Andrew Carnegie on Corporate Governance

The Wikipedia article on Henry Clay Frick records that he built the H. C. Frick & Company coke business in the Connellsville coal district of southwestern Pennsylvania in the 1870s, that Carnegie brought him into the Carnegie Steel partnership in 1882 to supply coke and to manage operations, and that Frick became chairman of Carnegie Steel in 1889, the operating executive who expanded the firm through the critical decade preceding the 1901 sale. The article records that Frick's Connellsville coke ovens were a decisive element of the Carnegie vertical-integration strategy, since cheap and reliable coke supply was the bottleneck variable in pig-iron production, and that the Carnegie-Frick combination integrated iron ore, coke, transport, and steel-making into a single controlled system. The article treats the partnership as the central operating alliance of the Carnegie Steel period, and the rupture between the two men after the Homestead strike as the central personal fracture of Carnegie's career.

The Wikipedia article on Henry Clay Frick records that Frick directed the 1892 Homestead strike response as chairman of Carnegie Steel, that he ordered the Pinkerton agents to the works on July 6, 1892, that he survived the July 23, 1892 assassination attempt by anarchist Alexander Berkman, and that he continued to direct operations from his hospital bed. The article records that the partnership between Frick and Carnegie ruptured irreparably in the years after the strike, that Frick was forced out of the chairmanship in 1894 over a dispute about the valuation of Frick's coke assets within the consolidated Carnegie Steel Company, and that he later sued Carnegie for the value of his interest. The article notes that the Frick-Carnegie correspondence during the strike survives as the primary historical record of the strike's management and that the personal rupture between the two men was never reconciled, despite a famous deathbed exchange reported by Clara Kelley, in which Carnegie requested a meeting and Frick replied that he would see him in hell.

The Wikipedia article on the Homestead strike records that Carnegie was at his Scottish estate, Skibo Castle, throughout the dispute and that his absence became a permanent feature of his public image, with critics charging that he had deliberately remained abroad to let Frick carry the strike through, and that Carnegie's own autobiography recorded that his partners had begged him not to return because of his extreme disposition to grant the demands of labor, however unreasonable. The article records that Frick's strict anti-union posture prevailed after the strike, that union membership in steel collapsed nationally, and that the strike's outcome shaped the National Labor Relations debates of the 1930s as a cautionary example. The article treats the strike as the central contradiction of Carnegie's self-presentation as a friend of labor, since the operating philosophy of partnership with the men was punctured by the events at Homestead in a way his own text never fully resolved.

Carnegie's account of the Homestead Strike begins with the date July 1, 1892, during his absence in the Highlands of Scotland, calling it the one really serious quarrel with his workmen in the firm's whole history. He framed the prior twenty-six years of labor relations as the pride of his life and quoted a 1904 letter from his chief partner Henry Phipps affirming that Carnegie was always disposed to yield to the demands of the men, however unreasonable, which was precisely why one or two of his partners did not wish him to return during the strike. The Bessemer open-hearth and basic inventions had made old machinery obsolete, and the firm had spent several million dollars at Homestead reconstructing and enlarging the works, with the new machinery making roughly sixty percent more steel than the old, while two hundred and eighteen tonnage men were still on a three-year contract and had already captured much of that gain.

On the financial structure of the 1901 sale, Carnegie noted that he had declined to take anything for the common stock of the new combination, even though it would have given him roughly one hundred million more dollars in five-percent bonds, an amount Morgan himself later said Carnegie could have obtained. Carnegie defended the concession by pointing to the speculative deception then rampant in old iron and steel mills being foisted on innocent purchasers at inflated values, with hundred-dollar shares trading for a trifle. He wanted no part of that game. Events proved the sacrifice was unnecessary, since the common stock paid five percent continuously afterward, but he had, as he put it, enough to keep him busier than ever trying to distribute it, and the refusal to take common stock was the price of moral distance from the promoters' culture he distrusted.