THE EXPERT WITNESS: A growth toward stewardship


By John F. Sase, Ph.D.
Gerard J. Senick,
senior editor
Julie Gale Sase, copyeditor

“Those who cannot remember the past are condemned to repeat it”
—George Santayana (1863-1952), Spanish-American philosopher

“The cultivation and expansion of needs is the antithesis of wisdom. It is also the antithesis of freedom and peace. Every increase of needs tends to increase one’s dependence on outside forces over which one cannot have control, and therefore increases existential fear. Only by a reduction of needs can one promote a genuine reduction in those tensions which are the ultimate causes of strife and war.”
—E(rnst) F(riedrich) Schumacher (1911-77), German-born English economist and author, “Small Is Beautiful: A Study of Economics as if People Mattered” (Harper Collins, 1974)

Last month, we returned to a higher plane and discussed the basis of sound human behavior that is applicable to personal relationships, to matters of law, to the governance of our country, and to the leadership of our global political-economy. This month, we will maintain a view from the bridge of Spaceship Earth and begin to discuss the matter of Stewardship—a matter both simple and complex—on both a global and a local level. We plan on returning to this subject in future columns.

Throughout human history, the matter of wealth has served as a fulcrum for solidifying basic human needs in the material world as well as a platform for attaining the loftier planes of human thought that helps in the preservation and advancement of our species. In this month’s column, we will explore matters that have occupied my thoughts since I (Dr. Sase) was a young child. Stewardship is a principle of ethics that focuses on the responsible management of resources. We can apply this polymath concept to many aspects of our lives, such as Economics, Theology, the environment, health, and property. Our discussion will be grounded in events of which some of us became aware as children, teens, and young adults. With the help of E.F. Schumacher, who provides one of our opening quotes, we will raise the discussion from a local to a global level as we address developments that have occurred over the past sixty years.

Memories and Studies at Local Levels

During the 1950s, Detroit was experiencing a global post-war automotive boom that resulted in surplus profits that fueled a generational shift that occured on many fronts. One of these fronts was the transfer in stewardship of wealth. Specifically, I recall that the equity-holders of numerous companies were concerned with what would happen to their estates when they passed from this mortal coil. In respect to closely held smaller corporations and non-incorporated firms, the process tended to be simpler than for those holding stock in larger firms. At that time, most of the equity in Fortune 500 companies was held by families or small groups of minority shareholders. Many of the blocks that were held dated back to the origin of these firms in the first quarter of the twentieth century or earlier. In some cases, sizeable blocks of stock were passed to the following generation of a family as a whole. Other blocks were divided among a large number of grandchildren through generation-skipping (aka Dynasty) trusts. In more creative situations, five or six smaller blocks were assembled into larger trusts that could skip a generation of inheritance taxes. For the bequestors, this approach allowed them to maintain control of their individual blocks and to enjoy the dividend income throughout the remainder of their lives. As the surviving bequestors often were the surviving spouses of males who had started these companies, these trusts were generally referred to as Dowager Trusts.

For the receivers, the line of succession for these holdings would be established early in life. The potential successors would be chosen at an early age, often below the age of ten. As a result, the details of these trusts likely would be incomprehensible to these individuals at such a young age. Following tradition, only one final child would be chosen through a sorting process not unlike a Spelling Bee. This tradition was intended to prevent potential infighting and diminishment of the voting power of the block. Minor issues included the avoidance of unnecessary legal expense through duplication of volumes of paperwork that a child would witness being signed by a parent or guardian at a law firm.

As the bequestors came to the end of their lives, the generated dividends would be absorbed by the trust. However, future dividends occasionally would remain within the trust rather than being disbursed to the one(s) holding title to it. In the case of such a trust, all proceeds would be reinvested. In respect to some of our largest corporations a half-century ago, there often would be no clear majority-vote solely held by one such trust. Rather, a majority-vote may have depended upon the agreement of at least two blocks. For example, one trust may be holding 23% of the equity and another holding 28%. Neither by itself could exert majority control. However, the two combined would carry the weight of 51%.

Though these large blocks could have increased their percentile holdings through the purchase of additional shares, this rarely has been an advisable investment strategy since it compounds the risk associated with the decision. For decades, the advisable strategy has been one of diversification. Therefore, dividends earned from the primary equity-holding would be spread across a large number of investment opportunities. These opportunities would generate income streams of their own back to the respective trust. As a result, this sort of diversification strategy provides a safeguard in the case of corporate bankruptcy. If a Stockholder’s Agreement is in place before a Chapter 11 Bankruptcy is commenced, stockholders of the company may have some priority in purchasing stock at a reduced price in the new company created through reorganization. If such an agreement does not exist or does not pass muster in Federal Court, the trusts still may acquire stock in the reorganized company on the open market. A prime directive from the beneficiary of a trust would need to be in place in order to allow a Trust Management company to embark on such a purchasing spree. However, some tri-generational agreements among the beneficiaries and trustees have been presumed to exist.


