AND LANDS WHEN CEOS WERE REMOVABLE: THE MONTGOMERY WARD STRIKE, PUBLIC OUTCRY, AND THE CORPORATE PROBLEM IN U.S. HISTORY.

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1 LANDS bs_bs_banner AND WHEN CEOS WERE REMOVABLE: THE MONTGOMERY WARD STRIKE, PUBLIC OUTCRY, AND THE CORPORATE PROBLEM IN U.S. HISTORY Lisa Phillips This essay provides a brief history of corporate regulation in the U.S. It takes as its focus the 1944 Montgomery Ward Strike, an event that crystallized the pro-business, anti-regulatory, and anti-new Deal, sentiment that was brewing in the country toward the end of the war. Considered to have been one of the most important photos in the history of journalism, the image of Montgomery Ward CEO Sewell Avery being carried out of his office by Army soldiers, and the corresponding year- long controversy, pitted President Roosevelt against the retail business giant (the amazon.com of the early twentieth century). Avery lost the battle but won the war. He used the controversy, and the image, to argue that the government was illegally overstepping its bounds, interfering with free enterprise, and engaging in seizures and regulation tantamount to the kind of fascism the Allies were fighting against. Thousands of people agreed with him. By the end of the war, the beleaguered business community launched one of the most successful campaigns in U.S. History designed to win back the hearts and minds of the American public and make business the harbinger of American democracy. The public was primed to hear its message having crystallized its opinion during the 1944 wartime strike. Corporate abuse has become an intense topic of discussion here in the early years of the twenty-first century. We have witnessed the fight for $15, strikes and protests among retail workers at Wal-Mart, Disney, and in the fast food industry, discussion of the corporate take-over of education at all levels, calls for campaign finance reform and the repeal of the Supreme Court s controversial Citizens United case. We re involved in an intense national debate, pitting people on one or the other side of a class war rivaled only by that of the 1890s and 1930s in its intensity. While some make the argument that all-powerful CEOS, multinationals, and banks and the politicians that support them have created what amounts to an oligarchy, others argue that American democracy can only live on in the free enterprise system, that it should continue to expand, unfettered, to every corner of the globe. These extremes were represented in the 2016 Presidential election as a Democratic-Socialist, Bernie Sanders, and the billionaire Donald Trump vied for their respective Party s nominations. 1 Donald Journal of Labor and Society Volume 21 March 2018 pp VC 2018 Immanuel Ness and Wiley Periodicals, Inc.

2 78 JOURNAL OF LABOR AND SOCIETY Trump won for reasons that will be analyzed for decades to come, not the least of which was the intense anti-government, anti-regulatory, sentiment people expressed by NOT voting for the Democrat, Hillary Clinton. As they did in the 1890s and 1930s, after the stock market-induced Great Recession of 2008 people have called for legislation to regulate businesses, banks, and the stock market, and are demanding that the Supreme Court overturn its 2010 Citizens United decision. 2 Unlike Presidents Theodore and Franklin Roosevelt, President Obama did not pursue regulation very aggressively in either his first or second terms. Taking the approach that businesses and banks were too big to fail, he opted, instead, to work with the Federal Reserve to keep interest rates low as a way to spur economic growth. Into his second term in office, businesses were posting record profits and unemployment rates had dropped, but wages remained stagnant leaving the gap between the rich and poor at its most extreme in U.S. history. Calls for regulation continue but, although the gap may be reminiscent of that of the 1890s, even the 1930s, there is not enough of a public outcry to overcome Congress reluctance to pass much. While the reasons for this are many, the roots of the country s current collective resistance to government regulation can be traced back to World War II. This essay revisits the context surrounding a major wartime strike which culminated in U.S. soldiers carrying Sewell Avery, chairman of the Board of Directors of the retail and mail-order giant Montgomery Ward, out of his office on a spring day, April 28 of 1944, and dumping him on the sidewalk. Splashed across the front pages of every major U.S. newspaper the next morning, the image did more to damage FDR s, and his successors, attempts to rein in big business than the actual merits of their policies. Over two thousand people wrote the President, some in favor, some against, and editorial after editorial picked apart every aspect of the President s, and Attorney General Francis Biddle s, decision. Of course, the decision had not been theirs alone but had been argued over at the highest levels of government with Secretary of War Henry Stimson and several others weighing in. At the time, the whole episode was considered a fiasco that made the government look ridiculous. Looking back, the strike at Ward s was a clear turning point. From the point of view of the working-class, it represented a high point in U.S. history when the President of the United States was really on their side. From business perspective, a low point and eventual rallying cry that helped crystallize what was an emerging campaign to extoll the virtues of free enterprise and ward off attempts by dictators like Roosevelt to seize private property. The Ward s incident was, of course, highly unusual. Business interests have enjoyed a great deal of freedom throughout most of the last one hundred and forty years of U.S. history. Only the most egregious of corporate scandals and near economic collapse, as historians and legal scholars have argued, have had the power to usher in regulatory eras. The Jay Cooke-inspired railroad scandals of the 1860s and the ensuing Panic of 1873, for example, prompted a strong public outcry, solidified the Populist and labor movements, and resulted

