Carnegie
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It was astonishing they had survived this long together.
To eject Frick from the firm, Carnegie would need a three-quarters vote in partners and in interest. If Harry Phipps, Harry’s nephew Lawrence, and Lovejoy, whom Frick had hired and promoted, aligned themselves with Frick, their voting power amounted to 20 percent. There were nine other partners carrying interests ranging from 3 percent to 0.5 percent—enough voting power to block Carnegie if a handful sided with Frick and Phipps, which was not out of the question if the latter two men promised monetary rewards to long-suffering junior partners. The easiest means of guaranteeing victory was to win over Phipps, so he wrote his oldest pard, hoping to appeal to his good reason in explaining, “It is a clear case of ‘Incompatibility of Temper,’ always sufficient cause for divorce.” While threatening to vote Frick out of office, Carnegie also told Phipps there was an alternative, which was for Frick to resign, thereby saving face. “I must beg you in laying this before Mr. Frick to say that the question of adjusting this in any other manner than that I indicate be not raised,” Carnegie wrote. “It would be useless.”12
To shore up support among the junior partners, Carnegie worked feverishly behind the scene. On November 26, he wrote a confidential letter to Schwab apprising him of his plans to eject Frick in which he expressed outrage over “Mr. Frick’s partnership with Moore by which he was to make millions—It was a betrayal of trust.”13 The letter served several goals. He confided in Schwab to strengthen their relationship; but in case Schwab was entertaining any thoughts of siding with Frick, Carnegie added in the biting piece about Frick’s betrayal of trust in scheming to personally make millions in the Moore deal. He also discredited Harry Phipps by implying he was ill and not fit for decision making, and he reminded Schwab that Lawrence Phipps could be won over because he had been given the vice presidency, the number two spot if Frick was voted out. No vote should be taken, Carnegie advised, unless all of their friends on the board were present.
On the same day, Carnegie wrote the board of managers to explain his position on Frick and to discredit him by intimating that Frick had been attempting to usurp power from Schwab, and that it had been a mistake to split power between a chairman and a president. “There is another reason why Mr. Frick’s retirement from office is in my opinion desirable today. His name as chairman means to the public no decided break in the chain of discredit which all failures in the stock exchange world entail. The Carnegie Steel Co. has been less considered recently for its triumphs in manufacturing and for conservative and non-speculative traditions than for its connection with professional speculators. It needs to be brought back to its legitimate business career which steadily pursued means far greater triumphs than any yet attained.” Frick had soiled the company’s reputation, he believed. Carnegie concluded his propaganda piece with a calculating warm embrace: “One of the chief sources of my happiness in life has been the feeling that my associates in CS Co. have grown to be friends first, partners second.”14 He was playing a well-orchestrated game.
But at the next board meeting, Frick calmly chaired the proceedings as though there were no extenuating circumstances. He appeared quite content with no apparent intent of resigning, and not one of the junior partners mentioned Carnegie’s letter nor asked Frick if he planned to resign.
That day Schwab wrote Carnegie: “Believe me, Dear Mr. Carnegie, I am always with you, and yours to command. I want to be straightforward toward all. I believe the great majority of important partners feel as I do.” However, Schwab then made it clear to Carnegie that he would have to take Frick on alone. The junior partners feared Frick, he explained, and “The only way for you to do is to take decisive action yourself first.”15 Schwab feared him, too. Would he waver in picking sides in the battle? Just two months ago, in September, Frick had given him a fine painting as a gift, which Schwab acknowledged with a loyal pledge: “Working with and for you is a great pleasure, and I am yours to command always. I do not write this as a formal and set letter but as a spontaneous expression of my true feeling.”16 Schwab was his to command—words echoed to Carnegie just two months later.
Between his campaign to oust Frick and his increasing involvement in the anti-imperialist movement, Carnegie entered another manic phase in his life, very similar to the winter of 1895–1896 when he was embroiled in Frick’s resignation, flogging Leishman over ore speculation, and fighting the Pennsylvania Railroad. His condemnation of the American presence in the Philippines became more acute as Britain became embroiled in the Boer War, which erupted in October 1899. It pitted the Boers, settlers of Dutch ancestry living in South Africa and the Orange Free State, against the British, whose significant presence the Boers detested. The British suffered serious casualties in the first months of the conflict and would eventually deploy 450,000 men— 22,000 never to return home. Such an escalation, Carnegie feared, would occur in the Philippines, and already had to a degree.
