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Weetman Pearson in Mexico and the Emergence of a British Oil Major, 1901–1919

Published online by Cambridge University Press:  14 April 2011

Lisa Bud-Frierman ,
Andrew Godley  and
Judith Wale
Lisa Bud-Frierman
Affiliation:
Visiting research fellow at the Centre for International Business History, University of Reading
Andrew Godley
Affiliation:
Professor of management and director of research at the Centre for Entrepreneurship, Henley Business School, at the University of Reading.
Judith Wale
Affiliation:
Institute of Chartered Accountants in England and Wales and a visiting research fellow at the Centre for International Business History, University of Reading
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Abstract

British overseas investment was a powerful force behind rapid global integration before World War I. Close to half of the total was in the form of foreign direct investment. Weetman Pearson was among the most successful of Britain's overseas-based entrepreneurs of the period. By 1919, the Pearson group of companies had become one of Britain's most valuable industrial enterprises, having diversified from international contracting into the Mexican oil industry. The Pearson group highlights the technical competence of British entrepreneurs in managing large, complex infrastructure projects, capable of navigating their way through various political systems, and adept at turning to whichever organizational form best suited their business interests. These characteristics were far removed from the now outdated stereotype of the incompetent late Victorian entrepreneur.

Type
Articles
Information
Business History Review , Volume 84 , Issue 2: A Special Issue on the Oil Industry , Summer 2010 , pp. 275 - 300
Copyright
Copyright © The President and Fellows of Harvard College 2010

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References

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26 , Connolly, El Contratista, 337–40Google Scholar. Other reasons thought to be in his favor were his allegedly “special relationship” with the president and his competence and skills in labor management ( , Connolly, “Pearson and Public Works,” 57Google Scholar , 60–63); , Spender, Weetman Pearson, 102Google Scholar ; Brown, Jonathan C., Oil and Revolution in Mexico (Berkeley, 1993), 47–53Google Scholar , emphasizes his ability to gain financial resources from London banks. Connolly also speculates about Pearson's role in supporting the Mexican regime by canvassing for British diplomatic support during a border dispute with Guatemala (El Contratista, 340–41). Unlike the case of the Gran Canal contract, there is no extant evidence to explain why he was awarded the Veracruz contract.

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30 Haber, Razo, and , Maurer, Politics of Property Rights, 50Google Scholar (the currency symbol has been omitted, so it is not clear whether it is $US or $Mexican—either way, it was a lot).

31 , Connolly, “Pearson and Public Works,” 62Google Scholar ; Haber, Razo, and , Maurer, Politics of Property Rights, 48Google Scholar , listing some of the politicians who were multiple board members, including Porfirio Jr. (also 197n21) . , Connolly, El Contratista, 12Google Scholar , on Diaz's wife's family benefiting from Pearson's acquisition of large land holdings around Veracruz. In 1895, Pearson also offered seemingly generous terms to a group of politicians who owned bonded warehouses. See Mexican Yearbook, 1908. Our thanks to one of the referees for this reference.

32 , Connolly, “Pearson and Public Works,” 57Google Scholar ; Haber, Razo, and , Maurer, Politics of Property Rights, ch. 6Google Scholar , for their revisionist perspective. Americans had become resentful of Pearson's privileged position with the Díaz regime. Henry Clay Pierce, one of his main rivals (see below), campaigned relentlessly against Pearson in the press. See , Jones, British Oil Industry, 67Google Scholar ; and , Brown, Oil, 54–55, 64, and 173–76Google Scholar. As domestic opposition to the regime grew, so did anti-Pearson sentiments and rumors, which persisted after 1911.

33 Jones, “Pearson.” He was the Liberal MP for Colchester from February 1895 to 1910. According to Jones, his political career was distinguished by his not having made a single speech in the Commons. He joined the House of Lords as Baron Cowdray of Midhurst in July 1910.

34 , Connolly, “Pearson and Public Works,” 58n, and 57Google Scholar on the profit margins for harbor dredging.

35 , Spender, Weetman Pearson, 121–22Google Scholar ; , Young, Member for Mexico, 110Google Scholar. Pearson spent several months in Mexico on the project each year for eight consecutive years. His frequent absences from the House of Commons led to him being nicknamed the “Member for Mexico.”

36 Haber, Razo, and , Maurer, Politics of Property Rights, 190–98Google Scholar ; , Brown, Oil, 9–10Google Scholar , 25– 27. Doheny later reorganized his holdings into the Mexican Petroleum Company.

37 Haber, Razo, and , Maurer, Politics and Property Rights, 199, Table 6.1.Google Scholar

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40 As quoted in , Spender, Weetman Pearson, 149Google Scholar. J. B. Body ran the firm's headquarters in Mexico City and continued as a director of Mexican Eagle after the Shell acquisition.

41 Ibid., 149–50.

42 , Middlemas, Master Builders, 211Google Scholar ; , Spender, Weetman Pearson, 122–23Google Scholar.