3 PHILLIPS: WHEN CEOS WERE REMOVABLE 79 in the creation of the Interstate Commerce Commission in 1887, the 1890 Sherman Anti-trust Act, and twenty-five years of additional regulatory legislation. 3 From the 1870s through the 1890s, a diverse labor movement emerged, a collection of worker-oriented organizations and bona-fide labor unions, with anarchists and socialists at one end of the political spectrum and ultra conservative railroaders at the other. While members of the very large working-class of the era rarely agreed with each other, they capitalized on the Cooke scandal, engaged in boycotts and strikes, ran political candidates for office, and created such a stir that muckraking journalists and an intellectual cadre of editorialists focused the nation s attention on the labor question enough to tip the scales toward regulation. It was at this point that business interests countered with their own kind of organization, creating the National Association of Manufacturers (NAM) in 1890 to better coordinate business interests efforts in opposition to increased regulation. 4 During TR s era, business regulation was a widely accepted solution to the problems associated with the rampant exploitation of labor, among other societal ills. By 1912, the people who were charged with regulating corporations, Herbert K. Smith being one, argued that the federal government needed to enlarge the role of the Bureau of Corporations to include a strong enforcement arm. Smith argued that an enforcement arm combined with public pressure were the only forces strong enough to curb the natural tendency toward monopoly. The more information his office provided, the more incensed the public, the more the lawmakers were pressured to pass regulatory legislation, and the more shamed businesses would be, he argued, to change their policies. We have found that public opinion, thus intelligently applied, when based on concrete facts, is the most effective force against industrial evils. He went on to cite examples of Standard Oil, two Cotton Exchanges, the tobacco industry, steel, all of which complied with some of the Bureau s modest recommendations after what were, in effect, press releases that generated public outcry. That was the extent of the Bureau s power. Negative publicity was all it had. Without it, Smith argued, the Sherman Act did little to solve what he called the corporate problem. 5 Smith was, of course, not alone in his critique. There was enough of an antitrust sentiment in the country to push Presidents Roosevelt and Wilson to pressure Congress to pass the Clayton Act and create the Federal Trade Commission, both in They strengthened the Sherman Act by making specific practices, those that limited competition, illegal, and by providing some enforcement powers. Those marked the end of the regulatory mood in the country, spanning at least twenty-five years, touched off by the Cooke scandal and sustained by muckraking journalists, an active labor movement, and public vigilance. 6 The outbreak of World War I put the country s emphasis on wartime production and less on regulation but not before an understanding of the plight of the working-class and the labor question were a part of a national discussion. During these twenty-five years the corporate problem was addressed by Presidents Roosevelt, McKinley, and Wilson differently. Each presidential administration, as historian Martin Sklar argued, envisioned a slightly different

4 80 JOURNAL OF LABOR AND SOCIETY relationship between governmental regulatory agencies and business interests. Theodore Roosevelt, again not at all at the left end of the spectrum of his day, was, nevertheless the most left of the three. He favored the greatest amount of government regulation. TR envisioned a semi-socialized system in which the government regulated public utilities, including the railroads, while businesses maintained control, that is, there was little governmental involvement, in other segments of the economy (retail, distribution, service, manufacturing). McKinley was in the middle, favoring less actual governmental regulation. He argued that the government s role should be limited to breaking up monopolies. Finally, Wilson, the most right of the three, argued for the least government regulation: none. Each operated within a different context with Wilson responding to the intense statism (the Bolshevik Revolution) of his era. 7 According to the Sklar, these three positions created the boundaries within which Presidents, Congress, and the public, operated for the remainder of the twentieth century. 8 To a certain extent, Sklar is right but, as Herbert K. Smith argued in 1912, public outcry was key in pushing presidential administrations and Congress in certain directions. Neither Smith nor Sklar accounted for the degree to which public outcry could be manipulated. Smith was convinced that the public would demand fair business practices of individual businessmen when they became too greedy. Keep the books open, Smith argued, so the public could scrutinize the ways in which businessmen distributed the company s profit. Smith took pains to distinguish the individual greedy businessman from the corporate capitalist system itself. The point, Smith argued, was to make sure people supported the system in general but used the pressure they could exert to keep errant capitalists in check. 9 After World War I, the U.S. experienced what seemed to be almost unlimited economic growth. The three pro-business presidents (Harding, Coolidge, and Hoover) and a pro-business Supreme Court followed in Wilson s path, arguing that what was good for business was good for the country. Wages rose and the dramatic rise in consumer spending seemed to prove them right. Regulation was, in a word, dead. The decade, not surprisingly, gave rise to rampant risk taking yet again and, eventually, public outcry over unfair business practices would re-emerge at by the end of the decade. This time it was the electric industry rather than the railroads that generated controversy. Even prior to the stock market crash, outcry was brewing over Chicago businessman Samuel Insull s acquisition of electric companies or, more specifically, the holding companies he created to cover up what was a complete monopoly of the growing industry. It was Insull, a household name and a 1920s business superstar, who provided FDR with the ammunition to launch his campaign for a New Deal in 1932 but, until the stock market crash in 1929, even Insull did not elicit a stringent enough critique to usher in any kind of business regulation. 10 For the better part of the 1920s, business s NAM was almost unnecessary as all branches of the U.S. government favored business. The Alien and Sedition Acts during World War I and the Palmer Raids immediately afterward effectively squashed the last vestiges of anti-capitalist sentiment, the Socialist Party and the Industrial

