Profiles In American Enterpris

This essay has a total of 3208 words and 14 pages.

Profiles In American Enterpris


Profiles in American Enterprise
A.G. Edwards Inc.

The industry for securities is undoubtedly an exciting and fast paced
industry. This means that brokerage firms such as A.G. Edwards and Sons must always be
watching the stock prices on every stock in the market so that they can give their clients
maximum profit. When A.G. Edwards and Sons' clients do well then in turn so does the
brokerage firm. A.G. Edwards Inc. is not the biggest corporations in America, but yet it
is still a very large corporation and has great importance in the industry for which it
participates. This paper will give an in depth explanation about how A.G. Edwards
functions as a corporation.

Along with competition from the government, banks and other brokerage
firms there is also probably the biggest factor involved of interest
rates. Interest rates are indirectly proportional to the activity in
the stock market. This means that when the interest rates fall the
market for securities becomes active. This is due to the fact that
people want the highest yield on there money and when interest rates are low, investing
money into a bank would yield less money then it would have before at a higher interest
rate. So people tend to want to put there money into something that will give them a
higher yield and stocks are just that. An example of this inversely proportional
relationship is always being demonstrated and was demonstrated in the past few years. At
the end of 1992 to the beginning of 1993 the volume in most businesses was at record
levels obtaining a pre-tax net income for the whole industry of 9.1 billion dollars
setting a new record for the second year in a row (Hoover's Company & Industry Database,
1993, p. 1 (Hoover, 1993,p.1)). This trend continued when in the beginning half of 1993
offerings (new business for the company) exceeded those of 1992 (Hoover,1993, p. 2).
Examples of this are as follows; more than 700 billion dollars of debt was issued in 1992
and then in the first half of 1993 an-other 440 billion dollars of debt was issued
(Hoover, 1993, p. 2). More than half of this debt was due to asset-backed debt such as
credit cards and other charges made to credit (Hoover, 1993, p. 2). These debts were
included because the debts were more or less sold to banks and other money lending
institutions who were more willing to take the risk for the high

interest rate.
This drop in interest rates did wonders for the brokerage firms involved and also
corporations that had acquired debt over the years. The fall of interest rates was great
for the brokerage firms because of the increase in business with the public's desire to
invest. So the

corporations used it to issue off more stock to the public to pay off
their debts (Hoover, 1993, p. 2). As if interest rates didn't have enough effect on
brokerage firms, there is also the heavy competition that was involved. This competition
is not only from other top brokerage firms such as Merrill Lynch, Morgan Stanley,
Primerica (Smith Barney Shearson), Salomon, and Goldman Sachs, but there is also
competition from big banks and securities over seas. Banks have a number of ways to
compete with security firms, but the most prevalent and direct is through mutual funds.
Since the late 1980's banks have been aggressively competing with mutual fund sponsors by
issuing there own mutual funds to the public (Hoover, 1993, p. 3). Mutual funds that are
issued by banks are now the fastest growing part of the mutual fund industry, with 10.6
percent of total assets and 30

percent of new sales (Hoover, 1993, p. 3). There has just recently been a large amount of
compe-tition from markets overseas and this

competition continues to increase. There are a few theories as to what
has caused so many U.S. investors to invest in foreign markets. It is
supposed that it is either individual investors who want to further
their portfolio or in-vesting in foreign markets to try and avoid
interest rates and changes in currency (Hoover, 1993, p. 4). The
investment in foreign markets has also been attributed to technology and the fact that up
to date information can be obtained instantly from any place in the world (Hoover, 1993,
p. 4). But whatever has caused it global securities have skyrocketed. Before the
organization and structure of the company a brief history and explana-tion of the company
will be discussed. A.G. Edwards & Sons was founded in 1887 by Benjamin Franklin Edwards
making A.G. Edwards & Son the first St. Louis brokerage to handle trades for the local
banks on the New York Stock Exchange (Flagg, 1994, p. 56). Then three years later
Benjamin's younger brother joined the company changing the name to read A.G. Edwards &
Sons (Flagg, 1994, p. 56). In 1898 Edwards bought a

seat on the NYSE and then in 1900 opened its first office in New York
(Flagg, 1994, p. 56). In 1925 Benjamin's son joined the team and later
became a managing partner (Flagg, 1994, p. 56). One of A.G. Edwards &
Sons greatest accomplishments in the past was the fact that on Black
Thursday the single most largest lost was 5,000 dollars out of more than one million
dollars (Flagg, 1994, p. 56). This well managed event