43 , Middlemas, Master Builders, 214.Google Scholar

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52 Hannah, “Divorce of Ownership,” states that the listing rule in London was that “in any public issue at least two-thirds of any security should be placed in the hands of the public,” 20. Overseas registered companies with a secondary listing on the London stock exchange could avoid the otherwise mandatory compliance with these regulations.

53 , Middlemas, Master Builders, 219Google Scholar. Ten of the tankers could carry 15,000 tons, the largest oil-tank capacity then available.

54 Citation from , Jones, British Oil Industry, 70Google Scholar. Also See , Jeremy, “Weetman Dickinson Pearson,” 589Google Scholar ; , Reed, “History of S. P & S.,” 7Google Scholar. Pearson had originally planned to market his oil through Bowrings, but then acquired that company and expanded it into Anglo-Mexican.

55 See, for example, Arnold, A. J., “Corporate Financial Disclosures in the U.K., 1900–24,” Accounting Business & Financial History 7, no. 2 (1997): 143–65CrossRefGoogle Scholar , especially, 161, 165. See , Hannah, “Divorce of Ownership,” on comparative patterns of disclosureGoogle Scholar.

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58 , Reed, “History of S. P & S.,” 6Google Scholar , 9, and , Connolly, El Contratista, 12Google Scholar , corroborate the £5 million figure invested in Mexican Eagle before 1919.

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61 , Wardley, “Anatomy of Big Business,” 278, Table 3.Google Scholar

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63 Stock Exchange Official Intelligence, 1920. This exactly follows the methodologies in Wardley, “Anatomy,” and Schmitz, “Largest.”

64 Its ordinary shares were not listed, so this may still conceal some undervaluation. The market value of the preference shares (£2.238 million) has replaced their par value and has been added to the existing reserves in the balance sheet to give the £3.9 million figure in Table 1.

65 In fact, prior to December 1918, S. Pearson's & Son had a market listing, but only the debentures (all of which were repaid by 1918) were quoted in the official list. The Stock Exchange Year Book states repeatedly that “reports are not obtainable, as all the share capital is privately held.” Stock Exchange Official Intelligence, 1919.

66 , Chandler, Scale and Scope, 669.Google Scholar

67 , Chandler, Scale and ScopeGoogle Scholar , Appendix B.1. Chandler simply states that his values were “based on the market value of shares for the years 1919… in the Stock Exchange Daily Official List,” Scale and Scope, 631. He does not explicitly state his valuation methodology. We note that the nonoil companies on his list are from Hannah and Kay, Concentration, whose method we have followed. For the purpose of comparison, note that Haber, Razo, and Maurer, Politics of Property Rights, state that Pearson and Doheny together enjoyed a 61 percent share in 1918 (198n24). If their shares were roughly equal, and Pearson alone had 30 percent, this would represent a firm output of around 26 million barrels out of the 1919 Mexican industry output of 87 million barrels . , Corley, Burmah, appendix, 320–21Google Scholar , states that Burmah's crude-oil production was 6.4 million in 1914, rising to 6.9 million in both 1918 and 1919, and peaking at 7.0 million in 1921.

68 Chandler also omitted several other major overseas-based British industrial enterprises, for example, Rio Tinto and Consolidated Goldfields, the secondand fifth-largest industrial enterprises, respectively, in , Wardley, “Anatomy,” for 1904–1905Google Scholar. Other possible omissions include Sir John Ellerman's shipping business and Wernher Beit and the other “Randlords”. See Rubinstein, W. D., Men of Property: The Very Wealthy in Britain since the Industrial Revolution, 2nd ed. (London, 2006), 60–61Google Scholar , 218–19, for example.

69 Haber, Razo, and , Maurer, Politics of Property Rights, 228–34Google Scholar ; , Connolly, El Contratista, 12Google Scholar.

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72 Katz, Friedrich, The Secret War in Mexico: Europe, the United States, and the Mexican Revolution (Chicago, 1981)Google Scholar ; and Meyer, Lorenzo, Mexico and the United States in the Oil Controversy, 1917–1942 (Austin, 1977)Google Scholar.

73 , Brown, Oil, 55, 173–76.Google Scholar

74 This was complicated by the fact that Pearson was himself a member of the government in 1917: he was appointed by Lloyd George as president of the Air Board in January. He resigned in November 1917.

75 , Read, “History of S. P & S.,” 11–12Google Scholar. Deterding had already constructed the global oligopoly with Jersey Standard and Anglo-Persian by then, so presumably he felt little cause for concern in representing a non-American interest in Mexico.

76 , Jones, British Oil Industry, 65Google Scholar , on “Pearson luck.”

77 Deterding's comment reported in , Reed, “History of S. P & S.,” 11Google Scholar.

78 , Jones, “British Multinationals and British Business,” 202.Google Scholar

79 Ibid. In which case Chandler and Daems seem overly dismissive of holding companies, in “Introduction,” Managerial Hierarchies, 4.