5 PHILLIPS: WHEN CEOS WERE REMOVABLE 81 Workers of the World split internally leaving the more mainstream American Federation of Labor to represent the working-class and no one to call for regulation. With Henry Ford s Five-Dollar Day, it hardly seemed necessary. 11 We all know that the Depression ended the feel good, pro-business era of the 1920s and ushered in what appears, still, to have been the most proregulatory and, to a certain extent, anti-business period in U.S. History: the 1930s. As in the 1870s, it was public outcry that fueled this era of intense regulation that was the New Deal. Samuel Insull became the symbol, writes historian David Kennedy, of the shattered business idols of the 1920s. In the four months between FDR s 1932 victory and his taking office (in March), Kennedy writes that President Hoover told then Secretary of State Henry Stimson that he had spent most of his time in conversation with Roosevelt educating a very ignorant...well-meaning young man about the myriad crises he was about to face. The banking system was about to collapse, gold was being shipped out of the country, and capital fleeing abroad. Yet the biggest danger facing FDR in all this, Hoover argued, was the state of the public mind. 12 Hoover was right about the depths of the crisis and the public s state of mind. By the time FDR took office, the economy was on the verge of collapse. Within this context, FDR took what was a modest and undefined anti-laissezfaire, more pro-regulatory pro- security platform, added his overriding philosophy of experimentation, and ended up engaging in what would amount to a thirteen-year seeming war with corporate America, especially relative to the free pass business interests had enjoyed in the 1920s and earlier eras. President Roosevelt s first steps in that direction, although he had no such plan in mind, were to regulate the stock market and close the banks. The crisis was so dire that even the Wall Street Journal, historian H.W. Brands finds, agreed with the famous Bank Holiday. FDR went on to sponsor legislation that mandated the full disclosure of stock, giving investors a clear sense of the health of the company and enabling the average man, rather than only businessmen who were in-the-know, to understand what it was they were investing in. While FDR s initial proposal called for government oversight of the stock exchange, the final version only went so far as to call for full disclosure. Passed in 1933, by 1934 the President s supporters were arguing that full disclosure embodied in the 1933 Federal Securities Act was not enough. Congress amended it and passed the 1934 Securities Exchange Act which created the Securities and Exchange Commission, a governmental oversight committee. The Act was opposed by the business community but public outcry in the depths of the Depression was with the President, there being little resistance to government regulation. 13 Along with regulating the Stock Exchange and stabilizing the banking industry, within his first hundred days of taking office President Roosevelt passed the National Industrial Recovery Act, the Agricultural Adjustment Act, and the Glass Steagall Act, among many others, of course, but these were aimed directly at regulating industrial businesses, agricultural producers, and banks. Never had such regulation taken place and never with at least enough support from the public to get the acts passed through Congress. While the President s dramatic

6 82 JOURNAL OF LABOR AND SOCIETY action matched the horrors of the era, by now his plan, experimental as it was, took definite shape. He shocked the business community with his brazenness and overstepped his Constitutional bounds. The Supreme Court outlawed parts of both the AAA and the NIRA but versions of them passed Constitutional muster during the President s second term. By 1936, the general public accepted government regulation as the antidote to the corporate and banking abuses largely responsible in their minds, at least, for the economic Depression they were living through. The Roosevelt recession of 1937 would, however, enable business interests to mount criticism that would eventually gain some traction. 14 The 1940 election showed some signs that the business community was on its way back. Although not a significant challenger, Wendell Wilkie ran a ticket critical of FDR s Tennessee Valley Authority (TVA) because, he argued, by providing cheap electricity, FDR was creating a kind of government monopoly with which private electric companies could not compete. FDR had come full circle: replacing Insull s monopoly of the 1920s with the government s less than a decade later. The difference was that, under the TVA, consumers benefitted from cheap electricity at businessmen s expense. Wilkie supported some of FDR s New Deal and separated himself from the rest of the Republican pack by also supporting the U.S. intervention in the war. Republican-owned newspapers supported Wilkie s bid helping him to win over 44 percent of the popular vote and take many of the Midwestern states. One newspaper editorialist claimed he would have won on his modest anti-regulatory platform had it not been for the war in Europe. 15 The war, particularly the U.S. mobilization for it, did more to institutionalize business regulation than any of the New Deal policies. In order to mobilize, the government seized American businesses, albeit temporarily, and regulated them to the hilt. In October of 1940, Congress passed an act enabling the President and the U.S. Military to requisition certain articles and materials for the use of the United States, when the export of said materials was denied for whatever reason. 16 Within the next week, the President issued specific regulations by which plants (the word plants was used purposefully, rather than businesses, to evoke wartime necessity) were to be requisitioned. These acts of Congress and subsequent regulations provided the justification for the sixty-four seizures that took place from June of 1941 until early This was not the first time Congress had authorized seizures during wartime. During the Civil War, the government took over the operation of the northern railroads and telegraph lines and, during WWI, it seized four businesses, including the arms manufacturer Smith and Wesson. Smith and Wesson was the only seizure that had resulted from a labormanagement dispute, most of these pre-world War II takeovers were uncontested and necessary for efficient wartime production. Wartime seizures during World War II were different in that they reflected class antagonism of the Depression-era and the government s expanded role in managing it. 17 During World War II, whenever any kind of labor-management disruption threatened production, the government was authorized to seize the business until the issue was resolved and seize it did. Aluminum producers in California,