His master, Herbert Spencer, loathed the Boer War, which further fueled Carnegie’s anti-imperialist activities. Spencer’s anger and anxiety over the human condition spilled into a burst of letters to Carnegie, more than he had ever sent before. “No one can more fully agree than I do with your denunciations of the doings of our race in the world,” Spencer wrote in October. “And not only our race but of all races.”17 In another letter, he suggested money might buy peace: “I very much wish that you would spend some few thousands out of your millions in employing a few capable men in the United States and Great Britain to war against war. . . . The mass of people do not in the least understand that if they advocate militarism and war as its concomitant they necessarily lose their liberties. That perhaps would be the strongest point continually to make, and a point abundantly illustrated by all human history.”18 Money, Carnegie well knew, could influence the politicians’ votes, but as for money having a more definitive role in fighting a war on war, he was skeptical and demurred.
Carnegie was outraged when, in late November, Whitelaw Reid sent him an invitation to a party celebrating the first anniversary of President McKinley signing the treaty with Spain. Aware as Reid was of Carnegie’s opposition, it was a mean-spirited stab. Even when they had knocked heads during Homestead, Carnegie had considered Reid a kindred spirit, since he had a little Scottish blood in him, and was fond of saying there was a “wee drap blude between us.” The blude, however, didn’t stop his temper from flaring when he declined the invitation: “Unfortunately I shall be in Pittsburgh the evening of your reception to the signers of the War Treaty with Spain, not the Peace. It is a matter of congratulations that you seem to have finished your work of civilizing the Filipinos. It is thought that about 8000 of them have been completely civilized and sent to Heaven. I hope you like it.”19
Fighting the insurgents was not near over. Pockets of well-armed nationalists were entrenched in the islands’ rugged terrain, with commanding positions along steep and narrow trails cutting through the countryside. The hunt for Filipino leader Aguinaldo was dogged and frustrating. As the United States remained entangled, Carnegie stepped up his attacks on McKinley, writing Secretary of State Hay, “We need more backbone in the President, that is all.”20 His criticisms couldn’t get much more blunt or unproductive, but his colorful commentary did fill the newspapers, offering insight and entertainment. In a letter published in the New York Daily Tribune, he shrewdly used a metaphor every person could understand: “I know many, poor households far behind me in knowledge and civilization as the Filipinos are behind us. I don’t think I should be good by attempting to govern any other household than my own.”21
An anti-Carnegie movement fired off a few salvos of their own. In Pittsburgh, two authors self-published a ninety-page book entitled Anti-Carnegie Scraps and Comments. “Does Andrew Carnegie stand by the flag of this country?” they wrote in the preface. “He has expressed sympathy for and given encouragement to the armed bands of Filipinos, but he has neither for our American soldiers who are now engaged in the final conque
st of the Philippines, to prevent our flag from being ‘hauled down’ from where it has been planted.” They accused him of being an extremist who was acting on behalf of the European nations to keep the United States out of the Philippines, and they perceptively exposed his hypocritical streak: “Andrew Carnegie calls himself an anti-imperialist. But Skibo Castle and the town of Skibo belong to him by purchase; he imitates in every way what he condemns and buys all he can of it.”22
Such attacks did not dampen his enthusiasm. Due to his unrestrained criticism of the McKinley administration, Carnegie was offered the presidency of the Anti-Imperialist League. He declined; it demanded more time than he had to give, considering there was Frick to contend with.
That the Anti-Imperialist League had turned to Carnegie for leadership swelled his ego and confidence, as did Schwab’s stated belief that only he could take on Frick, mano a mano. Now resolved to face his enemy, on Sunday, December 3, Carnegie took the train to Pittsburgh, prepared for a showdown the next morning. Tense but relieved the moment had finally come, on Monday Carnegie marched into Frick’s office and simply demanded his resignation. It was an anticlimactic moment, for Frick, who had been expecting him, did so quietly.
