Cyrus S. Eaton

Cyrus S. Eaton

Cyrus Stephen Eaton (December 27, 1883 – May 9, 1979) was a successful Canadian born investment banker, businessman and philanthropist in the United States, with a career that spanned over 70 years.

For decades one of the most powerful financiers in the American mid-west, Cyrus Eaton was also a colorful and often controversial figure. He was chiefly known for his longevity in business, for his opposition to the dominance of eastern financiers in the America of his day, for his occasionally ruthless financial manipulations, and for his outspoken criticism of America’s Cold War brinkmanship. He was also renowned for having funded and helped organize the first Pugwash Conferences on World Peace, in 1955, in answer to a call in a manifesto published by Bertrand Russell and Albert Einstein, in which they expressed their fear of the growing danger of nuclear proliferation and nuclear war. It became an important organization, won the Nobel Prize for Peace in 1995, and goes on to this day providing opportunities for scientists from around the world to meet openly in a collegial atmosphere to discuss peace issues of international concern.

Early years

Cyrus Eaton was born on a farm near the village of Pugwash in Cumberland County, Nova Scotia, Canada, in 1883. The Eaton family’s North American roots extend back to one John Eaton, an English farmer of Puritan persuasion, who landed at Massachusetts Colony in 1640. Over a hundred years later,in 1756, a descendant of his, one David Eaton, left New England for Nova Scotia as a member of the so-called New England Planters. In a plan for resettling politically dependable colonists onto farmlands taken from the Acadian French in North America, English farmers from the American colonies were offered free land in what is today Eastern Canada. In return for relocating his family from Connecticut, David Eaton received 640 acres of rich orchard land in the Annapolis Valley, and throve there to become the founder of a new branch of the Eaton family, the Nova Scotia Eatons, from which Cyrus Eaton came. On his mother’s side, Cyrus was a descendant of the McPhersons, United Empire Loyalists from Rhode Island, who had chosen to leave New England after the American Revolution in favour of an uncertain future in the far-flung English colony. They first landed at the colony of Sherburne, Nova Scotia. This colony failed, but in return for their loyalty to the crown, the McPhersons were eventually given a grant of farmland in Cumberland County, Nova Scotia.

Cyrus’s parents, Joseph Howe and Mary (McPherson) Eaton, raised their large family on a moderately prosperous farm near Pugwash Junction, Nova Scotia. Joseph also had lumber holdings, and ran a rural general store and post office in which Cyrus first showed his aptitude for business, becoming a dependable assistant by age ten. The Eatons were devout Baptists, and in the absence of a proper church building in the area, often hosted religious services for friends and neighbours in their rural home. Surrounded by such wholesome influences, the Eaton children grew up to be both pious and industrious. Cyrus in particular showed himself to be a bright, serious student, of precocious understanding, and his mother hoped to see him grow up to become a minister of the Baptist faith. Cyrus was at first inclined to fulfil this ambition, for he had a favourite uncle, Charles Aubrey Eaton, who could show him the way. This highly successful man had raised himself out of rural poverty in Nova Scotia, experienced a religious conversion, and become a prominent Baptist preacher in Canada and in the United States. Later, he would go into business, journalism and politics, and eventually became a Republican congressional representative from a district of New Jersey. He would go on to be one of the longest serving Congressmen of his era, and Cyrus's friendship with him lasted until the Congressman’s death in 1953. It had a profound and lasting influence on the course of his life.

Formative years

Education

After finishing what public schooling was available in Pugwash at that time, Cyrus left Nova Scotia at age sixteen for further education at Woodstock College, in Woodstock, Ontario, a preparatory school for the Baptist affiliated McMaster University located in Toronto, Ontario. After graduating, he enrolled as a freshman at McMaster in 1901. Staunchly independent, he declined assistance from his family and worked part-time in a jewelry store to support himself. University records indicate that while at McMaster he showed himself to be an accomplished athlete and a musician in demand, and he was also elected class president of his year. In his studies, he concentrated particularly on philosophy and finance, illustrating a diversity of interests that would endure for a lifetime.

Though affiliated with the Baptist denomination, and intended as a training ground for the Christian ministry, McMaster University was also a coeducational institution founded on liberal educational principles. The school of theology acknowledged the New Criticism, and despite lively internal controversy and dissension on the subject of the fundamentalist approach to the Bible, it planned a curriculum which would graduate well-prepared citizens who had not been sheltered, and were ready and able to engage vigorously with issues of concern to the modern world. While there, Cyrus Eaton received a balanced, modern education in a young and progressive university, and since he was living in the provincial capital, he also frequently took a seat in the visitor's gallery in the Ontario Legislature, profiting from the opportunity to supplement his formal education by observing parliamentary democracy in action.

