Incorporation of F. W. Woolworth & Co. in 1905
A move copied by other members of the Friendly Rival Syndicate
On this page we explore the rationale, in Frank Woolworth's own words.
"This will be the last letter I shall write to you as individual owner and proprietor of all the five-and-ten cent stores running January 1, 1905. It is a sad occasion and I will tell you later why I am transferring my business to a Corporation. Hereafter I will write to you as a representative of a Corporation. I am sorrowful, but modern methods must be pursued. Twenty-six years I have endeavoured to conduct five-and-ten-cent stores on an honourable and systematic and paying basis. But time is fast flying away and I cannot expect always to be in control of this vast property."
The Articles of Association specified that the Corporation would be organised under the laws of the State of New York and would retain the name F. W. Woolworth & Company. They came into effect on 16 February, 1905. The shares were divided between 50,000 shares of preferred and 50,000 shares of common stock, each with par value of $100. The preferred stock guaranteed a seven percent dividend, which was payable quarterly on the first day of April, July, October and January. The common stock did not guarantee a fixed return, but would return an income once the preferred obligations were met. The preferred stock was offered at par (face value) to members of the Woolworth family, and the employees. There was no public subscription. Thus the five-and-ten remained a strictly family affair.
The organisation meeting elected Woolworth, C. C. Peck, C. P. Case, H. A. Moody and H.T. Parson as Directors (all pictured at the top of this page). Frank was appointed the President and Hubert Parson the Treasurer (Finance Director). C. C. Griswold and H.W. Cowan (pictured in the second row above) were elected Assistant Treasurers.
A number of Executives were given stock on the condition that they stayed with the Company for five years, until January 1, 1910. These 'golden handcuffs' applied to B. W. Gage, C. M. Osborn, J. H. Strongman, A. V. Ivie, Walter Williams, C. B. Winslow, George W. Strongman, Lambert G. Smith, L. J. Surdam and Frank B. Carpenter.
Frank's explanation to Managers continued:
"The ties that have bound us together so long are not broken. We are now more united than ever. Now every manager of every store, every clerk and office boy, every sales-lady is safe because no matter what happens to me, or to any officer of the company, the business goes on just the same. Before you were all taking chances in betting on my health and ability. Every time I have been sick or unable to work I have thought of the terrible responsibilities resting on my shoulders and of so many people depending on my health. The corporation is more expensive than the old way of doing business, but that is the penalty for security."
Within seven years the stock had increased in value by more than six fold, setting the pattern for continued steady growth right through to the 1920s.
Seeing the personal wealth that the move generated for Frank Woolworth, Charlton, Kirby and Knox copied the move between 1905 and 1908. Perhaps they could see the writing on the wall. Frank had just raised enough cash to buy them all out, should he want to.
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