Charles M. Schwab
Perhaps of no other man in industry are as many anecdotes related as of Charles M. Schwab, the first president of the United States Steel Corporation, and now head of the Bethlehem Steel Corporation, the second largest steel organization in America.
Schwab is the Peter Pan of American industry. His is the spirit of perennial youth, his the philosophy of laughter.
“I try,” he says, “to be like Schulz. He was a foreman under me during the Homestead strike. He stuck by the company and one day came into my office dripping mud and water. To my inquiries he replied that some strikers had thrown him into the creek.
“‘What did you do then, Schulz?’ I asked.
“‘Oh, I shust laff.’”
One of the old Carnegie “boys,” Schwab is like the former iron master in his wonderful ability to infuse into those who work with him some of the enthusiasm with which he is so richly endowed, and to get from them loyalty and devotion. To this attribute, as much as to anything else, Schwab owes his great success.
It is impossible to get an accurate concept of Schwab’s personality without coming directly into contact with him. Many men have declared that “C. M.,” as he is known to his friends, is “the best salesman that ever stepped in shoe leather.” And this is not an exaggeration. There is something about him—fascination, personal magnetism, call it what you will—that captivates almost everyone with whom he comes in contact. His infectious laugh disarms hostility and criticism. His great ability compels admiration.
Numerous anecdotes illustrating Schwab’s magnetism are told in the steel trade; the following is typical:
Several years ago, when Bethlehem Steel was a little known company, its head visited a prominent New York banker to seek his aid in putting out a bond issue. He told the banker all about the great future in store for Bethlehem as he saw it—prophetically, as it has turned out—and his hearer was fired with enthusiasm regarding the proposed issue. He asked Schwab to go back to his office and dictate to a stenographer the statements he had made regarding the security behind the bonds and the future of Bethlehem Steel for the purpose of making up a prospectus. With that, he declared, the bonds would sell like hot cakes.
When the banker received the typewritten prospectus he was dissatisfied and rang Schwab up on the ’phone. The steel man’s arguments were not nearly so convincing in black and white as when given in his inimitable style, and the money magnate declared that the other had not included in the written statement the facts related in the conversation. So Schwab paid him another visit and went all over the matter again. The banker said:
“Yes. You’ve got it all down here. But it doesn’t sound the same. I tell you what we’ll do. You talk the bonds into a phonograph and we’ll use the records to sell them.”
And here is another Schwab anecdote told by himself:
“On one occasion, when Bethlehem was still a struggling company, I went to see a Philadelphia banker whom I knew very well and told him I needed a great deal of money. He said:
“‘I can let you have half a million.’
“‘Why,’ I replied, ‘I can get at least a million from bankers in New York who don’t even know me!’
“‘That’s the reason they lend you,’ he gravely returned.”
Charles M. Schwab was born at Williamsburg, Pa., on February 18, 1862, and educated at St. Francis College at Loretto in the same state. His father owned a livery stable at Cresson Springs, where Carnegie had a summer bungalow.
One day the little Scotsman, who loved music, heard the boy singing, and told Schwab, Senior, to bring the lad to him when he was ready to go to work. At the age of eighteen Schwab entered the employment of the Carnegie Company as a junior in the drafting room.
Schwab attributes his success largely to the interest which Carnegie took in him. Carnegie, on the other hand, declared that Schwab was one of the two men to whom he owed the bulk of his fortune, the other being Captain William R. Jones, who was superintendent of the big Braddock plant when Schwab enlisted in the steel army.
At the age of twenty-four Schwab was appointed superintendent of the Homestead plant, which had just been acquired by Carnegie. When he arrived there, the organization was in a terrible condition. The long series of strikes which the original owners had had to contend with had not only caused them to give up the plant in despair and to accept Carnegie’s offer, but had resulted in bitter feeling on the part of the workmen. But Schwab’s smile and good nature soon won them over, and in a few months the organization had been restored and Homestead was making money for Carnegie.
In 1889 Schwab returned to Braddock on the death of Captain Jones, as his successor. Three years later occurred the bloody strike at Homestead, and Schwab was again sent back there to take charge. When the strike was over he was put in charge of both plants. He was the only man that ever managed two plants for Carnegie.
One day Carnegie told Schwab that it had been decided to make him vice-president of the Carnegie Company. But the young man replied:
“No, Mr. Carnegie, I am no good at carrying out another man’s orders, and that’s about all a vice-president has to do. As superintendent I am boss of the plants I manage; I prefer to remain that way.”
Next day Carnegie again sought out his superintendent. “Well, if you won’t be vice-president, I suppose we’ll have to make you president,” he said, and so he did.
Like Gary, Schwab was satisfied that the next step in steel making, one that must come sooner or later, was the integration of the different departments of steel making into one big, harmonious whole. How he assisted in making this possible we have already seen. In 1901, on the organization of the United States Steel Corporation, Schwab became its president, with a salary of $100,000 a year and about $15,000,000 of its stock.
After the Corporation had taken over Carnegie Steel, Morgan, the story goes, found a contract among its papers pledging Schwab a salary of $1,000,000 a year. He had not been aware of the existence of this contract and asked Schwab what could be arranged on the matter. Schwab replied: “Let me have that paper a second, Mr. Morgan,” and taking it from the banker, he tore it into small pieces and threw them into the wastebasket.
But Schwab did not long remain president of the great steel merger. Long accustomed to being “boss” he found the new conditions disagreeable. Bred in the old steel school he was out of sympathy with the policies of the Corporation as inaugurated by Gary. There was no open breach between them, but the situation was obviously galling to the younger man and so he resigned, his resignation probably being hastened by the fact that he had been for some time in poor health, a victim of neuritis.
It was in 1903 that Schwab severed his connection with the Steel Corporation and sailed for Europe intending, at the time, to give up business permanently. But this was not to be.
Although he returned from Europe in 1904 Schwab did not actively engage in business again until 1907. He was, in a sense, pitchforked back into the manufacturing arena by the failure of the United States Shipbuilding Co. a year or two before and its reorganization as the Bethlehem Steel Corporation. Schwab, who had been the principal bondholder of the shipbuilding company, became the controlling interest in the reorganization and eventually assumed personal charge of its activities to protect his own investment as well as that of others.
Once in harness again Schwab threw himself heart and soul into the steel battle. He found Bethlehem Steel in a rundown condition and for years he poured into it his personal fortune and all the money he could borrow. Although himself the largest stockholder he steadfastly refused to consider dividends until the company was firmly established financially and the result was that, before the European war broke out, Bethlehem was solidly on its feet and showing large earnings. These were enormously enhanced during the war years, when the stock sold as high as $700 a share. To-day Bethlehem is the second biggest steel company in the world, its plants having a capacity of 3,250,000 tons of steel annually.
Although for many years a competitor of the Corporation of which he was once president Schwab is still a firm believer in the future of United States Steel and the value of its securities. On one occasion he told the writer:
“It is a wonderful concern. There isn’t anything like it in the world, nor could its plants and organization be duplicated at any cost. The future will show how well, how securely, its foundations were laid.”