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The Myth of Rockefeller Empire and Business Ethics

John D. Rockefeller John Davison Rockefeller (1839-1937) was the leader of the oil industry in the second half of 19th century and early 20th century. He developed new business management systems and contributed with huge amounts of money to several philanthropic institutions. Rockefeller was born in Richford, New York, and he was the son of William Avery Rockefeller, a salesman. In 1853, the family moved to Cleveland, Ohio. There, combining the devout humility of her mother and the excessive ambition of his father, young John looked for the great business of his life. His first incursion in the world of business made of him an accountant, and soon he won the respect and admiration of Clevelands business community because of his sense, mercy and perseverance. His first benefits coincided with the growth of a new and promising economical sector: the oil. Together with his brother William and other associates, John opened his first oil refinery in 1863, and two years later, he already controlled the oil industry of the city with his new company: the Standard Oil Company of Ohio. His innovative vertical integration of oil wells and pipes, supplying kerosene by tank cars to the local markets and the delivering the fuel by tank wagons to the retail customers, assured to the company a huge competitive potential in an emerging but more and more consolidated business. His ruthless strategy dealing with competitors progressively eliminated competency, ensuring to his company a more and more unquestionable monopoly. For this reason, soon the Rockefeller Corporation was on the spot of the anti-trust legislation. The Supreme Court of Ohio proscribed his company in 1881, as well as the Supreme Court of New Jersey in 1911, because of this he had to face innovative techniques of shareholding division and alliances among companies. In spite of his wealth amounting more than nine hundred million dollars, Rockefeller led a simple life. He took the train for going to work to New York, had dinner at home, did not belong to any club, went to church regularly, and gave free rein to his hobby: gardening. He spent his last years devoted to philanthropy, offering economical support to: YMCA (Young Men Christian Association, Anti-Saloon League, Baptist Church, Chicago University, Rockefeller Institute for Medical Investigation, and several different education centers.

Happily married with Laura Celestia Spelman, Rockefeller had four sons who became prominent members of the US high social circle. It is worth mentioning the careers of John Rockefeller Jr., who managed the family wealth as well as the donations; Nelson A. Rockefeller, who became Governor of New York; and Lawrence Rockefeller, one of the most important bankers and philanthropist of the country.

Rise of the Rockefeller Empire: the Standard Oil Company

John D. Rockefeller, settled in Cleveland, establishes in 1859, together with Maurice Clark, an English immigrant, the commercial agency, Clark & Rockefeller, an agency dealing with every type of goods. The Civil War helps to the fast prosperity of the agency, because of the demand of every type of products for the army. This event leads the associates to establish, together with Samuel Andrews, a company dedicated to oil refining and kerosene obtaining. Because of disagreements with his associate, Clark, Rockefeller buys him his share in the refinery. In order to increase the importance of his company, he associates Henry Flager and Stephen V. Harknes. With them, his associate Andrews and his brother William, John Rockefeller establishes in January 10th 1875, the Standard Oil Company, with a capital of USD 1,000,000, which will be increased the next year to USD 2,500,000, with the object of acquiring as much refineries as possible, within the monopolist politics characterizing the Standard Oil Company. Rockefeller was decided to conclude his project of conquering the oil industry, for this reason, he advanced, playing an unprecedented maneuver, helping to establish the South Improvement Company, an association embracing the main oil refiners of Cleveland, reaching an agreement with the rail companies for getting important discounts for the members of the association. This agreements caused the claim of the public who requested its cancellation, which was legally got, three months later, but by then, almost all Rockefellers competitors had broken and forced to sell or to associate with him. In just three months, Rockefeller had bought 22 of the 25 Clevelands refineries, thanks to this matchless maneuver, which was known as the Conquest of Cleveland. After this extraordinary success, Rockefeller dealt with the expansion of the Standard Oil to the whole country. Establishing or buying, his objective was to dominate the industry. Rockefeller controlled 90% of the oil refineries of the United States and soon after he exercised a monopoly of the distribution channels. Now Rockefeller was, as it could be said, the owner of the United States oil industry and nothing could change it.

The Standard Holding

In response to the state laws attempting to restrict the size of the companies, Rockefeller and his associates had to develop innovative organization methods that materialized in the invention of the enterprise trust.

The Standard was a company legally established in Ohio, despite its activities covered all the country. According to Ohio laws, the Standard could not be the owner of companies established in other estates, therefore Rockefeller had to evade this ban, having the managers and not the company directly, to acquire the shares of the companies located in other estates, these companies these other Standards remaining subjected to the common management of the Board of Directors of an only company, in this case, the Standard of Ohio.

Dissolution of the Standard

The Government of the United States enlisted to face the most powerful man in the US, John d. Rockefeller, and taking him to the court. In spite there were many journalists and investigators, both public and privates, putting forward Rockefellers monopoly, it was very difficult for the government to face the powerful baron and his empire. Years of legal disputes were required just for taking him to the court, because John D. Rockefeller had at hand an army of lawyers to mediate in the situation. In 1907, the Standard Oil was faced to several trails, one of them at the Supreme Court of Missouri, resulted in 1909 on a judgment determining the dissolution of the company and after a long series of appeals; in 1911 the Supreme Court decreed the fragmentation of the Standard Oil in 34 independent companies. Even so Rockefeller kept having 30% of the shares of all of those companies and his family kept having most of the remainder shares, therefore his wealth nor his power were affected.