Influence of Rockefeller

Cyrus traveled down the lakes during his first summer break at McMaster to visit his uncle Charles, who was then leading the flock at the Euclid Avenue Baptist Church in Cleveland, Ohio. Charles Eaton was a popular, gregarious man, known for his frontier humour, who ran an evangelistic style of ministry and devoted sermons to bearding in their dens the rich parishioners of Euclid Avenue, otherwise known at that time as Millionaire’s Row. On the other hand, he spent time on the mean streets of Cleveland, trying to focus a ministry on the material and spiritual needs of poorer members of the urban working class, many of them men like himself from farm backgrounds, who had been dislocated by the social changes wrought by the industrial revolution. During Cyrus's visit, Uncle Charles wangled a dinner invitation for him at Forest Hill, the summer residence of the most well known member of his flock, and probably the richest man in the world at that time, John D. Rockefeller, with whom he frequently golfed on his private golf course. The meeting turned out to be a turning point in Cyrus's life. He impressed his hosts so much with his knowledge and his polite, discrete self-assurance that Rockefeller eventually decided to offer him work as his private secretary. The position not only provided Eaton an opportunity to stay in touch with his beloved uncle during his summer vacations, but it also introduced him to some of the cream of Cleveland society, and gave him an insider's window on the world’s business affairs that would strongly influence his ultimate decision to give up his ambition for the ministry. Later, Eaton would often express great admiration for the infamous Rockefeller, calling him the world’s greatest capitalist. He opined that he could not have had a better tutor for his entry into the rough and tumble world of American business and finance, and wondered aloud how different his life might have been if he had accepted Rockefeller’s offer of a job with Standard Oil in New York, instead of striking out on his own.

After graduating in 1905, and still under the Rockefeller influence, Eaton went to work as a construction supervisor and troubleshooter for one of Rockefeller's utility companies, Eastern Ohio Gas and Power, laying gas mains in Cleveland. During roughly the same period, he functioned for the better part of a year as a lay preacher at the Lakewood Baptist Church, newly built in a suburb west of Cleveland, with a sizeable contribution from John D. Rockefeller; and according to a parochial history of Baptist Church activity in the Cleveland area, “under him, the work advanced well.” The urbane, dignified, young man who had so impressed the Rockefellers they offered him a job on the spot was equally capable of mounting the pulpit and leading the congregation in song and prayer, and the same valuable set of characteristics helped him to move quickly ahead in the ranks in business. High intelligence and an impressive, diplomatic presence made him an ideal negotiator, so he was asked by a syndicate of investors associated with Rockefeller interests to bargain on their behalf for urban utility franchises. The work led him on travels throughout the American mid-west and into the prairie provinces of Canada, where the people he represented were seeking opportunities to market natural gas, a byproduct of the oil well drilling. One of their targets, the young, Canadian city of Brandon, Manitoba, needed a reliable year-round source of power for street lighting because their current supply, from a hydroelectric facility, was stalled each winter when the river froze. However, in October, 1907, on the very the day that Cyrus Eaton finalized arrangements with the mayor of Brandon for a franchise to supply the town with electric power from a steam generated power plant, a financial panic struck. For a brief period, money for American investment was in extremely short supply, and the situation temporarily deprived the syndicate Eaton represented of their borrowing power. The shortlived panic shook their confidence in the future viability of the Canadian venture. The City of Brandon, however, had issued a franchise, and they expected something to be done, so Eaton seized his opportunity to take it over. He enlisted a Canadian partner, obtained financing from a Canadian bank, and they soon had a steam plant built. Within a year, the Brandon Gas and Power Company was generating power to light Brandon's streets, and also producing capital for Eaton’s next ventures. He later sold the Canadian company for a considerable profit.