proved that A.G. Edwards had what it took back then to make it in the
stock brokerage industry. Later down the line A.G. Edwards & Sons
formed a type of mother company entitled A.G. Edwards Inc. which now
oversees many other businesses. To this day the company still displays
these similar types of skills and that is why the industry has continued to excel. Despite
the fact that most people haven't heard of A.G. Edwards Inc., it is actually quite a large
company. The corporation is described as a "holding company (Compact Disclosure, 1996,p. 1
(CD, 1996, p.1))." The corporation contains many subsidiaries which are the following:
A.G. Edwards & Sons, Inc., Ceres Investment Co., Indianapolis Historic Partners, AGE
Commodity Clearing Corp., A.G. Edwards Life Insurance Co., Edwards Development Corp., A.G.
Edwards Trust Co., A.G. Edwards Asset Performance Monitor, Inc., A.G.E. Properties, Inc.,
A.G.E. Reality Corp., A.G.E. Redevelopment Corp., Gull-Age Capital Group, Inc., AGE
Investments, Inc. (CD, 1996 , p. 12). All of these subsidiaries perform the following
tasks: provide security and commodity brokerage services for individual, corporate and
institutional clients; distribute mutual funds, handle corporate and municipal unit
trusts, tax incentive investments, life insurance and annuities; provide investment
banking services for corporate, governmental and municipal clients; and operate as a
futures commission merchant (CD, 1996, p.1). As you can see A.G. Ed-wards Inc. is indeed a
big company and has tremendous assets. Since A.G. Edwards & Sons is the principle
subsidiary, when discussing the functions of the corporation the func-tions of A.G.
Edwards & Sons will mainly be discussed. A.G. Edwards Inc. is the full name of the
corporation and is based out of St. Louis Missouri. The primary office of the corporation
is One North Jefferson Avenue, St. Louis MO, 63103-2205. The primary SIC Code is 6211
Security Brokers and Dealers. The other two SIC Codes are: 6411 Insurance Agents, Brokers,
and Service; and 6719 Hold-ing Companies, nec (CD, 1996, p. 1). A.G. Edwards Inc.
currently contains 11,279 em-ployees. Since A.G. Edwards Inc. is a corporation it does
contain numerous officers the following is a list of the main officers: Name Age Title
Salary

Edwards, Benjamin F. ,III 64 Chairman of the Board, President, Chief
Executive Officer, Subsidiary Officer $1,512,627
King, Eugene J. 64 Vice President, Subsidiary Officer NA
Proost, Robert L. 58 Vice President, Subsidiary Officer NA
Avis, Robert 64 Vice Chairman of the board, Subsidiary Oficer $1,174,034
Dissett, Robert C. 58 Subsidiary Officer $893,849
Mesker, David W. 64 Treasure, Subsidiary Officer NA
Ewdards, Mary G. 53 Treasure NA
Sisler, David M. 60 Vice President NA

In the subsequent paragraphs the organization of the company will be
discussed. From reading over all of the sources that have been compiled for this paper it
is relevant to me that A.G. Edwards Inc. is a good solid company that treats its customers
well and contains employees who are on top of things. One of the biggest problems that
brokerage firms are facing is the complexity and strict rules and regulations that are now
being pressed upon the firms (1996 Annual Report, 1996, p. 5 (1996 Report, 1996, p. 5)).
Since this is occurring in the industry of securities it is very important for A.G.
Edwards to stay on top of everything in order to keep up with the competition and stay in
business. The following is a quote from A.G. Edwards' annual report: To remain flexible,
offer the services investors need and deliver value for what is charged. A.G. Edwards is
prepared to meet these challenges. We are confident our service-oriented philosophy, along
with our ongoing efforts to provide our in-vestment brokers the latest technology and
support resources, will position us well as we look toward the next century (1996 Report,
1996, p. 5).

From this statement A.G. Edwards declares that they are very prepared
for whatever is ahead of them in the future and will make the sacrifices to stay in
business and continue to have content stock holders, employees and clients. Benjamin
Edwards III, the CEO of the corporation states numerous times that the number one interest
of the corporation is to look out for the customer and always be placing them first. The
Organization of A.G. Edwards Inc. is organized like most other corporations. The
organization of A.G. Edwards Inc. can be considered centralized. As it can be seen from
the preceding chart the

organization is hierarchical. There is Banjamin Edwards who is the
president and resides over all the other positions in the corporation.
The other posi-tions include subsidiary officer, treasure, vice chairman of the board,
vice president, sec-retary, and controller assistant secretary. Under the people in these
positions is the board of directors and then the stock holders. The interesting aspect
about A.G. Edwards Inc. is since A.G. Edwards Inc. is composed of numerous small
corporations each subsidiary has its own board of directors.

Integration in a business sense has been described to me as in the
vertical and hori-zontal senses; vertical integration being defined as
containing a general sense of one or more industries or being a full
service corporation. So basically a corporation that sup-plies numerous services under one
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