7 PHILLIPS: WHEN CEOS WERE REMOVABLE 83 explosives manufacturing operations in Maryland, hydroelectric plants in Puerto Rico, iron works, nickel companies, brass works, four piers in New York City, cable companies that made materials essential to the production of electricity, lathe producers, leather mills, it did not matter if they were multimillion dollar companies or companies that made only a few thousand dollars, if the production of war-related goods had stopped and the conflict that caused it unresolvable by the National War Labor Board (NWLB), it was seized. Business owners could only sit back, watch, and wait for the government to compensate them. They had little, if any, latitude in determining price structure, profit margins, hiring practices, or any of the aspects of running a business that would have showcased their business acumen (but which resulted in lower wages than the government mandates and, more often than not, amounted to a tacit encouragement of discriminatory practices). This was a time of war: the point was full and efficient production, a stable and well-fed workforce, and surplus personal income to pump into the economy. Businesses owners were in the unusual (and rather humiliating) position to be dictated to. 18 FDR and Congress created the NWLB in January of Like its predecessor, the National Labor Relations Board, which had been created as part of the 1935 Wagner Act, the NWLB resolved labor disputes and investigated unfair labor practices. The NWLB had little if any power to enforce its own regulations. It was able to threaten to cut payments or nullify government contracts with businesses that failed to adhere to government regulations. It had even less power when labor was the offender. All it could do was tell union leaders to order their members back to work, nothing seemed seize-able with regard to labor. The government clearly saw its role as brokering between the two entities for the purpose of efficient wartime production but needed equal amounts of leverage to keep them each in line. In early 1942, this new tripartite relationship was in place, the government assuming a new, expanded managerial type of role, business owners in the position to abide by something other than market regulation, and laborers at work for the duration of the war. Businesses were assured a steady income through government contracts, labor was assured healthy membership rolls as all defense workers were automatically enrolled in the appropriate union, and the government ensured full and efficient production for the military s benefit. Labor unions negotiated contracts with business owners throughout the war using the government s wage and hour scales as guidelines. If a business owner failed to sign a contract or a labor union called a strike, the NWLB came in as a mediator. Seizure was a last resort. 19 In return for the maintenance of membership clause and the dues check-off, labor unions agreed to a no-strike pledge for the duration of the war. President Roosevelt hoped that this compromise would work to stabilize industry as a whole. Wartime disputes between business and labor interests were handled not by lock outs or strikes but through mediation by the NWLB. 20 Not everyone agreed with the no-strike pledge. Some vocal workers balked when union officials informed them of the compromise. Going out on strike, they argued, was the working-class only weapon. Some disgruntled auto workers went so far

8 84 JOURNAL OF LABOR AND SOCIETY as to predict that the no-strike clause would be written into their next contract. Most, however, initially accepted the wartime goals of full and uninterrupted production and the NWLB as the mediator of any disputes. 21 Officially, only two actual strikes occurred, both of which drew the public s ire: the Montgomery Ward strike, of course, and the United Mine Workers (UMWA) strike of the previous year. Officially as these were the only two strikes sanctioned by organized labor, meaning they constituted actual violations of the no-strike pledge. Unofficially, hundreds of wildcat strikes (not supported or tacitly supported by labor unions) occurred throughout the war, of which the general public was more than aware and referenced multiple times in letters. Unofficially, business leaders continually rebuffed the NWLB s regulations, keeping the agency busy as it tried to enforce a minimum of standards. And, the third entity in the tripartite system, the government, seized the operations of several businesses that experienced labor disruptions and were deemed crucial to wartime production. The Navy, the Department of the Interior, the Office of Defense Transportation, the Petroleum Administration for War, the Secretary of Commerce, Jesse Jones, and the War Department, ran the companies, always temporarily until business owners were brought in line and the government reimbursed private business owners for any money lost while the government was in charge. 22 Underlying both of the official violations then were years worth of underthe-surface turmoil that came to a head during the Ward s strike. FDR handled the Ward s situation differently than he had the miner s strike of just a year earlier. In both, his goal was to maintain the government s authority in bringing whichever entity it deemed recalcitrant in line for the benefit of wartime full production. That meant taking more of an anti-labor position with the miners and a very clear anti-business position with Sewell Avery. While the public was up-inarms during the miners strike, the Ward s strike elicited comparisons between the two that put FDR on the defensive and made his pro-regulatory policies suspect. In both instances, public opinion was not with FDR. The 1943 coal strike has been written about extensively. It provides, in this case, a good comparison for what would happen at Ward s just a year later. At the heart of both was what, exactly, the government was empowered to do, whose interests it was to protect. Coal production had been a source of conflict prior to the 1943 showdown between FDR and the fiery, John L. Lewis, President of the United Mineworkers Union (UMW), strikes in the steel and coal industries having occurred just before Pearl Harbor in October of These pre-pearl Harbor conflicts were equally as contentious. Coal production was crucial and U.S. participation in the war imminent. Preparing for the worst, FDR, and his administration drew up extensive plans for taking over the mines. They anticipated the biggest obstacle would be, not the coal companies opposition, but the union s and coal miners potential simple refusal to comply, to mine the coal. FDR could order Lewis and the miners back to work but what if they refused? It would be difficult to force 100,000 people or more to work. Could the government seize the workers themselves and subject them to some kind of arrest even though it was still legal to strike? The 1941 plans called for

