Other Free Encyclopedias » Online Encyclopedia » Encyclopedia - Featured Articles » Contributed Topics from P-T

Rockefeller, John D. - Overview, Personal Life, Career Details, Chronology: John D. Rockefeller, Social and Economic Impact

oil standard business company

(1839-1937)

Overview

Founder of Standard Oil and the world’s richest man when he died, John D. Rockefeller began as a frugal accounting clerk who set up a merchant grain business in 1858. With a $4000 investment, he went into the oil refining business in 1863. Through strict economy and the swift elimination of competitors, he soon dominated the oil refining industry. In 1911 his monopoly was broken by antitrust government regulations and Rockefeller turned to philanthropy, donating more than $500 million to charity. Rockefeller’s descendants, have an estimated family worth of $6 billion through wise investments and astute business practices.

Personal Life

John D. Rockefeller was born on July 8, 1839, in Richford, New York. His father was a farmer and trader. His mother was from a Purtain background, and she raised her large family with very strict values. The family moved from the east coast to Cleveland, Ohio, in 1853. At this time the area was beginning to grow into a large city. John graduated from high school there and began his first job at the age of 16 in a Cleveland mercantile firm.

Following in the footsteps of his religious mother, Rockefeller was an active member of the Baptist Church, and beginning with his first job as a clerk, he gave one-tenth of his earnings to charity. In 1864 Rockefeller married Laura C. Spelman. They had four children: Bessie, Alta, Edith, and John Davidson Jr. As his income grew, so did his benefactions. The total of Rockefeller’s lifetime philanthropies has been estimated at approximately $550 million.

Although he amassed an enormous fortune, Rockefeller preferred to live simply. His time was absorbed by business and later by organized giving. In both areas he imposed order, efficiency, and planning with extraordinary success and sweeping vision. He died on May 23, 1937, in Ormond, Florida, at the age of 97.

John D. Rockefeller, Jr. attended Brown University, and following his graduation, he went to work for his father. According to Webster’s American Biographies, “Among Rockefeller’s notable achievements were the restoration of colonial Williamsburg, Virginia; the planning of Rockefeller Center in New York City; the donation of the site for the United Nations headquarters building in New York; the creation of numerous forest and wildlife preserves; and the establishment of the United Services Organization (USO) during World War II.” John Jr. married Abby Greene Aldrich and they had six children, Abby Aldrich, John D. III, Nelson Aldrich, Laurence Spelman, Winthrop, and David. One of his sons served as governor of Arkansas and the others worked in business and various philanthropies.

Career Details

Success came early to John D. Rockefeller. His first firm, founded with Maurice B. Clark in 1859, grossed $450,000 in the first year of trading grain, hay, meats, and other goods. Clark did the fieldwork; Rockefeller was in charge of office management, bookkeeping, and relationships with bankers.

According to the Concise Dictionary of American Biography, “In 1863 Rockefeller, sensing the commercial possibilities in the recent linking of Cleveland by a railroad to the new ‘Oil Regions’ in northwestern Pennsylvania, had joined in building a refinery, which in two years was the largest in Cleveland.” Within two years, guided by Samuel Andrews’ technical knowledge, Rockefeller left his partnership with Clark and devoted himself to the business that rapidly became Cleveland’s largest refinery. In 1865 Rockefeller bought out his original partners and—along with brother William Rockefeller, Samuel Andrews, and Henry Flagler—built a second refinery, the Standard Works.

With Flagler’s assistance, favorable railroad freight rebates were secured for Standard Works. William Rockefeller was sent to New York to expand the East Coast market. Within three years, the company expanded vertically to include warehouses, fleets of wagons, and timber tracts for the making of its own barrels. The company eventually became so large that it required reorganization. A joint stock company, the Standard Oil Company of Ohio, with Rockefeller as president, was incorporated in 1870 and had capital of $1 million. Soon Standard Oil controlled one-tenth of American refining, but in an atmosphere of competitive chaos.