Now that Carnegie had his resignation, he wanted his stock. The simplest solution, according to Carnegie, would be for Frick to exchange his Carnegie Steel shares for shares in Frick Coke owned by Carnegie. It would be based on book value, with any imbalance settled with cash, and Frick could then take control of his old company. But what both men knew was that the book value of the Carnegie Steel shares were worth far more if the company were sold or taken public, so Frick balked at the seemingly generous but duplici-tous offer. Frick also contended he had no interest in returning to the everyday management of the Frick Coke Company; he wanted a clean break from Carnegie, and, besides, he had other pursuits in life to explore.
Carnegie also still faced the conflict over coke pricing, and he now threatened that he would expel Frick from his own coke company unless the $1.35 contract was accepted. “He can’t repudiate contracts for any company which myself and friends control—” Carnegie bragged to Dod, “we are not that kind of cats.”23 The threat failed. In a brazen display, he now had the gall to appeal to Frick’s compassion: “Give me a settlement permanent on coke and I’ll bless you. . . . We never had friction before—it annoys me more than dollars—even than Philippines.”24 Again Frick refused. Patience spent, Carnegie lashed out with one of his tantrums: “Excuse me, I have no time to waste upon the Prest. of the F.C. Co. who begins saying he didn’t know the bargain—that’s all I read—It’s gone to waste basket.” He then insisted Carnegie Steel was going to pay $1.35 permanently—no negotiations—and finished with another stab: “My friend, you are so touchy upon F.C. Co. (fortunately the only point) you are, and we all have our ‘crazy bones’—you know where Roslander, thanks to you for him, gets his finger sometimes and oh it hurts, doesn’t it?”25 When Carnegie entered into these manic phases, it was he who appeared to become somewhat unbalanced mentally. He was brilliant, no doubt, but arrested in an adolescent’s emotional state, moving in and out of an illusionary world in which he imposed his vision of order and righteousness. When told no, he kicked and screamed.
To date, even though Carnegie and his allies owned a majority in Frick’s company, the board had been controlled by Frick men, but the situation was about to change. It was time for Carnegie to take control of the Frick Coke Company board, and then there would be no question on coke rates. To mask his play for the company, on December 19, Frick’s fiftieth birthday, Carnegie sent him a birthday greeting, suggesting a desire to reconcile: “Mr. and Mrs. Carnegie cordially wish you many happy returns. Yours is a great record to date which they hope and believe the future is still to enhance.”26 At the same time he was making arrangements to transfer one hundred shares of Frick Coke stock to each of his loyal junior partners to make them eligible to sit on the board.27
Frick, who quickly realized he had been outsmarted and blindsided, capitulated control. He humbly wrote Thomas Lynch, his top man, “You are to be President and there will be no Chairman of the Board. . . . I have dictated this in the presence of Mr. Schwab.”28 At the same time, Schwab crowed to Carnegie: “Frick left yesterday for 10 days in the South. Before leaving arranged Coke Board matter with him: to be 7 members of the board, he to name 2 and we to name 5. He named himself and Lynch.”29 When the Carnegie men were officially elected at the next Frick Coke Company board meeting, Frick walked out in protest.
Carnegie had Frick on the run. There remained Frick’s interest in Carnegie Steel, but the Iron Clad would take care of that.
Upbeat as the year came to a close, Carnegie wrote Dod:
So well and all so happy, business an unalloyed pleasure as I think of every partner now—no rift in the lute.
Played 14 long holes of golf yesterday and same Christmas—60 years younger already.30
As a further testament to his good mood, Carnegie donated $300,000 to Cooper Union to help establish a daytime school program to match the evening program. (Six months later, he would contribute another $300,000 to what was one of his models for philanthropy.) And the loyal son gave Dunfermline a Christmas gift of $100,000 for new swimming baths and a gymnasium.31
To fill the void created by Frick’s ejection, Carnegie decided to take a more active role in daily management. “I have had to take general charge of the business for next year,” he wrote John Morley with confidence and conceit. “Some means to be made to meet these huge Combinations which are really at our mercy. But my being at helm makes victory easier. So thought my partners, but it is only a short postponement of withdrawal. Ashamed to tell you profits these days. Prodigious.”32 Indeed they were: $21 million for the year.