9 PHILLIPS: WHEN CEOS WERE REMOVABLE 85 soldiers and other military personnel to not only manage the company s daily operations but to mine the coal as well. The plan was put on the back burner when the UMWA and the coal companies reached an agreement and the miners went back to work. Shortly thereafter, the U.S. entered the war. 23 Now just over a year into the war, a similar situation arose. Miners in Pennsylvania called a wildcat strike in January to protest the increasingly dangerous conditions they were working under during what amounted to a wartime speed up (injuries and deaths had increased in 1941, 1942, and 1943) as coal companies posted record profits and inflation soared. The wildcat strikers demanded a wage increase even though the companies were following the wage guidelines set by the NWLB. Lewis ordered the miners back to work while the UMWA and the Appalachian soft coal operators tried to negotiate a contract. When they were unable to reach an agreement, the UMWA set April 1st as a strike date, this one officially sanctioned by Lewis and the UMWA and a clear violation of the wartime no-strike pledge, setting up a show down between Lewis and FDR. 24 Having ushered in the most pro-regulatory period in U.S. history, you would think FDR would have backed Lewis and the miners if, for no other reason, to keep the coal companies in check, and had army soldiers carry the coal company owners out of their offices. He did not. Instead, he ordered Lewis to get his striking miners back to work. This time, Lewis brazenly refused and the strike was on. In a show of solidarity, coal miners in Pennsylvania and Alabama stayed out as well. In one of the largest strikes in U.S. history, by June over half million miners around the country were on strike. FDR again ordered the miners back to work, and told his Secretary of the Interior, Harold Ickes, to seize the mines. The press had a field day. Most of the coverage vilified Lewis and the striking miners who were crippling the production of coal during a war! The President looked weak, unable to control the situation, unable to control Lewis, with the whole episode taking too long to resolve while servicemen were losing their lives overseas. The President had several options, including taking over John L. Lewis position, decertifying the union, and putting the government in charge of disciplining the miners. As he had planned in 1941, he could have ordered the military to both manage the mines, with soldiers mining the coal, but half million workers would have had to have been replaced by soldiers and during a war. Instead, FDR authorized the NWLB to negotiate a wage increase with the coal companies, violating the spirit of the wartime arrangement that promised not bend to the will of illegally striking miners. 25 In a May 2, 1943 press release, President Roosevelt had chastised the miners, told them they were obstructing the war effort and engaging in something unwarranted, unnecessary, and terribly dangerous. He, at least publicly, failed to mention the coal operators record profits, the speed-up and dangerous conditions the miners faced, saying only that he had, for his entire life, believed in the right to join a union and would do nothing to weaken the UMW but that it was inconceivable that any patriotic miner could choose anything other than going back to work. 26 Within the next few months, FDR would take a much more decisive approach with Lewis counterpart in the business community: Sewell Avery.

10 86 JOURNAL OF LABOR AND SOCIETY This dissimilar approach was not missed by the public. Perhaps because retail and warehouse workers were not as essential as coal miners to the war effort (although FDR would argue they were central to the efficient distribution of goods during wartime), perhaps because FDR had regretted not taking the miners side and needed labor s support in the upcoming 1944 election, perhaps because FDR s relationship with the little known Samuel Wolchok, head of the United Retail and Wholesale Employees Association (URWEA), the union that called the strike, did not demand a show-down the way his relationship with the contentious Lewis did, this time, FDR positioned himself with Montgomery Ward s workers when they violated the no-strike pledge. Referred to as one of the most famous news photos in the history of journalism (Figure 1). 27 The President was now ordering the seizure of a company s operations but, in this case, to take a stand against corporate recalcitrance rather than against renegade striking mine workers. The photo, reprinted across the country, shows U.S. Army troops removing the sitting Chairman of the Board of Montgomery Ward, Sewell Avery, from his office. A world war and an unparalleled degree of presidential prerogative certainly contributed to FDR s brazenness, but why make such a seemingly anti-business demonstration this time? During the mine workers strikes, the President reined Lewis and labor in, not business. In the miners case, FDR and his advisors feared the UMWA strike would inspire work stoppages. In the Ward s case, they feared Avery would inspire business owners to flagrantly defy the NWLB s directives. In both, the goal was clear: to ensure that both labor and business abided by the government s directives, this was a time of war, after all, full production the goal, with the government the only entity able to secure the cooperation of both toward that end. Tensions had been brewing between Ward s workers and Avery for the previous several months. Among many issues, Avery had consistently refused to recognize the Chicago local of the URWEA as his workers bargaining agent, despite the fact that businesses contracted with the government during the war were required to do so. Not recognizing the union made any negotiation around hours and wages impossible, an effective business tactic on Avery s part. Avery had refused to recognize the union during the first round of contract talks in December of 1942, the dispute went to the NWLB, Avery refused, again, to comply with the NWLB s order, FDR stepped in and Avery, reluctantly signed a one-year contract with the URWEA. As the contract came up for renewal the next year, Avery, again, refused to recognize the union. This time the NWLB ordered the workers to hold an election to determine whether they wanted the URWEA to represent them (this was never an issue, the NWLB simply wanted to counter Avery s contention that the workers were being represented by the union against their will). The URWEA was incensed. Not only had Avery refused to recognize it, he refused to comply with the maintenance-ofmembership clause and the NWLB was now throwing the union into an election, another violation of the wartime arrangement. It called a strike for April 12, 1944 (just one year after the miners strike).

