Between rationality and responsibility

opinion consideration should be given to whether any additional measures for the workers’ security can be taken.⁹

In this respect the committee mentioned an “[…] arrangement, which exists in the private railroad companies”.¹⁰ What the committee had in mind was most likely pension schemes. However, it did not make any special request in this matter but presupposed that the government would undertake “[…] the measures […], which the workers’ legitimate interests may require”.¹¹

With some exceptions, the position taken by the committee became the decision of Parliament. Although the workers did not persuade the political majority to let the monopoly be directly managed by the state, some acknowledgements concerning the workers’ rights in the future company were made. An important feature of the decision was that redundant tobacco workers were awarded the right of compensation if laid off before 1 June 1920. The compensation issue is further discussed in chapter 10. The following section concentrates on the guidelines that the state set up for the Tobacco Monopoly in general and for its relation with the workers in particular.

state (a charter). The legislation concerning the tobacco industry stipulated that all production of tobacco goods in the country should be run by one company jointly owned by the state and private interests. Import of tobacco goods was still allowed, on the condition that importers paid a licence fee, equivalent to the company’s expenses and profit.¹²

According to the articles of association, the board of the Tobacco Monopoly was to consist of six or eight members, of which the government would appoint half the number, including a chairman and a so-called director on duty (jourhavande direktör), who would be responsible for controlling the administration on a daily basis. Though, the state was the majority owner, the private owners had a significant influence since they appointed the remaining half of the board members, including the managing director.

Between 1915 and 1929 the position of managing director was held by Oscar Wallenberg, a member of the famous Wallenberg family. He had previously been a naval officer and was often called “captain”. His professional background is not without importance for this story since he found some inspiration on how to deal with personnel reductions in the armed forces.

Wallenberg’s closest employee was the technical director Pehr-Olof Holsti, who was an engineer by profession and often assisted Wallenberg in negotiations and was responsible for much of the contacts with the union.

Besides regulating issues such as the taking over of property, tax payments and accounts, the charter included articles of huge relevance for labour management, although the message was somewhat ambiguous.¹³ To put it simply, the company had to strike a balance between rationality and social responsibility. On the one hand, the company board had to manage the business efficiently; all opportunities for cost-saving measures were to be taken. The ultimate purpose of the company was, after all, to deliver incomes to the state.

On the other hand, politicians had made certain concessions to the tobacco workers. The charter stipulated that the company: “[…] as far as possible provide employment for those persons who otherwise would be entitled to compensation […]”.¹⁴ As will be seen in chapter 10, the employment protection concerned workers that had been steadily employed in the industry before

12 af Trolle 1965, pp 22-23.

13 The charter is reproduced in Minnesskrift utgiven med anledning av Svenska Tobaksmonopolets tjugofemåriga verksamhet den 1 juni 1940: 1915-1940, pp 494-499.

14 Swedish: ”[…] i så stor utsträckning som möjligt bereda anställning för personer, som eljest skulle vara ersättningsberättigade […]”.Minnesskrift utgiven med anledning av Svenska Tobaksmonopolets tjugofemåriga verksamhet den 1 juni 1940: 1915-1940, p 497.

nationalization. In addition to the charter, the government gave its board representatives instructions to treat the workers “[…] with that special responsibility which came from the company’s position as the sole employer within the tobacco industry”.¹⁵

Since this instruction left some room for interpretation, the ideological beliefs of the state representatives on the board had some importance. In this respect it should be mentioned that there was always one member of the board belonging to the Social Democratic Party during the whole period of our investigation. Initially, this representative was Gustaf Nilsson, who was a Member of Parliament and had been involved in the committee work on tobacco taxation. Nilsson was very active in issues concerning the workers and often had opinions that differed to those of the board majority. Nilsson was at times invited to the meetings of the union leaders. He died in 1926 and was succeeded by the Member of Parliament and former storage foreman Anders Johan Bärg.¹⁶

The institutional framework surrounding the Tobacco Monopoly changed over time. For example, the politicians put restrictions on the dividends made by the company. In connection with the renewal of the charter in 1924 it was obvious that the Tobacco Monopoly was a highly successful business. At that time the company’s accumulated dividends were greater than the total costs associated with nationalization and over twice the size of the capital invested.

