Business English: A Practice Book

by Rose Buhlig

After the traffic department has solicited the business for the company, it is the duty of the operating department to render the services required by the traffic department. The work is done by four large divisions: (1) the engineering or construction department, whose duty it is to build the roads over which the company may operate; (2) the maintenance-of-way department, whose duty it is to see that the roadbed and rails are kept in good order and repair; (3) the equipment department, whose duty it is to see that the company is supplied with proper locomotives and cars and to see that such equipment is kept in repair; and (4) the transportation department, which has to do with the operating of the trains.

The financial policy of a railroad is usually in charge of one of the vice-presidents, who must be a man of experience in financial matters and who acts with the approval of the directors. The accounting department is more important than may appear at first sight. Railroads are now under the supervision and regulation of the government, and one of the rights that the government has is to examine the books of the company at any time and to require all companies to submit a monthly report to the government.

The legal department of a railroad is especially important for two reasons: (1) In performing its services, the company has business dealings with a large number of persons, and in the adjustment of claims against the railroad, expert legal advice is constantly necessary. (2) The railroad, as stated above, is under the regulation and control of the state and the national governments, and the enforcement of this regulation makes the railroad a party to numerous proceedings in the courts and before the Interstate Commerce Commission. The large railroads operate in from ten to twenty states. It can thus easily be seen that the legal department has a great deal more to do than if the railroad operated under but one political power.

Public Utility Corporations

Public utility corporations supply services without which the people of to-day could not very well live. They are those supplying water, light, heat, power, telephones, local transportation, gas, etc. They may properly be called public necessity corporations. The nature of these businesses practically gives them a monopoly in their locality; this is the reason that they have grown so enormously during the last thirty years. The Commonwealth Edison Company, which supplies a large part of Chicago with light and power, began in 1887 with a capital of $500,000 and in 1914 its capital obligations had a market value of over $83,000,000. The American Telephone and Telegraph Company began in 1885 with $12,000,000 of capital stock and in 1914 had practically $340,000,000. The other public service corporations have kept pace, according to the growth of the locality they serve. In the depression of 1907 this class of corporation kept steadily increasing the volume of its business when all others went back a step. Since these corporations are dependent on the local community for their business, if the community grows the company must grow, and usually faster than the community. For this reason the stocks and bonds of these companies are usually a good investment.

It is a common practice for municipalities to demand a share of the profits of the company, by way of a fixed sum, a certain percentage of the gross profits, or a share of the net profits. For example the city of Chicago receives, from the Commonwealth Edison Company each year 3 per cent of its gross receipts from the sale of current and 10 per cent of its gross receipts from the rental of conduit space, amounting in 1913 to more than $300,000, quite a considerable sum. The Chicago Railways Company and the Chicago City Railway Company, the two large street car companies of Chicago, after deductions for expenses and charges and 5 per cent on the amount invested are made from the gross income, pay to the city 55 per cent of the surplus earnings, keeping for themselves 45 per cent. Whenever these companies pay part of their earnings to the municipality, they are really under municipal supervision, and their books and accounts are open to examination by the city at any time. These companies are called quasi-municipal corporations.

Industrial Corporations

As the name indicates, industrial corporations are those that carry on our industries. They are by far the largest class of corporations and have among their number some very powerful companies, whose assets run up toward the billions. This class of corporations has not had the gradual, steady growth of the public utility corporations, but in the case of the most successful, the growth has been amazing. The Standard Oil Company for many years prior to its dissolution had paid dividends on its capital stock of about $100,000,000 at the rate of 40 per cent a year. The Steel Corporation is said to have produced a thousand millionaires and is still producing them. This class of corporations has not been so closely under the supervision of the federal and municipal authorities as the railroads and public utility corporations, and their financing has been carried on in a looser fashion than that of the other two classes. For this reason the securities of these corporations are not generally regarded as highly as those of the other two. However, the federal government has taken and is taking steps to regulate these corporations, and this will tend to bring them eventually to the standards of the railroad and public utility corporations.

Exercise 307
Oral

Explain carefully: