that day. One side contended that the will did not violate the common law rule, although there was an accumulation for a long period of time. The other side vigorously asserted that if a man could select any number of lives in being, there was no objection to his creating an estate whose duration should depend upon the lives of all the people in the world. The result would be that one could never tell when the estate actually terminated, for it would be impossible to obtain satisfactory evidence as to when all of the persons, living at the time of the creation of the estate, had died. But the court sustained the validity of the Thellusson will and declared that the term "lives in being" must be taken in a reasonable sense and that only such number would be permitted as could be proved by reasonable evidence. Peculiar as this ancient rule may seem, it is far from being a law of the past, for in the States which do not have statutes regulating the time of vesting, it is still in force, and those States which have enacted laws on the subject have simply adapted the old rule-too often modifying the rule so imperfectly that it were far better to return to the old. In New York, for example, the statute declares that the suspension of an estate or the postponement of vesting of remainders shall not be longer than two lives in being at the creation of the estate. By such a law no period of years, however short, is permitted. The result is that many a will drawn by a layman-frequently a plain, sensible will which would have been valid at common law-providing for a trust extending over two or three or any number of years under twenty-one has been held invalid. The experienced lawyer knows how to comply with the provisions of the statute and at the same time create an estate for years by making the vesting of the trust estate determinable in the alternative, namely, upon the termination of two lives in being or after a term of years, whichever event shall first happen. Naturally the layman is critical. He complains of the law, for he can see no reason in permitting him to declare a trust during two lives in being, and, at the same time, refusing to allow him to create such a trust for two years. And there is ground for his complaint, for this particular New York law has been a stumbling block in spite of the fact that the courts have construed it in such a way as to relieve hardship whenever possible. The general principle of preventing a man from controlling his property forever is sound, but the law should be so worded that even a wayfaring man could not err therein. The mere statement of the rule against perpetuities leads at once to a consideration of the methods employed by those who have built up large estates and who have handed them down from generation to generation. If the law restrains a man from controlling his estate beyond certain limits, how have so many vast fortunes been accumulated and preserved? The answer is that those who have thus transmitted their estates for long periods of time have relied upon two things: First, they have made use of trusts for the longest possible period under the laws of the State, thus emulating the example of Thellusson. Secondly, they have trusted those who ultimately came into absolute possession of the property to follow the policy of their forefathers and to hold the estate while it accumulated and, finally, to convey it again in trust. In a recent New York case the testator provided in his will that the estate should not be "given or sold only in the name of the Hacker family, and must remain the Hacker estates forever." The will was declared invalid because of the clause creating a perpetuity. Had this unfortunate testator followed the example of Daniel Webster, who also had a desire to keep certain estates in the family, he would have gone far in accomplishing his purpose. That eminent lawyer said: "My great and leading wish is, to preserve Marshfield, if I can, in the blood and name of my own family. To this end it must go in the first place to my son, Fletcher Webster, who is hereafter to be the immediate prop of my house, and the general representative of my name and character." To carry out this general plan he named three trustees to hold the estate in trust to pay out the income during the life of Fletcher Webster and after his death to convey the same in fee to such of the male descendants as a majority of the trustees might elect. He possessed one other large estate besides Marshfield and his wish was that his grandson Ashburton Webster take one of his estates, and his grandson, Daniel Webster, Jr., take the other. By such provisions and by merely expressing his wish as to the disposition of the estate after the termination of the life estate without making the wish binding, he exercised, within legal limits, the right to determine, as far as possible, the transmission of the estate in the family. Jay Gould, who died in 1892, created a trust for the benefit of his children for life. Contrary to most of the trusts by which large estates are transmitted, this trust was made up of equal separate parts. This provision for an equal division of the estate, after the termination of the trust, undoubtedly accounts for the failure of that estate to grow into a much larger fortune; but in thus providing for his children Mr. Gould must be credited, at least, with a due respect for the equality of members of his family and with the spirit of American property rights. Chief Justice Fuller, of the United States Supreme Court, who died in 1910 leaving an estate of about a million dollars, bequeathed none of his property to charity. In fact he left his property entirely to direct descendants by providing a trust for the lives of his children and, upon the termination of the trust, an equal division, naming as trustees the Merchants' Loan & Trust Company and Stephen S. Gregory. The filing for probate of the will of the late John Jacob Astor, who perished on the Titanic, affords a recent illustration of the methods by which estates have been handed down from generation to generation. The law of primogeniture, namely, the descent of an estate to the eldest son to the exclusion of other members of the family, is contrary to the spirit of American law and has never been followed in this country; but the Astor estate has been preserved by the use of this old rule, to a partial extent, in the making of wills. Ordinarily the Astors, beginning with the original John Jacob, have selected the eldest son as the conservator of the estate, passing over him only when a younger