The formal agreement may have grown out of “folkspeak” such as “Grandpa says not to touch a penny of it [the wealth]. Sit on it in case the company ever goes belly-up. Then you have enough money to buy the company back.” Perhaps a conversation ensued within the family of William A. Davidson, co-founder of Harley-Davidson (H-D) with his grandson “Willie G.,” who guided the design end of the motorcycle company for nearly half a century. After bowling conglomerate AMF purchased H-D in 1969, it became just a cog in the AMF conglomerate. The finances of H-D deteriorated and the company faced closure until Willie G. joined with a dozen other Harley executives to repurchase the firm in 1981.

A Hypothetical Situation?

How can we maintain ethical stewardship when the financial interconnectivity of companies become impersonal and beyond the vision of individual humans who hold title only through self-perpetuating trusts. The term of “the 1%” has evolved into a social meme for a supposed group of human beings. Perhaps this 1% is not a group of people. We need to ask ourselves whether or not the 1% is merely the beast, the golden calf that we as humans have created in the form of financial entities that have taken on a life and power of their own as they have grown exponentially in size and power while becoming increasingly unaccountable to national governments.

Let us consider a “perhapsly” hypothetical example close to home by taking a look at General Motors Company. In this respect, a Dowager Trust that included half a dozen blocks of stock was established in the mid-1950s, the era in which the DuPont Corporation began its corporate liquidation of General Motors stock following the decision handed down by the U.S. Supreme Court (see, United States v. E. I. du Pont de Nemours & Co., 353 U.S. 586 [1957]). The DuPont Corporation began investing in General Motors in 1917, after the first GM bankruptcy the year before. DuPont invested in 28.7% of GM equity in 1919 but reduced its holdings to 23% during the Great Depression. Nevertheless, GM was buying 68 % of its paint and 38 % of its fabric from DuPont by 1947, which led the U.S. government to file an antitrust suit against DuPont. Meanwhile, the Dowager block held about 28% of the stock in old GM.

To make our point, let us pick a couple of large trust-management companies through a search of We want ones that might handle projects such as the so-called Dowager Trust and similar large entities. For confidentiality, we will contract, invert, and rotate the names so that our code-key is MU, the name of a mythical continent or a bovine sound. First, let us select Trust “M.” Founded more than a century ago, M is one of the largest fiduciary-asset managers in the United States. Second, let us use Trust “U,” a smaller but much older company that provides services similar to that of company M.

Given the General Motors Chapter 11 Bankruptcy of 2009, let us say that we directed trust managers of M and U to buy 23% and 28% of the New General Motors stock for a couple of trust funds. Let us assume that each fund held approximately the same amount of old company stock from the time of origin to the date of the bankruptcy filing. We can “pretend” that each trust generally was left relatively dormant for decades in order to allow for the accumulation of adequate funds to weather the bankruptcy losses and to make the new equity investment. While in dormancy, let us say that some prime directive prevented anyone (except for the two management companies that would collect a few mils—one one-hundreth of one percent—in fees) either from drawing income from the trusts or dividing the two trusts into numerous smaller pieces for distribution. The underlying logic of this prime directive is shown in two ways. First, if the principal beneficiary were to draw a living from one of the trusts, many other individuals who were involved during the formative stage of these trusts may protest in order to do the same. Second, if the trusts had been split apart into more pieces than Voldemort’s soul, there may not be sufficient funds to repurchase company equity. These local holdings would benefit regional commonwealths through their local economic-impact multipliers. These multipliers measure the increase to local income and wealth that occurs through sequential rounds of spending of income that is generated by the equity. This economic principle works like water cascading over the multiple tiers of a “porcelain fountain” (see the sketch featuring Fred Armisen, Scarlett Johansson, and Ryan Reynolds as the proprietary family of Mike’s Fountainry on Saturday Night Live in 2009:

This sounds like a simple matter of Wealth Stewardship. Or does it? What happened to the remaining equity and earnings made over half a century? The necessary diversity in investment would cause these two trusts to grow exponentially. During their decades-long growth phases, where did all of the additional capital migrate? It was the responsibility of fund managers and their teams to study their ticker-tapes or computer screens in order to select opportunities that would comply with the primary fiduciary law. This law requires managers to maximize the profit of these funds, subject to minimizing the risk to the asset owners, hopefully. In this case, the owners would be the beneficiaries of the funds. If we stop to think about it, this thought opens up a portal of near-nightmare proportions. Also, this common strategy may run contrary to goals that are important to many of us, such as the maintenance of sufficient affluence through a sustainable economy for all. To what shadowy interests around the world has this sum of exponentially growing capital migrated? Will that which these funds have financed inadvertently return to haunt us or even to destroy us?

