The Trouble with Corporations

An image of a factory
Many delegates were suspicious of bringing corporations and industry to Oregon. Others wanted the growth corporations offered. (Image courtesy Columbia University)
Many of the delegates entered the convention with a strong mistrust of corporations. They had seen abuses in the Midwest and elsewhere in which unscrupulous corporate operators left innocent stockholders deep in debt and workers unpaid. Other delegates saw no way for Oregon to move forward without easy access to "the genius of our age to incorporate." Some of the debate revolved around stereotypes of corporations as large and uncaring machines of the economy that routinely chewed up farmers and workers. But couldn't corporations also be seen as a small group of local people banding together to build something that would benefit the entire community—such as the Willamette Woolen Mill that was nearing completion within view of the convention? These very different views of corporations and their role in Oregon's future would drive delegates to long and intense debates.

A stock certificate
Should stockholders be liable for all debts to laborers?
Much of the rhetorical heat centered on stockholder liability. The committee with responsibility over corporations, drafted a report that proposed limiting this liability to the amount of each stockholder's investment but it placed no limit on the liability for debts owed to laborers. Each stockholder, therefore, conceivably could be sued into insolvency for wages owed by a failed corporation. The proposal quickly drew a response and exposed divisions between anti-Democrats and Democrats as well as within the ranks of the Democrats.

The Genius of Corporations 

Anti-Democrats viewed the lack of liability limits for labor as a threat to the meaningful development of corporations in the new state. In the temporary absence of firebrands Thomas Dryer and David Logan, they were led in debate by John McBride and William Watkins, both denouncing nearly any barrier to corporate growth. Watkins pointed to the "tangible modern benefits of liv[ing] in a country of plank roads and telegraphs, canals and railroads." He declared that "it is the genius of our age to incorporate—the genius of our institutions, and has laid the very foundation of the improvement and progress of the present time. ...Why, the United States is nothing but a great corporation." Watkins pointed to another state for an example of the possibilities: "Look at the old state of Massachusetts, and what in her position? Why, her corporate wealth is sufficient to buy up a half dozen of the smaller states of the union. To buy them up real estate and all. And she has obtained it by acting according to the tendencies of the age...." Footnote 1

Image of John McBride in suit and tie.
John McBride argued against restrictions on corporations. (Image no. 07-0595a courtesy National Archives) Enlarge image.
McBride predicted a chilling effect on investments in Oregon if there were no limits on the liability of individual stockholders for labor expenses. He said one or two other states had similar provisions and "the effect is [that] capital is driven beyond their limits." In looking to the progress of Oregon, McBride declared that "we want capital here. Can we get it if we lay on this restriction? If a gentleman in New York or Boston has capital to invest in any enterprise that this country stands in need of, will he send his capital here and make all the property he has left behind liable?" McBride argued that investors would logically put their money into states without liability issues...states that welcomed them instead of erecting barriers. Footnote 2

A Fungous Growth of Improvement

Democrats Matthew Deady and Reuben Boise were no less forceful in attacking the excesses of corporations, with Deady going so far as to say that the world would be better if they were outlawed. He claimed the the lack of liability limits for labor would cause the demise of small farmer investors and that their labor (expended to gather capital for investments) should be valued no less than other workers. Deady described the evils of the typical corporate process: "How are these companies got up? They are generally got up by some smart gentlemen running round among the farmers and representing to them some glittering schemes where hundreds of thousands of dollars may be made. They get the farmers to subscribe...and they keep managing the concern until everything connected with it is managed into their own pockets or gone to ruins. The farmers...know little or nothing about how the thing is managed until it bursts." Deady heaped shame on the proposal in which "these honest farmers are followed as long as they have a dollar, while the worthless scamps who got it up go away...." Footnote 3

As the debate deepened, Deady upped the ante by offering a sort of "poison pill" in the form of a proposal calling for stockholders to be "individually liable for all of the debts and liabilities" of corporations. This would have the practical effect of stifling most incorporations in the state, but in his eyes would benefit Oregon by discouraging "a fungous growth of improvement in this country," with its attending California-style speculators. Deady then went further, asking delegates to compare visions of two worlds, a darkly Dickensian industrial nightmare and their own agrarian ideal:


But despite Deady's moving contrasts, the eloquent support of Reuben Boise, or even the colorful anecdote of Frederick Waymire's experience with the corporate misdeeds of the Portland Plank Road and Telegraph Company (see sidebar above), the delegates decisively voted down the call for effectively banning corporations. The vote showed a pragmatism that neither worshipped at the feet of unfettered corporate growth as preached by McBride and Watkins nor subscribed to the hellish vision of Oregon portrayed by Deady and Boise.

Middle Ground 

Instead, most Democrats followed the lead of George Williams and La Fayette Grover. They looked to the benefits corporations provided that would enhance rather than threaten the rural character of the agrarian ideal. An example could be viewed only a short walk from the convention where the final work was being completed on the Willamette Woolen Mills, the territory's first large factory. This corporate endeavor was home-grown in origin, scope and benefit. This was proof that, within the proper framework and regulation, corporations could benefit Oregon and free it from the need to import expensive products from far-off factories. Otherwise, Williams warned, "We must pay tribute to Massachusetts and New England all our lives, unless we can devise some way here for the erection of manufacturing establishments in this state." Footnote 5

A photo of a building
The Willamette Woolen Mill (shown here in circa 1870) gave delegates hope that responsible corporate development was possible in Oregon. (Image courtesy Salem Online History) Enlarge image.
Williams envisioned a benevolent corporation that was far removed from Deady's cold and uncaring machines or scheming swindlers. He looked to more of an association of "men of moderate means" consisting of relatives, friends and neighbors banding together to meet local needs and break the shackles of dependence on far-off corporations: "But with liberal provisions in the constitution, those little farmers throughout the country can put their capital together, as they have in the case of the woolen factory now in this city. Then a man can put in $250, one $500, and another $1,000, and the prospect is that there will be a fine and flourishing manufactory established in the territory of Oregon." Footnote 6

After several days of debate, delegates finally voted 31 to 20 for an amendment that consisted of the more pro-corporate language that the anti-Democrats had promoted: "The Stockholders of all corporations, and joint stock companies, shall be liable for the indebtedness of said corporation to the amount of their stock subscribed, and unpaid, and no more." Footnote 7 The delegates were swayed by the argument that the legislature could enact a mechanic's lien law to protect laborers from corporate failures. And, while they approved language that could be interpreted to support a robust capitalism and corporate enterprise, they did so while embracing the pragmatic, locally-based ideal embodied by the Willamette Woolen Mill. Oregon, they hoped, could avoid the worst excesses of the "soulless and irresponsible bodies called corporations," free itself from dependence on distant factories while maintaining the essence of the agrarian society as it moved to statehood. Footnote 8

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Notes 

  1. Carey, Oregon Constitution, 242.
  2. Ibid., 247.
  3. Ibid., 233-234.
  4. Ibid., 248-249.
  5. Ibid., 255; David Schuman, "The Creation of the Oregon Constitution," Oregon Law Review 74-2 (Summer 1995): 638.
  6. David Alan Johnson, Founding the Far West: California, Oregon, and Nevada, 1840-1890 (Berkeley: University of California Press, 1992) 183, 185-186; Carey, Oregon Constitution, 255.
  7. Carey, Oregon Constitution, 423.
  8. David Alan Johnson, Founding the Far West: California, Oregon, and Nevada, 1840-1890 (Berkeley: University of California Press, 1992) 183, 186-187.
  9. Carey, Oregon Constitution, 487-488.