11 PHILLIPS: WHEN CEOS WERE REMOVABLE 87 Figure 1. Sewell Avery s, CEO of Montgomery Ward, removal from his office by Army troops in The picture was taken by Harland Klotz for the Chicago Daily News. It appeared in every major newspaper across the United States. As he had a year earlier, FDR ordered the retail and warehouse workers back to work. This time, however, he also ordered Avery to comply with the NWLB s orders and not only recognize but also negotiate with the union. Avery, as had Lewis, refused to back down. He was ready for the strike. He sent out a mass mailing and had hired part-time workers, many of whom were high school-aged, on a temporary basis, sending out a mass mailing to high school students in which he offered them full-time employment during their upcoming spring break. The union, unlike the UMWA, called off the strike but Avery continued to defy the WLB s orders. Against Secretary of War Henry Stimson s advice,

12 88 JOURNAL OF LABOR AND SOCIETY FDR ordered the seizure of the company and put Jesse Jones, the Secretary of Commerce, in charge of Ward s operations. Avery refused to recognize the seizure order. It is important to understand Avery s position. In this context, he represents the put-upon business executive, having weathered now a decade of what he considered to be government intrusion in the realm of private business dealings. To Avery s mind, the government was seizing companies left and right and was probably not consoled by the fact that they were all returned to private ownership as quickly as possible. By all accounts a brazen obstructionist, Avery was, nevertheless, taking a pro-business stand against a now three-term President who had done everything he could to curb business power (or business recklessness). When forty-five soldiers, wearing helmets and brandishing bayonets, showed up at Ward s headquarters to take over the company, Avery refused to leave. When Undersecretary Wayne Taylor, who had not approved of this saying it would make the army look ridiculous but was nevertheless sent by FDR to assist with running the business, suggested that Avery simply cooperate, Avery replied, To Hell with the Government. Attorney General, Francis Biddle, who had flown in from Washington the night before, then ordered the soldiers to take him out. Avery replied in disgust, You New Dealer! 28 It was Biddle who had headed the NLRB during the 1930s and had supervised the Tennessee Valley Authority, the government-owned public utility that took profits away from business. 29 An amazing turn of events, the Ward s strike also enables us to look at the position of the retail and warehouse segment of the labor movement, ever so important now in the early twenty-first century Wal-Mart, Amazon, and fast food (retail and warehouse) driven economy. That generation s amazon.com, Ward s employed people across the country in its retail stores and warehouses and sold merchandise to hundreds of thousands of customers through its mail order catalog system. Ward s was a company people had grown dependent upon, if not fond of, and Ward s employed people not only in Chicago but across the country. Retail, wholesale, warehouse, and distribution work was not, on the whole, high-paying with the exception of unionized dock work (longshoremen) and driving (teamsters) jobs. The Congress of Industrial Organizations (CIO) had been organizing in retail, wholesale, and distribution since at least The CIO had a great deal of difficulty not only organizing in these areas but in keeping internal schisms from hampering its efforts. Samuel Wolchok, served as president of the United Retail and Wholesale Employees of America (URWEA-CIO), was part of the old guard of Jewish Socialists in New York and more of a John L. Lewis Social Democrat (a left-leaning Democrat influenced more by Socialism and very much anti- Communist). Wolchok lived and worked in New York where the URWEA was headquartered. 30 While it was he who negotiated with Avery and FDR, the strike was actually called by Chicago URWEA Local 20 and led by its president, Harry B. Anderson. 31 Like some other key locals throughout the country, Anderson and the members of Local 20 did not always see eye to eye with Wolchok.