son would prove a better manager. By this method and by the use of trustees for the longest periods allowed by law, and, further, by a reliance upon the son or grandson who ultimately came into possession to repeat the methods of his father, these men have built up enormous estates, and have handed them down intact. The elements necessary for the building up of a great private estate are easily deducible from these examples. A man must be possessed of the ability to acquire money; generally speaking, he must turn a deaf ear to charity: he must use the full time allowed by law for the creation of trust estates; he must follow the old English idea of primogeniture, thus denying the equality of the members of his own family, and finally, he must select those who will carry forward effectively his work of preservation in the management of the estate. There is only one other method of creating a perpetual estate, and that is by making a bequest to charity. In this connection we think at once of Carnegie, Rockefeller, Kennedy, Pearson, Widener and many others. The list is long and is a credit to American liberality. Public policy dictates that a man shall not hold his property indefinitely for his own particular desires, but the same wise policy declares that a man may leave his property for the benefit of charity in trust forever, and he may accomplish this either by will or by deed. One of the most recent large trusts of this kind is the deed of trust for $4,000,000, executed by P. A. B. Widener, giving securities to be used for the endowment of the Widener Memorial School for Crippled Children. It is a strange coincidence that at the time this perpetual trust for charity was created, the will of George D. Widener, the son who perished on the Titanic, was filed and by it he placed his estate in trust until the death of the last surviving child. One of the trustees was the Land Title & Trust Company of Philadelphia. At one and the same time and in the same family a perpetual bequest to charity and the foundation of a large family estate are illustrated. It will also be observed that in these recent testamentary provisions the trust company is becoming an important factor. Whether the gift is in trust for a charity, or whether it is in trust for the foundation of a vast family estate, those who create such trusts are beginning to realize that the trust company is a reliable trustee which lives forever. Individual executors, administrators, and trustees may come and go, but the State, by its corporation laws, has made possible an institution which outlives sons and grandsons, lawyers and business men. Furthermore, the State has thrown around such companies numerous safeguards which insure the greatest possible stability. In addition to this care on the part of the States, it must be said to the credit of trust.companies themselves that their standards have been high. To their aid they bring the most capable business men and the most competent lawyers, and we have yet to learn of a real trust company which has betrayed a single trust. In the conservation of great fortunes, whether for succeeding generations or for public charities, the trust company is bound to become an important factor. THE WORK OF CONGRESS Owing to factional deadlocks and the diversion of a presidential campaign, Congress will add but little in the way of new legislation. The principal achievements have been the enactment of the service pension law calling for increased appropriations amounting to $35.000.000; the creation of a children's bureau in the Department of Commerce and Labor; a law controlling the use of white sulphur in the manufacture of matches and the enactment of a constitutional amendment to be submitted to the legislatures of the various States, providing for the election of Senators. Aside from appropriation bills some important work has been accomplished in the Senate in regard to arbitration treaties and international agreements covering wireless telegraph and ocean-steamship safeguards. As anticipated, the question of national monetary reform has been indefinitely postponed. The solution of this problem will depend largely upon the outcome of the next elections and the partisan character of the two branches of Congress.. THE INTEREST OF BANKS AND TRUST COMPANIES IN SCIENTIFIC MANAGEMENT* HARLOW S. PERSON Director the Amos Tuck School of Administration and Finance, Dartmouth College Bankers as a class have not given much attention to the problems of management of industrial concerns, and especially to the more recent philosophies and systems of management. They have too many problems already-problems belonging peculiarly to the banking field, to be attracted by other problems which, at first glance at least, could have only a remote relation to their business. And there is no ground for criticism of this attitude, in view of the fact that many managers of manufacturing and mercantile concerns, to whom the problems of management are obviously vital, are equally indifferent. It is, in fact, this indifference of many of the banker's clients that makes organization and management an important subject for the banker. The point I wish to make this evening, is that every bank which is depository or creditor of a manufacturing or mercantile concern is more or less an advisor of that concern and to a degree responsible for its success. That makes management an important matter for the banker. Before pursuing that thought further, however, I wish to say a word about the latest philosophy of management, now known by the name "Scientific Management;" and I take the liberty of using the very words I have prepared as part of the introduction to the forthcoming volume of addresses and discussions at the conference on Scientific Management recently held at the Amos Tuck School. "Scientific Management" is said to be a third stage in the development of organization. The first stage was represented by the non-systematized business, of which there are to be found survivals among older and smaller plants. In this stage the management grew up with the plant, was inbred, and was bound by traditions handed down from manager to manager. There were, of course, in the period of non-systematized • From an address delivered before the Northern Vermont Bankers' Association at its annual meeting at Woodstock, Vt., March 7, 1912 business general improvement and brilliant examples of the development of new methods, but the period was one of high profits and of little incentive to improvement, and new methods came fortuitously and spread only by