The New York Times rung in the New Year with a rosy editorial: “The year 1899 was a year of wonders, a veritable annus mirabilis, in business and production. To paraphrase a celebrated epitaph, prosperity left scarcely any of our industries untouched, and touched nothing it did not enrich.”33 The United States had surpassed Britain in iron and coal output in the mid-1890s and was now a premier economic power, with Carnegie Steel one of the companies setting the pace for industrial development and innovation. Other firms were emulating the Carnegie template for management, which he had adopted from his railroad days. It was highly controlled and coordinated, while at the same time offering incentives to managers and foremen to break old methods and to innovate. His drive for modern equipment and facilities brought riches, and, by inspiring other industrialists, contributed to America’s rise as the preeminent economic power in the heat of the industrial revolution.
Mild weather prevailed in the first days of January, followed by increasing clouds bringing snow and rain. Under the cover of this poor weather, Carnegie slipped into Pittsburgh for a January 8 secret meeting of the board of managers, at which he moved that the company invoke the Iron Clad to eject Frick and purchase his interest at book value. The move was seconded and approved.
There was no hiding in Scotland during this conflict; on Wednesday, January 10, Carnegie strode boldly into Frick’s office and delivered the news. The Carnegie Steel Company would buy coke for $1.35; and furthermore, he said, the board had voted to enact the Iron Clad and the transfer of his stock would be made at the close of business on January 31. He would be paid book value.34 The book value of the company, Carnegie claimed, was $25 million, giving Frick a mere $1.5 million for his 6 percent interest; whereas from Frick’s viewpoint, the company’s real value was at least $250 million, last year’s agreed selling price, which would make his interest worth $15 million. As Frick considered this little discrepancy in value he felt as though a sword was driven through his back. A fit of anger gripped him and his eyes blazed. Anticipating violence, Carnegie backed away. Coming around his desk, Frick yelled, “For years I have been convinced that there is not an honest bone in your body. Now I know you are a god damned thief. We will have a judge and jury of
Allegheny County decide what you are to pay me.”35
After his verbal spanking of Carnegie, Frick went to John Walker’s office to cool off and discuss the situation. Walker, a top executive at Frick Coke, was one of his few allies. “John, I lost my temper this morning.” “Well,” Walker replied, “I knew you had one to lose.” He then agreed with Frick that Carnegie could not force the $1.35 contract on the company and that Frick’s interest in the steel company had to be bought out at a fair valuation. Phipps, yet again disappointing Carnegie, supported Frick. The battle lines were drawn, and that same day Frick notified Carnegie Steel that the company was not authorized to sell or to transfer his stock.36
Regardless, Carnegie pressed ahead with his unrelenting campaign against Frick. At the January 24 Frick Coke Company board meeting, a resolution was passed stating the company would supply all the coke Carnegie Steel required for the next five years at $1.35 a ton, retroactive to January 1; at the time, coke was selling for about $3.50 a ton on the open market.37 Also, the board voted that the overbilling of the last year, amounting to $596,000, was to be refunded. The vote on both issues was five to two, Frick and Lynch dissenting.
As the battle became more heated, the Carnegie-Frick conflict shook the company like an earthquake, and a great, jagged fault line ruptured as men chose their sides. The first victim to fall into the great crevasse was Lovejoy. Not wanting to lose Carnegie as a friend, but also feeling an allegiance to Frick, who had hired and promoted him years earlier, he resigned rather than pick sides. An unrecognized casualty of the war was Louise. She and Adelaide Frick had become good friends, but now with what appeared to be the final, climactic fight, their friendship was destroyed. Carnegie was ambivalent about their relationship. Frick had married into Pittsburgh’s upper class and had been immediately accepted, while Carnegie had always been considered an outsider, and for that, he held a grudge against Frick and the upper-class families. The most prominent and predictable defection to the Frick camp was, of course, Phipps. As early as Christmas, Phipps had anticipated the fight would be taken to court and began to organize his papers on the Iron Clad. He claimed he sided with Frick as a matter of principle, nothing more, as Frick deserved to be paid a fair market value for his stock, just like he himself would want.