13 PHILLIPS: WHEN CEOS WERE REMOVABLE 89 When the over 5,500 Ward s workers, employed at the department store on Chicago Avenue, the mail order house across the street, and three associated warehouses went out on strike, people took notice. For Wolchok and the URWEA and its locals across the country, the maintenance of membership clause was a tremendous benefit, worth striking for and why it was such an insult that Avery argued his workers were forced to join the URWEA. The clause did not create a closed shop exactly. Workers could choose NOT to join the union; they had fifteen days upon being hired to decide. Maintenance of membership and the automatic dues check off were manna from heaven for labor union organizers who fought tooth and nail during previous decades to convince people that joining a union was in their best interests. Maintenance of membership also staved off competition from company-backed unions whose organizers were often paid off by employers to sully the reputations of the non-company-backed unions, win elections, then negotiate wage rates and hours per week that were more acceptable to company, that is, lower than what the real union would have negotiated. This was a perennial problem in the retail, wholesale, warehouse, and mail-order industries, which were dominated by small shops and stores and particularly difficult to organize. Ward s, a national company, was nevertheless divided among retail, mail-order, and warehouse workers, and spread out across the country. Wolchok s URWEA was organizing it and other retail stores, a less-than-visible national union headquartered in New York with a very New York feel. The wartime labor arrangement offered the UREWEA the possibility of making some real headway in stores across the country. Business owners, CEO s, and managers, whose best interests were served by maintaining as profitable a business as possible, while appreciating labor s supreme sacrifice, nevertheless continued to resent union and NWLB interference. They wanted to hire and fire at will and adjust wage scales and hours to best suit the company s health. Sewell Avery, Ward s CEO, refused to comply with the NWLB s requirement that Ward s first recognize then negotiate with Local 20. Striking workers repeatedly accused Avery of defying a government- NWLB order by not signing a contract with Local 20. Union president Samuel Wolchok argued that Avery was striking against the government during a war. Ward s remained under the government s control for two weeks. In that time, the NLRB oversaw an election in which the majority of Ward s workers voted for Local 20. As Avery returned to work, he said the NLRB election was of no consequence and said he would, again, refuse to negotiate a contract which included a maintenance of membership agreement saying it in effect gave the union the ability to hire and fire his employees. Anyone who did NOT support the union, he said, could be discharged under the clause. He was right to a certain extent. New employees who refused to pay dues after an initial fifteenday grace period could be discharged for not complying with the contract. They could also, however, choose NOT to join the union during that period, not pay dues for the remainder of the contract, yet still be covered. Employers were not supposed to lower the wages of any employee below NWLB-generated wage

14 90 JOURNAL OF LABOR AND SOCIETY scales. Avery refused to give up that amount of control to either Local 20 or the NWLB. Harry Anderson, Local 20 s president, was especially angry with FDR s decision to hand the operations back to Avery before the contract was negotiated. Anderson said that the seizure of the plant had been a farce because, now, when the union needed the government s support to finalize the contract, the government deserted and brought Avery back in. Local 20 threatened another strike if Avery did not sign a contract that included a maintenance-ofmembership agreement. 32 The back-and-forth continued for seven months. Local 20 went on strike again in December of By the end of the month, the Army again seized control of the same Chicago-based Montgomery Ward s facilities, again escorted Avery out of his offices, and this time took over Ward s stores, plants, and warehouses in six other cities. In the months before the second strike and subsequent takeover, riots had occurred outside Ward s facilities in Detroit, Ward s workers in Kansas City quit, and the CIO was growing increasingly combative. Government officials feared the tinderbox theory had become reality. War workers, frustrated over the government s slowness to force companies to abide by the NWLB s requirements, seemed on the verge of exploding in the face of slow to no government action. Government officials were particularly concerned about the situation in Detroit, the heart of the defense industry, where any walk-out could cripple the war effort. Pat Quinn, head of the Greater Detroit Industrial Union Council and a member of the UAW, had threatened as much saying the CIO and organized labor would consider it their right to rescind their wartime no-strike pledge if the government refused to force Avery to comply. Under pressure, Roosevelt issued the order for the second seizure. The Army ran the day-to-day operations of the Chicago Ward s facilities for the next eight months, until just after V-J Day when the company was turned back over to its private owners. 33 As fascinating as it is to consider the circumstances that led to the government s seizure of various companies during the war, even more interesting and, perhaps, influential, was the public s reaction. The picture of Avery being carried out of his office by U.S. Army soldiers during a war did more to rally the public s support behind business and the free enterprise system than anything since the seemingly endless era of good feelings during the 1920s. The image helped a wavering American public crystallize its negative assessment of government regulation. While there were as many letters written in support of the seizure as against, the people who voiced their opposition did so in almost one voice with a critique that became the basis of the business community s campaign to win back the hearts and minds of the American people. Critics consistently extolled the virtues of the American free enterprise system, the one our boys were fighting for, and linked Avery s removal and the subsequent government seizure with a Hitler-like kind of fascism. While the workingclass saw FDR s response as a victory, in the long-run workers and unions lost the proverbial war and are still fighting against a tightly wrapped pro-business,