Rockefeller’s next method for imposing order on the oil industry was to buy out most of the Cleveland refiners, then acquire others in New York, Pittsburgh, and Philadelphia. Standard Oil was efficiently organized, was managed with great foresight, and wielded tremendous economic leverage. As a result, the company was able to survive the temporary depressions that were difficult for smaller or less efficient companies. Its vertical structure was expanded to include pipeline systems, oil terminals, and direct-marketing facilities. By 1879 Rockefeller dominated the entire oil industry. Standard Oil was refining 90 percent of American oil using its own railroad tank cars, depots, ships, and docking facilities. Strict planning and economy were enforced throughout the process, which allowed the company to cut the price of refined oil from 23 cents per gallon to 7 cents per gallon during its first 20 years of operation.

In the 1880s the nature of Rockefeller’s business started changing; he moved beyond refining oil into producing crude oil itself, and moved his wells westward as new fields opened up. He pioneered this expansion by acquiring oil land before it was certain that its sulfuric oil could be refined. He employed scientist Herman Frasch, who devised new methods for making these fields yield an enormous profit. He also developed markets for the byproducts of his business—kerosene, lubricants, varnish, and fuel oil. As the penetration of American markets was assured, foreign markets in Europe, Asia, and Latin America were added.

Since 1872 Standard Oil had circumvented Ohio regulations by placing its out-of-state acquisitions in the hands of Henry Flagler as “trustee.” All profits went to the Ohio company while the outside businesses, entrusted to a nine-man directorate that was itself incorporated, remained nominally independent. The Standard Oil trust, established in 1882, was the first of many such industrial combinations that caused public opposition to monopolies to change to hostility.

By 1883, after winning control of the pipeline industry, Standard’s monopoly was at a peak. With a capital reserve of about $70 million, the trust was the world’s largest and richest industrial organization. Journalists condemned Standard Oil for various unethical business practices: railroad rebates, a system Rockefeller did not invent that was used by many refiners; price discrimination; industrial espionage and bribery; and elimination of smaller firms through unfair competition, such as cutting off their crude oil supplies or restricting their transport outlets. Standard Oil was investigated by the New York State Senate and by the U.S. House of Representatives in 1888. A rising tide of reform sentiment led to the passage of the Sherman Antitrust Act in 1890. By now the Standard Oil trust controlled about 95 percent of the petroleum industry in the United States; had extensive holdings in mining, manufacturing, and transportation; had virtual control of pipeline distribution in the United States; and was an economic power of global proportions. In 1892 the Ohio Supreme Court ordered the trust dissolved. Rockefeller formally disbanded the trust by requiring the directors to hand in their trust certificates, but in practice the organization remained intact and still met regularly to determine overall policy.

Rockefeller’s most famous excursion outside the oil industry began in 1893, when he helped develop the Mesabi iron ore range of Minnesota. Three years later, his Consolidated Iron Mines owned a great fleet of ore boats and virtually controlled Great Lakes shipping. As an iron ore magnate, Rockefeller now had the power to dictate to the steel industry. In an alliance with steel king Andrew Carnegie, Rockefeller agreed not to enter steelmaking and Carnegie sold his ore holdings to the vast new merger created by Carnegie and J. P. Morgan, U.S. Steel. In 1896, Rockefeller’s fortune passed the $200 million mark for the first time.

In 1899 Standard was recreated legally as a “holding company,” Standard Oil of New Jersey. Rockefeller retained the title of president until 1911, the year that firm was dissolved by the United States Supreme Court, but for more than a decade he had been retired from active business and had devoted himself to philanthropy. In his early career, Rockefeller had depended on the Baptist Church for advice; the Church wanted its own great university, and in 1892 the University of Chicago was Rockefeller’s first major philanthropic creation. As his fortune grew, he established and endowed philanthropic foundations including: the Rockefeller Institute for Medical Research (now Rockefeller University) in 1901, the General Education Board in 1902, the Rockefeller Foundation in 1913, and the Laura Spelman Rockefeller Memorial Foundation in 1918 (named for his wife who had died in 1915).