Today, we have to wonder about these exponentially evolved trusts that currently exist as a small group of legal entities—paper monsters—that do not breath, think, or feel on their own. Should we allow them to have dominion over flesh and blood humans and the rest of nature? If left unrestrained, will these multiple entities merge into a single colossus that can only be obeyed or destroyed? These are questions that world thinkers have been asking and writing about for more than a century.

Small May Once Again Be Beautiful

E. F. Schumacher and others have addressed these world challenges, which we continue to face to the present day. In his book “Small Is Beautiful,” Schumacher presents a polymath mixture of Politics, Philosophy, Environmentalism, and Economics that focus on these same issues. He challenges the intoxication of the twentieth century through what he describes as “gigantism.” For many decades, our methods of mass production allowed us to manufacture greater quantities of less-expensive goods than ever before. In addition, our mass media and culture opened up new opportunities to reach an increasingly wider audience. These market and media forces have led us both to more expansive exchanges and to larger political entities. Schumacher believes that the scale of these markets and entities has brought us to the dehumanization of both people and the economic systems that order our lives. It is important to note that he published his words at the formative cusp of the European Economic Union in 1975.

Have we improved or gotten worse in the past 42 years of life on this planet? One of Schumacher’s recurrent themes has been how modern organizations strip the satisfaction out of work and make workers nothing more than an anonymous cog in a huge machine. Though craft skills experienced a resurgence in the late 1960s and again in more recent years, they no longer carry the importance that they once had. Small niche-brands such as Ben & Jerry’s Ice Cream made a stand for a while by attempting to build upon the “small-is-beautiful” economic model of enterprise before getting absorbed by large organizations. Today, craft brewers and craft establishments such as Shinola appear to be doing well in the United States and Europe. How long will this last? How long before Shinola goes to S*** rather than S*** to Shinola?

Schumacher also reminds us that the quality of human relationships suffered fifty years ago. At that time, he saw that our society expected human beings to serve as adjuncts to machines on the production line. This consciousness reflects the plight of the subterranean workers in “Metropolis,” the classic German science-fiction film by director Fritz Lang and author/screenwriter Thea von Harbou (UFA, 1927). Similarly, our economic system drifts back and forth into this dehumanization in a world in which a few persons make decisions by using the criteria of profitability rather than that of human and environmental needs (insert name here). Even these decision-making managers are subject to our corporate laws of primary fiduciary responsibility. We live in a time in which much of our lower-skill manufacturing work has migrated to elsewhere in the world. However, large-scale retailing has kept the story alive in the United States.

In short, Schumacher raises many socio-economic issues with which we continue to wrestle. He questions unbridled economic growth that challenges the constraints of natural resources on that development. Schumacher reminds us that human happiness is not achieved through material wealth. Many of his main influencers, who include 13th-century Philosopher and Theologian Thomas Aquinas, Indian-independence leader Mahatma Gandhi, and American Theologian and Mystic Thomas Merton, have stated the same belief. In underscoring the preceding insight, Schumacher warns us about increasing levels of mental illness, including depression, anxiety, stress, and panic attacks—exact issues with which we are dealing in our current decade. In summary, the above issues are those that Schumacher feared but answered in Small Is Beautiful. He warns us that we must go back to human needs and relationships because it is from these essentials that the ethical response of Stewardship springs.

What is the takeaway for attorneys and other scholars? In order to get a better grasp on Stewardship, we need to rethink much of our human philosophy and other beliefs upon which our laws are based. Only when we do that can we adequately review the laws that relate to economic, social, and political activity. Such a review will provide the basis for adding, deleting, and rewriting our laws as needed.
Dr. John F. Sase has taught Economics for thirty-six years and has practiced Forensic and Investigative Economics since the early 1990s. He earned a combined Masters in Economics and an MBA at the University of Detroit, and a Ph.D. in Economics at Wayne State University. He is a graduate of the University of Detroit Jesuit High School (

Gerard J. Senick is a freelance writer, editor, and musician. He earned his degree in English at the University of Detroit and was a supervisory editor at Gale Research Company (now Cengage) for over twenty years. Currently, he edits books for publication (

Julie G. Sase is a copyeditor, empath, and parent coach. She earned her degree in English at Marygrove College and her graduate certificate in Parent Coaching from Seattle Pacific University. Ms. Sase coaches clients, writes articles, and copyedits (