15 PHILLIPS: WHEN CEOS WERE REMOVABLE 91 anti-regulation, patriotic sentiment that has become the bedrock of American democracy. In the days and weeks after Avery s picture was splashed across the front pages of almost every American newspaper in print, thousands of telegrams and letters poured into the White House, editorials and op-eds followed, and FDR and Francis Biddle scrambled to explain themselves. What can possibly be wrong with you? came a telegram from Lubbock, Texas, There has been nothing since Pearl Harbor that so upset me as this incident, said another, Maybe the rest of business concerns should liquidate before you get to them, from Detroit, and (there are hundreds like this), your usefulness as head of our government has come to an end. The letters reveal the deep resentment businessmen felt toward FDR and his New Dealers and a newer links they were making between this particular seizure and fascism and dictatorship. The sentiment was expressed as much by businessmen as by servicemen reading about the incident. Was this class war? Yes. Avery may have been forced to comply but the bad press was what stuck in the long run. 34 Despite the bad press, and most of it was bad, letters and telegrams poured in from every major labor union and hundreds of locals throughout the country, with everyone from the Barbers and Beauty Culturists Union, Local 6, in Long Island, New York to bricklayers in Newark, railway clerks in Bellingham, Washington, machinists in Terre Haute, Indiana, and 400 Americans of Jugoslavian descent in Chicago, expressing their support for the President s actions. 35 People who clearly identified as working-class, expressed their satisfaction in seeing a business giant go down. A letter from the Bettendorf Tank Arsenal read, Now it is proven that we have not misplaced our faith in you. An architect wrote, Having worked on some of the largest buildings and bridges in the country, I found Montgomery Ward the cheapest concern and a real sweatshop... no corporation is higher than the individual and men like Mr. Avery are not worth what they get except they get it outside the law. There were hundreds like Pearl Cole s letter, although hers was one of the more colorful, I think that your actions will keep other men with lots of Jack and Big Ideas from trying to crush the unions. FDR s supporters were as quick to identify Avery as the fascist as his opponents were to identify him as the fascist; one expressing support for FDR s having seized that fascist outfit, Monkey Ward, in Chicago. 36 Ward s, a household name and depended upon by people across the country, nevertheless inspired a consistent Wal-Mart type critique at least two generations before the big box retailer caused controversy. People referred to Montgomery Ward as the Chicago Octopus. Guy Allot, from Alliance, Ohio sent FDR a copy of letter he wrote to Cedric Foster, a pro-avery radio broadcaster from Boston, Yes, yours are crocodile tears when you appreciate that the Chicago Octopus has been one of the greatest destroyers of country general stores and personally owned businesses. He and several others criticized Avery for not going along with the NWLB s orders, holding him responsible for disrupting the war effort. Avery was more concerned, Francis S. Block wrote,

16 92 JOURNAL OF LABOR AND SOCIETY with defying the WLB than winning the war. The only criticism I can find, came a telegram from Peoria, Illinois, is the picture where Mr. Avery is suspended in mid-air by the soldiers. 37 Yes, that picture was a big blow to the President s otherwise consistent attempts throughout the war to maintain the government s firm hand in keeping production running smoothly and efficiently. After months of debate about how to handle Avery, that picture did more to ruin the Administration s attempts to handle it consistently with the previous seizures than any of the vicious op-eds that appeared in the days and weeks afterward. From those, the President may have recovered, along with his pro-regulatory agenda. Instead, the image served as a rallying cry for everyone who opposed, had doubts, or even did not know quite what to think about the government s pro-regulatory stance. Evan B. Brewster wrote, We are fighting a war for freedom, sir, and freedom, as I see it, means among other things the absolute safeguarding of private property. Another said FDR s actions were in perfect symmetry with what we are fighting against. Esther Combs Goodman, from Los Angeles, referenced her two brothers who had died in the war and the one left, what, she asked the President, are we fighting for? Many people clipped the picture and referred to it in their comments, Please explain the enclosed picture, which, except for the uniforms, might have been taken somewhere in Germany, wrote a Michigander. Call off the Army, what in God s name have we come to in this country, and Why don t you grow a small black mustache. 38 While the President took most of the heat, his Attorney General, Francis Biddle, served as a bit of a fall guy. It was Biddle who advised the President on the seizure s legality. One of key issues was, of course, whether Ward s was engaged in wartime production. Ward s was a clearly a retail establishment. Sure Avery had been a thorn in the Administration s side since the beginning of the war and yes, maybe showing him who was really boss was necessary to the war effort, a way to prevent other business owners from defying the NWLB s orders, but Ward s was a mail order business and department store? During the discussions about whether to execute the seizure, Secretary of War Henry Stimpson was the most adamant that the Army not be used in the seizure. Biddle recalled in his personal journal that Stimpson, a war hero who had executed the Battle of the Bulge, argued that the great U.S. army must not be sent to act as clerks to sell lace and women s garments over the counter of a store. Biddle was initially against the Army s involvement but found nothing illegal about the seizure. Ward s operated a large distribution network of critical importance to the defense plants and four of its subsidiary facilities were directly involved in producing carburetors and other engine parts necessary for the war effort. Despite these arguments, the women s garments image resonated with people who saw Ward s as a retailer of, primarily, household goods. 39 Several argued that the President s actions were deeply resented by the people. Mrs. Lillian Freeland wrote from California, this sort of thing breeds hate for government control of anything. Charles Fisher argued that the President clearly overstepped his bounds, that there is no power granted you by