American and Canadian business career

Eaton had become an investor and an operator in one of the fastest growing industries on the continent. From 1900 through 1920 the number of private electric systems in the U.S. grew from approximately 2,800 to 6,500. There were plenty of opportunities for imaginative entrepreneurs, and Eaton's next big opportunity came to him through the good offices of his father-in-law, Augustus F. House, a distinguished Cleveland physician and banker whose daughter Margaret had become Eaton's wife in 1909. Dr. House had profited, with Eaton's assistance, from the merger of Lakeshore Banking and Trust, a bank he founded, with Cleveland Trust. As a result of this, and because of his success with Brandon Gas and Power, House introduced his son-in-law to an important Cleveland utility and traction magnate, George Taylor Bishop. Bishop took a personal liking to Cyrus, and invited him to join his office to learn more about the 'art' of financing electric utilities. Over the years, as he worked with Bishop on consolidations of utility holdings, the 'Eaton interests’ grew into controlling stakes in a significant number of utility operating companies. The Eatons began a family with the birth of a daughter in 1909, the first of seven children, and in 1912, the year Cyrus Eaton became an American citizen, he and Bishop incorporated one of the country's first utility holding companies, Continental Gas and Electric, of the state of Delaware. The Eatons used part of their growing fortune to build a mansion on Euclid Avenue, and in keeping with the lifestyle cultivated by rich people of his era, Cyrus carried on an important attachment to the country by purchasing a country estate near his friend Bishop's, with a one hundred and fifty year old farmhouse and over 300 acres of farmland in Northfield, Ohio, south of Cleveland. He rode to hounds with the Summit Hunt Club, started an important herd of shorthorn cattle, and in 1916 became a partner in Otis and Company, a major investment banking firm with head office in Cleveland and branches in New York and Chicago. Cyrus Eaton seemed to have melded completely into the American way of life, living a productive, secure, low-key existence centered on family, business affairs and church.

Under the Eaton/Bishop management, Continental Gas and Electric grew eventually to be one of the largest utility holding companies in North America. But its success marked just the beginning of Eaton's ambitious plans. At that time he was most active, Cleveland was the center of the wealthiest industrial area in North America, yet it was, he felt, unfortunate that the financiers of Wall Street in New York controlled so much of the industrial decision making at the local level in Cleveland, and throughout the region. Its development would be in better hands if local financiers such as himself, who understood and could better respond to the region's needs, had a greater degree of input and control. The booming post war American economy was just the opportunity midwesterners needed to wrest control from New York. Increasing levels of affluence after the First World War, and the resulting success of American industry created the exuberant bull markets of the 1920’s, and what was needed were financiers with the vision to lead. The tool he chose for his assault on the fortresses of power was the investment trust.

With hundreds of thousands of new investors turning to American stock markets, an early form of the mutual fund, called the investment trust, was becoming a popular way for investment managers and investment bankers to attract and to absorb new pools of available capital. Investment trusts fed on investors who lacked expertise of their own, and were eager to place their money and confidence in the hands of managers with a reputation for success. The Eaton group certainly had that, and in 1921, Eaton ventured beyond Continental Gas and Electric, the utility holding company he and a group of other investors controlled, to create and sponsor an investment trust with a similar name, Continental Shares Ltd., listed on the New York Stock Exchange. The ultimate design was to use the power vested in him as Chairman of the Board and board member of many important corporations to challenge Wall Street's hegemony and exert his own control over financial decision making in the region.

Under the the utility holding company format, a limited group of wealthy investors usually pooled resources to invest in operating utilities and other utility holding companies they could control and manipulate for their own profit. However, because of a history in America of abusing and mismanaging their prerogatives, from the public point of view, privately held utility company operators and utility holding company managers were facing increased competition from public sector power providers, and as well, the prospect of greater government regulation. Both factors were reducing the attractiveness of these investments in the eyes of the wider public, and promising to hamper their future profitability. The investment trust was founded on a wider mandate. It raised capital from investors no longer content with clipping railroad coupons or cashing predictable utilities dividend checks. It appealed to investors who were willing to risk some of their new affluence on a chance to participate in the booming profitability of the wider American business community in the enlarged postwar economy. It offered shares in a new form of holding company, and it managed that money on behalf of the investors by trading in a diversity of important new industries that would hopefully raise share values and pay dividends. By using 'other people's money,' the organizers and managers of these funds obtained positions of power and control in the market which was out of all proportion to the magnitude of their personal investments. As trusted managers who retained all decision making power, they could engineer stock market coups at minimal risk to their own capital, and derive day-to-day income from management fees. As well, it was usual for the investment bankers who sponsored these trusts to derive income from the banking and management sides. In this case, Eaton used his dominant position as Chairman of the Board of Continental Shares to capture banking business for Otis and Co., his investment bank, to include substantial fees for consulting and for underwriting the sale stock and bond issues.

