INTERLOCKING DIRECTORATES. A term used to designate the method by which the interests of many companies normally in competition are controlled by the election into their directorates of a few men acting in the interest of the combination to which they be long. Obviously, the success of the interlock ing directorate system is predicated upon a cer tain betrayal of trust toward the individual company which the director is expected to serve with singleness of purpose, for he is placed there by the combination to serve the latter's interests. In a recent official investigation it was shown that a large steel manufacturing concern was the owner outright of several rail roads, and the directors of the steel company were also directors in 29 other railroads, oper ating in the aggregate more than half the rail road mileage in the United States and in 12 of the largest street-railway companies. Con trol was thus exerted over the purchasing de partments of all this great body of steel users, and, of course, in the ultimate interest of the steel company, and not of the railroads which these directors were intended to serve. The
control of this steel company was traced also in a number of gas, oil and water companies, and in telegraph and telephone companies, large users of iron and steel products, through the same system of interlocking directors, and it was shown that the assets of the companies thus controlled in the interest of the steel company totaled the prodigious sum of T16,000,000,000.
The reaction of public opinion to these dis closures was so prompt and vigorous that one of the largest banking houses in the country voluntarily withdrew its members, men of the highest financial standing, from upwards of 30 directorates of railway, industrial and banking concerns. The system is now thoroughly dis credited, and the unadulterated responsibility of the director to his individual company has been emphasized both in legislation and by the courts.