This section is from the book "Business Finance", by William Henry Lough. Also available from Amazon: Business Finance, A Practical Study of Financial Management in Private Business Concerns.
In forming combinations among competing manufacturing plants, it is not at all unusual to find the initiative coming from the manufacturers themselves. Sometimes they get together and, through a committee or through informal discussion, agree upon a plan of forming a new corporation which shall take in all the previously competing plants. This was the method of forming the leather, cordage, asphalt, and glucose combinations. In a case of this kind, we hardly speak of a "promoter." There is really not much need for his services, inasmuch as the manufacturers meet of their own accord. Another situation exists in some industries where there is keen competition and possibly some ill-feeling, but where one plant or one individual stands out as a recognized leader, either through size, enterprise, personality, or other cause. If a combination is to be formed in an industry where this situation prevails, it may be easily possible for the leading firm or individual to become the promoter. This was true in the case of the salt, malting, and bicycle combinations. It constitutes a somewhat exceptional case when a business executive or a group of executives in one concern actually promote a combination with their rivals. The case is exceptional for the reason that no man easily submits to taking a position of inferiority to a former competitor or to seeing his competitor, starting from the same level as himself, form a combination and take a large block of promoter's profits. It is far easier for a man to come in from outside in order to carry through such a combination.
The customary case of the business executive as a promoter arises in the formation of entirely new enterprises. The man who takes the lead in such enterprises, is commonly the same man who expects to manage them after they are organized. In many respects this is the correct arrangement. It obviates the objection which arises when the promoter forms a combination and then ceases his active connection with it; namely, that the promoter is influenced wholly by his desire to sell stock and float the new enterprise and not at all by consideration of the future requirements of the enterprise. On the other hand, when the future manager of the enterprise himself promotes it, there is the corresponding danger that he will overlook its financial needs while securing his capital - if he is successful in getting it on any terms - by unnecessarily crude and wasteful methods. To be sure, the resulting loss is chiefly in the prospective profits of the promoter himself, so that no one else is likely to object. However, in the interests of men of this type, a few remarks as to points which they should watch in forming their financial plan will not be out of place.