United States Steel: A Corporation with a Soul

by Arundel Cotter

Nor were these panic fears confined to the steel giants alone. In fact, the smaller manufacturers, the jobbers and the retailers, having generally smaller resources, were in much worse case. Most of these latter were piled up with heavy stocks of steel which they had purchased during the boom in the earlier part of the year, and a sudden drop in steel prices would have meant not alone the wiping out of all hope of profit, but certain bankruptcy for a large percentage of them.

To the head of the biggest of the steel producers, then, all eyes were turned. Judge Gary was deluged with letters from all quarters asking him to use all his power and influence to help weather the financial tempest. Naturally, it was very much to the interest of the Steel Corporation, as well as of other steel manufacturers, to do all that was possible to prevent the failure of the steel middlemen. Not only would bankruptcies have meant the drastic cutting down of accounts due, perhaps their total loss in some cases, but each failure would have meant the loss of a customer. These things the steel men knew from past experience.

One thing above all others seemed to be needed, the great essential in panic of every kind—that those concerned should keep their heads, should remain cool and face the danger steadily, and with the strength of unity. A leader was needed, and a strong one, and Judge Gary, head of the Steel Corporation, was looked upon to assume the post, which he did. To Judge Gary it seemed that the first and essential step was to bring the steel producers together and to explain the situation to them, pointing out that the only hope of salvation was in coolness and unity.

So he wrote a letter to practically all the large steel producers inviting them to a dinner at the Waldorf-Astoria, in New York, on November 20, 1907. The response was unanimous, and on the evening of that day there gathered around the table in the ballroom of that hotel the representatives of concerns producing more than 90 per cent. of all steel made in America, as well as the representatives of some Canadian companies.

At the proper time the host explained the object of the meeting. What he said can best be related in his own words:

I stated the purpose and object of the meeting were if possible to prevent the demoralization of business. I stated that the first object of the meeting was to secure a better acquaintance with each other, and come into close contact in order to know one another, hoping that we might deal with and toward one another as gentlemen and not as enemies. That the purpose was, if possible, to prevent demoralization of business, to secure as far as practicable stability of business conditions, as opposed to wide and sudden fluctuations; to prevent, if possible, failures on the part of our customers and to comply with their wishes in every respect; to prevent, if we could, a long continuance of the panic, which meant failures to a great many people and manufacturers themselves, because of their debts at the banks or because of their commitments for extensions, and to customers because of the large stocks they had on hand, the sudden change in the prices of which might be very damaging; and so far as we properly could, to maintain, or to assist in maintaining, business conditions generally, the opposite of which should be deplored.

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I stated distinctly ... at that time that, as they all understood, we could not make any agreement, expressed or implied, directly or indirectly, which bound us to maintain prices or restrict territory or output; it must leave us free to do as we pleased, and must rely upon a disposition of all others to do what they considered fair and right, and for the best interests, not only of themselves, but all others who had any interest in that or any other work. I made that perfectly plain.

Judge Gary’s remarks made a profound impression, and his hearers unanimously agreed to adopt the means he suggested for obviating the worst of the panic dangers. Resolutions creating a general and several sub-committees were made and passed and the meeting adjourned, subject to call.

Following this dinner similar sessions were held in January, April, May, and December of 1908. The December feast was the last of the Gary dinners proper, although some meetings were held subsequent to that time.

Were prices fixed at the Gary dinners? Let us settle this point as it was one of the chief things charged against the Corporation in the Government suit, and is the question on which the ethical morality of the holding of these dinners rests.

At the first of the Gary dinners the host explained that the fixing of prices was forbidden by the laws concerning restraint of trade, and that nothing could or should be done which would not conform in all ways to the law. Yet it is plain that the effect of these dinners was to stabilize prices for steel. It does not appear that there was any definite agreement between the different interests represented as to what quotation they should ask for their products, but it is obvious that the mere statement, between gentlemen, that one intended to adopt a certain course in regard to prices tended to influence his colleagues to follow a similar course. It must be suggested, nevertheless, that there was never any question of restraint, as all were free to act as they saw fit, and it seems that on some occasions there was not even absolute agreement. At the worst the participants at the Gary dinners stretched the interpretation of the law a little to do a great right—the financial salvation of the steel industry, which, remember, was, and still is, the leading industry of the country.