Since high profitability could undermine public confidence in the company, an amendment was made to the charter stipulating that the company should not set prices higher than was required to get fair revenues. Still, not even the following price cuts could squeeze profits and two years later the dividend was limited to 13 and 7 percent for preference and stem shares, respectively, in another amendment to the charter.¹⁷ The high profitability of the Tobacco Monopoly during the period of our investigation is a factor to keep in mind when assessing how the company and the union responded to shortage of work.

After the first prolongation of the charter (in 1924) a public inquiry looked into the administration of the company. This inquiry, which published its final report in 1928,¹⁸ showed that although the Tobacco Monopoly was not expected

15 Swedish: ”[…] med den särskilda hänsyn, som betingades av bolagets ställning såsom ensam arbetsgivare inom tobaksindustrien.” Vasseur 1940, p 346.

16 SM, STM, Styrelsens protokoll, 17 May 1926.

17 af Trolle 1965, pp 74-75. The maximum dividends were later lowered to 5.5 percent (for both stem and preference shares). af Trolle 1965, p 79.

18 Monopolkontrollutredningens betänkande angående anordnandet av den statliga kontrollen av Aktiebolaget Svenska tobaksmonopolets verksamhet 1928.

to be profit-maximizing, there were certainly expectations that the company would minimize costs.

The conclusion was that the administration was satisfactory in some respects, and less so in other respects. For example, the management was praised for its purposeful and successful efforts to mechanize production.¹⁹ Still, the investigators noticed a significant gap between the prices of domestically produced tobacco goods and that of imported ones and suspected that there was potential for further rationalization measures.²⁰ This could, according to the investigators, be accomplished by concentrating production to fewer plants, “of course […] considering the employees legitimate interests”.²¹

The investigators’ were less satisfied with areas such as financing, purchase of inputs, accounting procedures and auditing.²² In general, they thought that the managing director had too much freedom and that the control function of the director of duty had not been working properly. More specifically, the investigators called attention a substantial loan granted by the managing director to a senior employee in the company’s service.

In order to set things right, the investigators proposed to abolish the position of director on duty and to strengthen the auditing. They also wanted to formalize an already existing managerial body.²³ This board of directors was originally a committee for handling purchasing matters and other issues of greater concern for the company. In addition to the managing director, the committee consisted of the director on duty, a director’s assistant and reporting officials. The managing director made decisions at the meetings but the other participants could state differing opinions, which were noted in the minutes. The investigators wanted to regulate the composition of the committee, its purpose and competence. They thought that the chairman of the company board should be the chairman of the committee, thereby restricting the power of the managing

19 Monopolkontrollutredningens betänkande angående anordnandet av den statliga kontrollen av Aktiebolaget Svenska tobaksmonopolets verksamhet 1928, 27, p 198, 215.

20 Monopolkontrollutredningens betänkande angående anordnandet av den statliga kontrollen av Aktiebolaget Svenska tobaksmonopolets verksamhet 1928, p 215.

21 Swedish: ”Vid genomförandet av dylika åtgärder bör givetvis hänsyn tagas till de anställdas befogade intressen.” Monopolkontrollutredningens betänkande angående anordnandet av den statliga kontrollen av Aktiebolaget Svenska tobaksmonopolets verksamhet 1928, p 216.

22 Monopolkontrollutredningens betänkande angående anordnandet av den statliga kontrollen av Aktiebolaget Svenska tobaksmonopolets verksamhet 1928, p 185.

23 Monopolkontrollutredningens betänkande angående anordnandet av den statliga kontrollen av Aktiebolaget Svenska tobaksmonopolets verksamhet 1928, pp 205-206.

director. Besides dealing with purchasing of inputs, pricing and marketing, the investigators explicitly included wage issues in the committee’s area of competence.²⁴ While being quite detailed concerning raw material purchases, the instructions provided no guidance on labour related issues. Nevertheless, it seems like labour related issues were affected by the formalization of the management’s authority since “personnel issues” was a standing item on the board agenda from 1931 onwards. Various types of welfare arrangements for the workers were often treated under this heading.

After the criticism of the investigators, Wallenberg resigned in 1929.²⁵ He was replaced by Gustaf Åkerlindh, who served as managing director until 1939.

The shift in leadership did not mark any radical change with regard to the personnel policies of the company.²⁶ However, it is worth noting that the new managing director, like the managerial body, got formal instructions. The instructions emphasized that he should try to accomplish the greatest possible savings of expenses and the greatest possible rationalization and to constantly be aware of possible ways to concentrate production and introduce labour-saving methods.²⁷ As with the instructions to the board of directors, the instructions to the managing director made no references to the blue-collars.