For other uses, see Trust
"Family Tree" (1904), which depicts how the largest trusts at the turn of the 20th century were in turn connected to each other.
In the broader sense of the term, relating to trust law
, a trust is a centuries-old legal arrangement whereby one party conveys legal possession and title of certain property to a second party, called a trustee. While that trustee has ownership, s/he cannot use the property for herself, but holds it 'in trust' for the well-being of a beneficiary. Trusts are commonly used to hold inheritances for the benefit of children and other family members, for example. In business, such trusts, with corporate entities as the trustees, have sometimes been used to combine several large businesses in order to exert complete control over a market,
which is how the narrower sense of the term grew out of the broader sense.
The OED dates use of the word "trust" in a financial sense from 1825.
Corporate trusts came into use as legal devices to consolidate power in large American corporate enterprises.
In January 1882, Samuel C. T. Dodd
, Standard Oil's General Solicitor, conceived of the corporate trust to help John D. Rockefeller
consolidate his control over the many acquisitions of Standard Oil
, which was already the largest corporation in the world.[failed verification]
The Standard Oil Trust formed pursuant to a "trust agreement" in which the individual shareholders of many separate corporations
agreed to convey their shares to the trust; it ended up entirely owning 14 corporations and also exercised majority control over 26 others.
Nine individuals held trust certificates and acted as the trust's board of trustees.
One of those trustees, Rockefeller himself, held 41% of the trust certificates; the next most powerful trustee held only about 12%.
This kind of arrangement became popular and soon had many imitators.
An 1888 article explained the difference between trusts in the traditional sense and the newfangled corporate trusts:
A trust is ... simply the case of one person holding the title of property, whether land or chattels, for the benefit of another, termed a beneficiary. Nothing can be more common or more useful. But the word is now loosely applied to a certain class, of commercial agreements and, by reason of a popular and unreasoning dread of their effect, the term itself has become contaminated. This is unfortunate, for it is difficult to find a substitute for it. There may, of course, be illegal trusts; but a trust in and by itself is not illegal: when resorted to for a proper purpose, it has been for centuries enforced by courts of justice, and is, in fact, the creature of a court of equity
— Theodore Dwight, Political Science Quarterly 
Octopus representing Standard Oil
with arms wrapped around U.S. Congress and steel, copper, and shipping industries, and reaching for the White House.
Meanwhile, "trust agreements", the legal instruments used to create the corporate trusts, received a hostile reception in state courts
during the 1880s and were quickly phased out in the 1890s in favor of other clever devices like holding companies
for maintaining corporate control.
For example, the Standard Oil Trust terminated its own trust agreement in March 1892.
Regardless, the name stuck, and American competition laws are known today as antitrust laws as a result of the historical public aversion to trusts, while other countries use the term "competition laws" instead.
Prominent trusts included:
had a dominant role in the supply of diamonds.
- ^ [See William L. Letwin, Congress and the Sherman Antitrust Law: 1887-1890, 23 U.Chi.L.Rev 221 (1956)]
- ^ "trust". Oxford English Dictionary (Online ed.). Oxford University Press. (Subscription or participating institution membership required.). "A group of companies, industries, etc., organized to reduce or eliminate competition, or to control production and distribution for their common advantage. Also: spec. such a group with a governing body of trustees holding a majority of the stock of each participating company, and therefore having a controlling vote in their conduct."
- ^ a b c d e f g h Barak Orbach and Grace E. Campbell Rebling, "The Antitrust Curse of Bigness", 85 S. Cal. L. Rev. 605 (2012). "In 1882 Standard Oil's General Solicitor invented the corporate trusts that inspired the birth of the antitrust discipline."
- ^ Compare: Orbach, Barak; Campbell Rebling, Grace E. (2012-05-17). "The Antitrust Curse of Bigness" (PDF). Southern California Law Review (published 2012). 85 (605): 610. Retrieved 2018-04-05. Standard Oil continued expanding uninterruptedly, but state laws and organizational complexities made its size an impediment. Samuel Calvin Tait Dodd, who served as Standard Oil's general solicitor from 1881 to 1905,[...] devised a solution. He created a legal instrument to manage size — the 'trust.'[...] In January 1882, Dodd converted the common-law apparatus to a corporate device that would promote the accumulation of capital and managerial efficiency.
- ^ Dwight, Theodore (1888). "The Legality of "Trusts"". Political Science Quarterly. 3: 592.
- ^ Moody. "Standard Oil Company. 'The Oil Trust'". The Truth About The Trusts. pp. 109–132.
- ^ Moody. "United States Steel Corporation. 'The Steel Trust'". The Truth About The Trusts. pp. 133–204.
- ^ Moody. "Consolidated Tobacco Company and Affiliated Corporations. 'The Tobacco Trust'". The Truth About The Trusts. pp. 69–96ff.
- ^ Moody. "International Mercantile Marine Company. 'The Shipping Trust'". The Truth About The Trusts. pp. 97–107.
Last edited on 14 January 2021, at 00:34
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