Cyrus Eaton’s Continental Shares, with its diversified portfolio of stocks in basic industries that stood to profit from the burgeoning auto industry, was at first extremely successful. In 1924, he parlayed its utility holdings derived from Continental Utilities into a major position in the large utility-traction conglomerate, United Light and Power. By 1928, Eaton had begun to carry out the final stage in a campaign to become a dominating force in many of the major links in the auto industry’s chain of supply. In addition to electrical power, his investment trust purchased dominant positions in the Cleveland based paint company, Sherwin-Williams, the world's major supplier of auto coatings, and in Goodyear and Firestone, Ohio based world leaders in the manufacture of tires and rubber. His next major target was steel, and he was particularly interested in controlling companies that produced the strong, light steels used in auto manufacture. These plans led to a series of rapid purchases and mergers of several medium sized steel companies in Ohio and Pennsylvania, culminating in the merger that formed a new company Republic Steel, at the time of its founding the third largest steel producer in the United States.

The stock market crash of the 1930s caused Eaton a major, though temporary, setback, and the conditions that prevailed during the slow recovery of his and America's fortunes forced him to scale back his financial and industrial ambitions permanently. As well, it was during this period of the late 1920s and early 1930s that Eaton first gained a broad and well deserved reputation in the English-speaking world for financial daring and for controversial decision making. In later years he would skillfully turn this reputation from celebrity to notoriety, and use it to assist him in focusing public attention on important issues, such as détente with Russia, nuclear disarmament and the dangers inherent in American militarism. Not for nothing had he studied philosophy and cultivated the classics, and at various times in his later life he strode confidently into alien arenas of public debate where he displayed courage, conviction, knowledge of important issues and talents for leadership, on an impressive scale.

Eaton's many financial interests included organizing the mergers that formed Republic Steel Corporation and the Chessie System. He assumed the helm of the Chesapeake and Ohio Railway (C&O) in the mid-1950s when his colleague Robert Ralph Young of the Alleghany Corporation had to step down from the C&O to make a bid for the New York Central Railroad. Once the C&O had obtained control of the Baltimore & Ohio, and the Chessie System had been created, he largely retired to take care of his philanthropic interests.

Later years

Eaton gained visibility outside the business community in the 1950s, when he became an ardent critic of the United States foreign and military policies during the Cold War. He became particularly controversial for engaging in personal diplomacy between the United States and communist countries in an effort to calm the waters and to promote friendlier relations and more peaceful trade between ideologically opposed segments of the world’s economy.

Eaton also gave personal and financial support to efforts to limit the nuclear arms race, and was involved in founding and financing the original Pugwash Conferences on Science and World Affairs, which took their name from Eaton’s hometown of Pugwash, Nova Scotia where the first meeting was held in July 1957 at his summer estate overlooking the Northumberland Strait.

The Pugwash Conferences were ultimately awarded the Nobel Peace Prize in 1995. Eaton's 1950s efforts at rapprochement with the Soviet Union won him the 1960 Lenin Peace Prize. He was dubbed "the Kremlin's favorite capitalist".

Eaton died at his home in Northfield, Ohio at age 95.

In 1994, a residential developer bought Eaton's estate in Sagamore Hills, Ohio, a village 15 miles (24 km) southeast of Cleveland, Ohio and 20 miles (32 km) north of Akron, Ohio. The Eaton Estate had an area measuring approximately 200 acres (0.81 km²) and the developer constructed over 300 houses ranging in prices of $250,000 to about $500,000. Street names in the development called "Eaton Estates" include Pugwash, McMaster, and Republic as an homage to Cyrus Eaton.

The elementary school in Pugwash in named Cyrus Eaton Elementary School in honor of him.

Lee Eaton Elementary School in Northfield, Ohio was named after the daughter (Lee) of a local Industrialist, Cyrus Eaton. His daughter was an invalid all her life, and died at the age of 41, never having had the opportunity to see the school completed. It was Eaton, committed to life-long learning, who donated 12 acres of land for the school, and according to Carl Coffeen, Superintendent of Summit County Schools (1955), “…this was the first time he had known of a citizen making such a donation”. Thus, the school was named, Lee Eaton. In his dedication speech Mr. Eaton stated, “I hope the children of this school will make the most of their opportunity to know the best of both the country and the city”.

Existing Family

Cyrus Eaton may have left a legacy in many parts of the economical and political world, but he also left a number descendants. Augustus Farlee, a daughter of his, had 2 children: Stephen Eaton Hume, and David Hume, both born in the mid to late 1940's. Stephen Hume lived in the United States for his childhood, attending military and boarding schools. David also lived in the US, but attended different schools than his brother. When they grew up, David remained in the states and had 4 children. Years later, he moved to Colombia and added 3 more branches to the family tree: Katherine, Carley, and Alexander. Stephen, on the other hand, moved to Canada, and had 2 daughters: Natalie Inez Eaton Hume, and Georgia Farlee Eaton Hume.

External links

• Bio at the Cyrus Eaton Foundation