imitation. "The second stage of organization is represented by the systematized business, charIacteristic of the last two decades. During the period following the Civil War, improvements in transportation destroyed isolated markets, brought more intense competition and reduced the margin between raw material cost and selling price. This situation compelled many managers, who might otherwise have remained bound by tradition, to seek by improved methods and organization a reduction of the costs of manufacturing processes. Chemistry was called in to make salable products of what had been waste; blank forms of great variety were devised to keep account of materials and of labor that there might be no mis-application and waste of these; as units of business became larger, printed and written directions came to replace personal oversight and instruction by the manager, and systems were devised to effect the smooth working of routine. Cost accounting, the sextant and compass of the business man, was more highly developed and more generally adopted and this required the systematization of processes. "Systematized management is not Scientific Management, say the advocates of the latter. Under the former tradition remains dominant; improved methods are acquired by experiment, it is true, but not by the precise laboratory method of the observation and measurement of a large number of units; new methods become known by imitation rather than by teaching; and the reduction of a cost once accomplished, it is common to accept the result as final, because the solution of an immediate problem. rather than as a step only toward greater improvement. "The third stage in the development of organization and management, they say, is that of Scientific Management. Nor is it merely theory, they insist further. During a period of thirty years its principles have been in process of working out and during a briefer period, of application. Plants employing an aggregate of 50,000 men have adopted the new methods. Witness after witness testified before the Interstate Commerce Commission that he was connected with the management of plants employing these methods, and presented an impressive array of facts concerning its results,greater productivity, greater profits, higher wages and reduced prices to the consumer. If Scientific Management be universally applicable in business organization and management it may truly be the most important advance in industry since the introduction of the factory system and power machinery. "Mr. Taylor insists that the general principles, or philosophy, of Scientific Management should not be confused with the mechanism, which is merely incidental. He emphasizes four fundamental principles. First: the method of Scientific Management is the method of a true science. The organizing engineer 'objectifies' a plant to be organized, he enters as an 'outsider,' bound by no traditions and prejudices of its management, holds it, so to speak, at arm's length, studies it by departments and as a whole, compares it with other similar plants of his experience and observes defects that the 'insider' does not see. In this process the truly scientific method of analysis into units and experimental recombination of them is followed; not superficially, but exhaustively, until enough data are collected from which trustworthy laws may be derived. There is one case of experimenting by Mr. Taylor in which nearly 50,000 experiments were carefully recorded, classified and studied, 800,000 pounds of steel and iron were cut up into chips, and nearly $200,000 were expended. This observation is not confined to machinery and material only; it is applied also to men and, for illustration, laws of fatigue and recovery from fatigue, are discovered. In accordance with laws thus derived, standards of productivity are established and the methods of their attainment set forth in rules. In this observation and experiment and in the derivation of laws there is no assumption of finality. The organizing engineer does not stop when a reduction in cost is effected; he assumes that there is always the probability of further important discovery of new laws, and observation and experiments do not cease. This attitude of mind and these methods, says Mr. Taylor, justify the claim that the new management is a science. "A second general principle of Scientific Management is that there should be, and as a result of the laws derived by observation and experiment may be, a scientific selection of machines, material and workmen. For instance, by a careful study of each individual of a group of men in any department. it may be found that many are not physically or temperatmentally adapted to performing the particular functions required in that department and that they are adapted to the performing of functions in some other department. There follows a redistribution of men between departments with the result that, without an increase in aggregate energy expended, there is an increase in aggregate productivity. It is the scientific method of adapting instrument to purpose. "The third principle of the new management is that, a workman once discovered and assigned to the performance of the function to which he is adapted, the management should provide continuous instruction for him. From this point of view the factory should become a school; the workman should be instructed how to use the most efficient method with the greatest skill. "The fourth of Mr. Taylor's principles of Scientific Management is that there should be intimate co-operation between management and men and a redistribution of responsibilities. The workability of the new management, says Mr. Taylor, depends upon such sympathetic co-operation. There must be mutual recognition of the possibility of mutual helpfulness. This recognized, there must be a readjustment of duties, for under present systems of management there is required of a workman so much as to make impossible his highest efficiency. The manager, under the present system, requires of the workman simply the accomplishment of a certain result. To the workman is left the determination of the method as well as the actual performance. Under Scientific Management the experts in the planning room determine the method and leave to the workman freedom to apply all his energy to actual performance. "These four general principles constitute, according to Mr. Taylor, the philosophy of Scientific Management. The devices employed to give effect to these principles constitute the mechanism The philosophy and any pecular mechanism are not to be con |