As he was giving away a large percentage of his fortune, his successors at the helm of Standard Oil were raising prices and distributing record profits through enormous dividends. President Theodore Roosevelt was especially incensed at Standard’s acceptance of illegal railroad rebates, a practice that continued long after it was outlawed. In 1907 one of the company’s subsidiaries was fined $29.24 million, which was such an outrageous sum that the ruling was overturned on appeal. Undaunted, the government continued to pursue antitrust violations, and in 1911—after 444 witnesses and 1,374 exhibits were presented—Standard Oil of New Jersey was required to spin off 33 independent subsidiaries.

Chronology: John D. Rockefeller

1839: Born.

1859: Established first company, Clark and Rockefeller.

1863: Entered his first oil refining business with a $4000 investment.

1865: Bought out his partners and opened Standard Works.

1870: Incorporated a joint stock company, Standard Oil Company of Ohio.

1879: Refined 90 percent of American oil.

1882: Established the Standard Oil trust as a way to circumvent the laws of Ohio.

1892: Ohio Supreme Court ordered the dissolution of Standard Oil trust.

1911: United States Supreme Court ordered the dissolution of Standard Oil of New Jersey, a holding company.

1937: Died.

Because Rockefeller’s business ethics were questioned, his philanthropic endeavors were initially received with suspicions. Some even turned down his offers of help, calling his benefactions tainted money. Eventually, through the use of publicity agents and by overcoming his own policy of silence about his affairs, he was able to bring about a change in public opinion and distribute a large portion of his wealth where it would work for the benefit of society.

Social and Economic Impact

John D. Rockefeller’s genius was in his ability to organize, and this was shown in his business and his philanthropy’s efforts. He was able to recognize and seize opportunity, solve difficult problems, and bring together talented groups of men to implement his plans. He won the loyalty of his partners and associates by giving them the freedom to use their talents to their fullest extent. He was a man of few passions who lived for his work, and his great talent was his organizing genius and drive for order, pursued with great single-mindedness and concentration. His meticulousness attention to detail, though, kept him from understanding that business ethics and government intervention were forces to be taken into consideration. Laws that still regulate business and allow the government to break up monopolies were passed and tested in the court system because of Rockefeller’s unwillingness to consider the good of the general public. The government subsequently filed antitrust complaints against American Telephone & Telegraph, International Business Machines, and Microsoft Corporation based on the same laws that were used to break up Rockefeller’s monopoly.

According to Ron Chewnow’s 1998 biography, “Never before in the history of the U.S. had there been so far-reaching a struggle between industry and government.” The monopoly was broken when the Supreme Court ruled that Standard Oil’s trade restraints violated the public interest, but ironically the required reorganization ultimately tripled the worth of John D. Rockefeller. With the emerging automobile industry, the end of antitrust litigation, and the posting of dividends in excess of 50 percent, the public exhibited in insatiable appetites for shares in any of the companies. Exxon, Mobil, and Chevron—along with Standard Oil—are just a few of the subsidiaries that came to dominate the oil industry throughout the twentieth century.

Roddick, Anita Lucia - Overview, Personal Life, Career Details, Chronology: Anita Lucia Roddick, Social and Economic Impact [next] [back] Rock Hudson (1990) - Overview, Synopsis, Critique

User Comments

Your email address will be altered so spam harvesting bots can't read it easily.
Hide my email completely instead?

Cancel or

Vote down Vote up

over 5 years ago

The sentence: "Never before in the history of the U.S. had there been so far-reaching a struggle between industry and government." is a sentece which Ron Chernow took out of Carr's book: John D. Rockefeller's Secret Weapon, P.147.

Vote down Vote up

about 1 year ago

The biography was written by Ron Chernow not Chewnow

Vote down Vote up

over 3 years ago

tbh if u want anyone to be able to read this, don't use a lot of big words. i got bored, and i bet every other peep did too, you feel me? no u don't. so forget it and go back to eting your oreos. oh, and some of it was helpful but ya know when u make a paragraph saying this kinda stuff, a compliment isn't very helpful. Goodbye other Wangles! see you in Maryland! :)

Vote down Vote up

5 months ago

Hello from 2017.