An agency problem is defined in economics where an inherent conflict exists in any relationship; notably between business owners (principals) and their employees (agents). The association between Andrew Carnegie and Henry Clay Frick has been described as one of the most important working partnerships in America’s commercial history. It was a relationship that left Carnegie’s reputation as the “working man’s hero” in tatters after the Battle of Homestead. Carnegie had reduced daily working hours from twelve to eight and paid his employees more per hour than his competitors.
Ultimately, disagreement over a $1.00 per ton difference, upon which the workers’ daily rates of pay were based, forced the confrontation at Homestead. As author Lee Standiford explains in Meet You in Hell, “it seems inexplicable that Frick and Carnegie would not have surrendered.” The difference in the agreed tonnage rate would have dented the bottom line by only $20,000; compared to $300,000 in lost profits. At issue must have been Frick’s pride, having a score to settle from bowing down to demands of coke field workers in the mid-1880s. For Carnegie, the union had failed to negotiate comparable rates of pay and conditions in competitor mills where it represented workers. His was an argument against the union and not workers.
Henry Clay Frick’s ascension to the role of chairman of Carnegie Steel followed a series of events including the death of Andrew Carnegie’s brother, the death of the company’s most able superintendent, and the impending retirement of a seminal business partner, whom the Homestead mill was jointly named. Frick’s chairmanship began with consolidating the Carnegie mills and partnerships under a single corporate structure with nineteen partners and recapitalizing Carnegie Steel from ten to twenty-five million dollars. Frick’s share of the consolidated businesses was elevated from five to eleven percent; and the difference to be paid out of profits as was Carnegie’s preference for rewarding talented senior employees.
From the start, Frick was not an employee who worked his way through the ranks to become chairman as his successor, Charles Schwab, would be. Frick, like Carnegie, had risen from poverty to be a successful businessman in his own right, attracting the nickname “The Coke King” for supplying coking coal to the steel mills. Andrew Carnegie did not seek control of the supply chain for steel through backward, sideway, and forward integration to the extent that Rockefeller did with oil. By several accounts, Carnegie counselled Frick out of selling his coke processing plants. Despite this, Frick chose to sell a majority interest to Carnegie.
Billionaires think of themselves as superior identifiers of people talent. They are kingmakers. Unlike Rockefeller, whose management team largely comprised former owners of businesses acquired by the oil titan, Carnegie nurtured his most talented employees and rewarded them with equity stakes. Carnegie’s approach, with contempt for hereditary wealth, was different from that of railroad baron Cornelius Vanderbilt who principally selected his executive talent from his sons-in-law. By contrast, J Pierpont Morgan, a third-generation banker earned a reputation for fatiguing his workers to the point of death by exhaustion.
 Les Standiford. Meet You in Hell: Andrew Carnegie, Henry Clay Frick, and the Bitter Partnership that Transformed America. New York: Three Rivers Press, 2006, 117.
 Lee Standiford. Meet You in Hell: Andrew Carnegie, Henry Clay Frick, and the Bitter Partnership that Transformed America. New York: Three Rivers Press, 2006, 228.
 Lee Standiford. Meet You in Hell: Andrew Carnegie, Henry Clay Frick, and the Bitter Partnership that Transformed America. New York: Three Rivers Press, 2006, 111.