The Seven Sisters Three of the 34 companies, the Standard of New Jersey (Exxon), the Standard of New York (Mobil) and the Standard of California (Socal or Chevron) kept playing a decisive role in the world of oil, when they became part of the seven sisters. The first thirty years of oil belonged to the US, that is, the Standard Oil. But soon European apathy for oil changed into a moderate interest when a new type of motors was found out, the internal combustion engines. Then a rich English businessman acquired the Caucasian concessions. At the same time, a group of Dutch businessmen incorporated the Royal Dutch Company. The Standard was not happy at all about this and attacked fiercely, as a defense, both European companies allied by establishing the Royal Dutch Shell. In this background, the Shell Royal Dutch promoted the famous meeting at the castle of its president, Achnacarry. This meeting was attended by the presidents of the Anglo Persian (future British Petroleum) and Standard Oil of New Jersey (SONJ), representing this last mentioned company the most precious jewel of the Rockefeller Empire, which was by then spread worldwide. The agreement of Achnacarry as it is known, gave rise to the incorporation of a world oil cartel to control the industry in the benefit of its members.

In resume, the seven companies that would play the main roles in the history of oil and that would be known as the seven sisters were: the three heirs of the Standard (Exxon, Mobil and Chevron), two Texan companies (Gulf and Texaco), a British company (Anglo-Persian, BP) and a British-Dutch company (Royal-Dutch Shell).

Business Ethics
As important as the rise of the empire may seem, it is even more important the fact that this great businessman knew how to manage it. Not also because of his particular persuasion in acquisitions, but also to the management of activity, trying to rationalize it and control it in order to ensure the collective efficiency after the ultimate results. The industrial organization and, in general, the business management would become permanent subjects since then, but Rockefeller lacked of references; notwithstanding, his thought seems significant, at least at his time, both technically and humanely. Rockefeller said: If in the conduct of industry, therefore, the manager ever keeps in mind that in dealing with employees he is dealing with human beings, with flesh and blood, with hearts and souls; and if, likewise, the workmen realize that managers and investors are themselves also human beings, how much bitterness will be avoided! This sentence shows a concern for the human dimension of the employees. And he continues: Are the interests of these human beings with labor to sell and with capital to employ necessarily antagonistic or necessarily mutual? Must the advance of one retard the progress of the other? Should their attitude toward each other be that of enemies or of partners? The answer one makes to these fundamental questions must constitute the basis for any consideration of the relationship of Labor and Capital. [] If these great forces cooperate, the products of industry are steadily increased; whereas, if they fight, the production of wealth is certain to be either retarded or stopped altogether and the wellsprings of material progress choked. Nowadays this could be considered with irony, considering that this businessman believed in the existence of rich and poor people, even though they all seemed human to him, but the fact is, that at early 20th century, this approach was very innovative. We should remember that, one hundred years ago, businessmen considered employees as mere tools. Likewise there is the religious sense explaining his philanthropist profile, Rockefeller became famous for his charity. This is to be added to his main features: purpose, perseverance, breadth of sight and, of course, to the holistic and systemic perspective with which he conceived his company, served him to prevent and neutralize problems, as well as to coordinate the activity, orchestrating committees subordinated to the executive committee. New realities required new methods, but he did not learn these at the business schools, these schools arrived later. Rockefeller was a tidy man who used his bureaucracy. From the very beginning, bureaucracy caused controversy in the companies, and more when, at the 20th century, it acquired a sometimes suffocating dimension, but Rockefeller seemed to have very clear ideas about the management of information and quotidian control.

About the power distribution, he controlled his empire well, because he had organized it to facilitate the necessary coordination, based upon a community climate. He became a very wealthy man and shared wealth, but we have the feeling and so he said that his wealth was a consequence and not a purpose. Rockefeller just saw a chance for business and went for it, with a lot of success. The keys: integration, scale economy, stability, organization, forwardlooking approach, contribution to society, winning attitude, reality perception. In resume, it does not seem a case of huge immorality but a case of huge venture. A quote of Rockefeller himself resumes his line of thought: Every right implies a responsibility; every opportunity, an obligation, every possession, a duty.

We must recognize the contribution of John D. Rockefeller to the development of modern management, but we should also learn important things from him and his achievements, at least please find below my conclusions about this businessman, his thought and ethics: - Efficiency requires that we focus all of our attention in the activity we are carrying through, not to disperse in the cult to ego. - It seems effective to look beyond the usual reach, both in space and time. - Not only me but the other people is also important. - The own prosperity should be consequence of the prosperity of the organizations (corporations, industries) we are working for. - We should practice observation, as well as reflection, letting nothing blind us. - Systemic thought was already important at the 19th century. Maybe it is still an unresolved subject at the 21st century. - Changes are not exclusive to our age. Innovation is a permanent requirement. - Instead of going with the flow, it is more convenient to have a purpose and to play the leading role in our professional life.

- Chernow, Ron. Titan: the life of John D. Rockefeller, Sr. London: Vintage Books, 2004. - Collier, Peter; Horowitz, David. The Rockefellers: an American dynasty. New York: Holt, Rinehart and Winston, 1976. - Tarbell, Ida M. The History of the Standard Oil Company, Vol. I (in two volumes). Introduction by Danny Schechter. New York: Cosimo Inc, 2009.

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