Bell Telephone Company

Alexander Graham Bell (inventor and the company's 'Chief Electrician'): 1,497 shares

Thomas Sanders (financier and treasurer): 1,497 shares

Thomas Watson (head of operations, and its first full-time employee): 499 shares

The Bell Telephone Company was incorporated in Massachusetts on July 30, 1878, with 4,500 shares of stock. It then merged with the New England Telephone and Telegraph Company (incorporated on February 12, 1878) to form the National Bell Telephone Company (incorporated on March 13, 1879, with 7,280 shares, later increased to 8,500 shares in May 1880). A little over a year later it was reorganized to become the American Bell Telephone Company (incorporated on April 17, 1880, with 73,500 shares, which included 14,000 trustee shares held by National Bell Telephone). American Bell's outstanding stock rose to 258,863 shares by May 1900.

Two days after the company's formation, on July 11, 1877, Bell married Hubbard's daughter Mabel Gardiner Hubbard, and made a wedding gift of 1,487 shares of his allotment to his new wife, keeping only 10 shares for himself. Bell and his wife left not long after for a tour of Europe that lasted over a year, during which time Mabel left her shares with her father under a power of attorney, allowing him to become the new company's de facto president.

Both Hubbard's and Sanders' roles in the newly born company were pivotal to its early survival and its eventual growth to become a corporate giant. Hubbard's very early structuring of its telephone service by leasing, instead of selling telephones, was critical to its success. He based his decision on the previous legal work he performed for the Gordon McKay Shoe Machinery Company, where its shoe sewing machines were leased, not sold, and royalties also had to be paid to the Gordon McKay Company based on the numbers of shoes produced. Hubbard insisted that leasing was the better option, even if it significantly raised the need for initial capital expenses. Sanders for his part, a wealthy leather merchant, provided most of the financing for both Bell's research and the young company, eventually amounting to expenditures of some $110,000 "before he received any reimbursement" by the sale of his shares.

Not long after the National Bell Telephone Company was established, it required substantial new capital in order to maintain its majority share ownership of its affiliate telephone companies and to provide further funds for expansion of its overall telephone infrastructure. On April 17, 1880, National Bell was split into the American Bell Telephone Company, led by Theodore Vail as general manager, and with the International Bell Telephone Company (IBTC) as a holding company for its international subsidiaries. IBTC's first non-North American subsidiary was the Bell Telephone Manufacturing Company (BTM), established by Hubbard at Antwerp, Belgium, in 1882. The Bell System's Bell Telephone Company of Canada subsidiary, wholly owned by the National Bell, had been established two years earlier.

Alexander Graham Bell's ten shares of Bell Telephone Company stock were later converted into a single share of the American Bell Telephone Company, and still later into two shares of the American Telephone and Telegraph Company. AT&T President Frederick Fish later returned Bell's single American Bell Telephone Company share to him as a memento after it had been converted and canceled.

Of the Bell Company's original shareholders, Thomas Watson resigned his position in 1881 with his shares making him a millionaire, thereafter living a colorful life as a Shakespearean actor and later as a shipyard owner and ship builder—always retaining his friendship with Bell. Thomas Sanders, whose entire personal fortune was virtually depleted during the Bell Telephone's first formative years (until a historic settlement was reached with Bell's fierce competitor Western Union on November 10, 1879), quickly sold his Bell shares for almost $1,000,000 but then lost most of his wealth with an investment in a Colorado gold mine. He also remained a confidant of Bell, who later helped ensure the welfare of Sanders' deaf son in his adulthood.

Hubbard was satisfied to leave the head of the Bell Company to another major investor, William Forbes, who was brought into the company as its president and as a member of its board of directors in late 1878. Under Forbes' leadership, a new executive committee was created at its corporate level to reorganize and run the overall company with professional management. The company was also recapitalized, with Vail continuing as its head of operations. After leaving the offices of what became the American Bell Telephone Company, Hubbard created the National Geographic Society as its president, with Bell succeeding him the next year.

Ownership of American Bell was transferred to its own subsidiary, American Telephone & Telegraph Company (AT&T Company) on the second to last day of 1899. AT&T had been incorporated on April 17, 1880, as American Bell's "long lines" division to handle its long-distance telecommunications. On January 1, 1900, AT&T, a publicly traded corporation, owned the major assets of American Bell and thus became the head of the Bell System. By December 31, 1900, it had 569,901 shares of stock outstanding, which rose to 18,662,275 shares at the close of 1935.

A year earlier in 1880 the management of American Bell had created what would become AT&T Long Lines. The project was the first of its kind to create a nationwide long-distance network with a commercially viable cost-structure. The project was incorporated in New York State as a separate company named American Telephone and Telegraph Company on March 3, 1885. Starting from New York City, its long-distance telephone network reached Chicago, Illinois, in 1892, with its multitudes of local exchanges continuing to stretch further and further yearly, eventually creating a continent-wide telephone system.

On December 30, 1899, the assets of American Bell were transferred into its subsidiary American Telephone and Telegraph Company (formerly only the long lines company); this was because Massachusetts corporate laws were very restrictive, and limited capitalization to $10 million, forestalling American Bell's further growth. With this assets transfer on December 30, 1899, AT&T became the parent of both American Bell and the Bell System.

John Elbridge Hudson joined Bell Telephone as counsel in 1880 and served as president from 1889 to 1900.