception in 1901, had made a batch of steel highbinders work together and actually practice his ethics in business. U. S. Steel was the sublimation of Judge Gary. He was the personification of U. S. Steel. What further did he want? He ought to cease his labors--and incidentally let the melon be cut.

Fortnight ago U. S. Steel led a stock market rise. Talk centered on that melon, on the resignation of the grand old man.

Again last week the talk rose . . . he would resign at the end of the year. With a benignity that was a conscious principle with him a generation ago, a benignity that is now an irritating habit, he put off the questioners--no immediate resignation--still active. . . .

Some youngsters think him an old business fogey, are bored to rehear his aphorisms, wise words they learned as their financial ABC's. "Consider public opinion," "frank and honest information about corporation business," "particular cordiality to stockholders," "no more damning of public or government," "conforming to existent laws," "cooperation rather than competition," "consideration for labor," "8-hour day." These phrases sound stale nowadays. A generation ago they were novel, might have continued so yet. But Judge Gary who invented them--something few of the younger businessmen know--applied them practically to the conduct of the U. S. Steel Corp., when in 1901 he took command as J. P. Morgan Sr.'s* direct agent.

"Moral principles are at the base of all permanent business success-- they go together. In the long run, every business question, every public question must be settled by what is right and what is wrong," he once declared. These business ideas, fantastic in their period, he had developed in his small town (Wheaton, Ill.) Methodist church circles, had kept them through his political activities there, had used them to build up a law practice of $75,000 yearly. Only if he were permitted to apply them to big business would he accept the presidency of the Federal Steel Co., which he organized for J. P. Morgan Sr. in 1898. "You can select the directors, name the executive committee, choose your officers and fix your salary," Morgan told him.

The same situation developed in U. S. Steel. One director there quickly stopped attending board meetings. He believed in Sunday schools, but not in turning a business into a Sunday school. The judge made his directors stop gambling with $20 gold pieces. Eventually he got full co-operation in his ideals.

Mr. Gary almost always gets his way. He makes up his mind and then applies an exceedingly subtle way of argument. He pats his opponent on the back. As he pats he gives a little shove, then another little shove. Soon the opponent is gently shoved onto Mr. Gary's own premises. The debate is settled. He deprecates antagonisms. To contrary views he agrees with a "but" and eventually butts his exceptions into the well-patterned decision he held at the beginning of discussion.

Thus, against many argumentative attacks, he has serenely resisted the distribution of U. S. Steel's $521,863,109 surplus. That sum means far more than money to Mr. Gary. It is the balance wheel to his corporation. It is the keel of his ship. It makes U. S. Steel Common (since last April definitely at 7%) an incomparable symbol of security, despite bad years, which no business can escape. For the the last quarter of 1914 it had only $567,359 of profits available for dividends which required 12 times that sum. The difference came from surplus. The next quarter, the first of 1915, were almost as bad. But dividends were paid.

He knows the clamor, satisfied it a trifle in 1917 by giving 16 3/4% dividends. That and the 16% of 1918 are the farthest he has ever deviated from his institutionalized 5%, now 7%.

U. S. Steel is not the most profitable of U. S. steel fabricators. Its 90 millions of 1925 earnings were only 4.77% on capitalization. Smaller concerns earned greater percentages--Central Steel (18%), Youngstown Sheet & Tube (6.94%), Interstate Iron (8.31%), Ludlum Steel (8.19%). . . .

U. S. Steel is enormous--250,000 employes, $442,000,000 payroll -- plants, railroads, ships. But it must be careful. Judge Gary, its nurse, its tutor, will see that it is careful.

If he were to resign . . .

Wall Street has its candidates-- Nathan L. Miller, Dwight W. Morrow, James Augustine Farrell. Mr. Farrell, president of the Corporation since 1911, is the keystone of its organization, the pivotal point between the executive committee and the subsidiaries. He, a great steelmaker and foreign trader, could scarcely be spared from his duties. Mr. Morrow, lawyer and partner of J. P. Morgan & Co., is more available. Everyone knows that U. S. Steel continues to be an Morgan industry. Mr. Morrow is the astute friend of presidents (he is almost the chum of President Coolidge, was his classmate at Amherst; also President Wilson trusted him). Mr. Miller, the onetime Governor of New York, might also slip into the Judge's place, indeed more conveniently than Mr. Morrow. He, since last October, has been the concern's general counsel, a director, and a member of the finance committee.

*The present John Pierpont Morgan was then studying finance in his father's English institutions. He returned to the U. S. and became a partner of J. P. Morgan & Co. in 1901, the year his father created the U. S. Steel Corp. Morgan Sr. died in 1913.