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cash, then the prices paid for property acquired and the amounts paid for services rendered in connection with the promotion of the company.

Strict supervision is maintained to make certain that the property of the corporation is not dissipated, in order that the stockholders may not lose by reason of waste or fraud. Dividends can only be paid out of profits, and at least one-twentieth of the net profit of each year must go into a reserve fund, until this fund equals one-tenth of the capital stock. Fullest publicity is required by the German law. All reports are open to public inspection. Stockholders can secure an examination of the books, if they so desire, and any misrepresentation on the part of officers with the intent to deceive is a criminal offense, punishable by fine and imprisonment.

In England the laws regarding the organization of a corporation are much less strict than in Germany. It is not necessary that all the stock be subscribed or paid in. There is not the same requirement for maintaining a parity between the value of the property and the stock subscriptions, but there must be the fullest publicity in these particulars. A prospectus displaying the affairs of the company in full, must be issued and filed where the public can have access to it. Promoters and directors are held strictly liable for the truthfulness of all statements concerning the business. In preparing the annual statements after the commence

ment of operations, it is customary to engage professional accountants of high standing to examine the books and report upon the condition of the company.

In France, as in England, publicity and strict liability of all officers are the main features of their corporation laws. The amount of capitalization is not limited, but since 1893 the par value of shares has been determined by law. In the case of limited liability companies, the stockholders can appoint auditors to examine the books and transactions of the company, and they may themselves have access to certain of the records such as the balance sheet and list of stockholders fifteen days before the annual meeting.

Now what is the situation in the United States ? It is probable that in our own country the privileges of the corporation are greater than in any country in the world. More serious excesses can be perpetrated and more serious frauds accomplished than anywhere else. There is a wide latitude in the powers which corporations may exercise.

Of course, the laws of the respective states differ widely, but the general tendency is toward laxity in governmental control and latitude in the management by officers of corporations. What is the essential reason for this condition? It is not due to the perversity of our people, but to causes plainly discernible. We must recognize that here in the United States, there is the greatest oppor

tunity for the ready acquisition of wealth on a large scale that has ever existed. We have a vast undeveloped country, between the lesser and the greater ocean, abounding in the treasures of the farm, the forest, and the mine, far in advance of all other countries in the mining of copper, well to the fore in silver and in gold, mining more coal than any other nation, and having the greatest variety of products. The humblest American shares the general desire to acquire wealth just as rapidly as possible. Again, he wishes the country to be developed, because he expects to obtain a part of the wealth so created.

Thus corporations have been allowed a free hand because it was believed they were the readiest agency for the rapid development of these great resources. Such is the real reason for the extensive privileges given to these organizations. The idea has prevailed that no one should stand in the way of any means for increasing the wealth of the country, and that a corporation could develop and make available its resources, where individuals single-handed would fail.

That the time has come when regulation is necessary in a larger degree than before, I think all who have carefully considered this subject must admit. Momentous results will undoubtedly follow the recent decisions of the Supreme Court in the Trust cases, but the disposition of the people upon the subject will be even more important. That will

determine whether the great aggregations of private capital will be tolerated or destroyed. It will determine also whether there will be a growing tendency for the state or some political body to take over these organizations as soon as they acquire a controlling position in any industry. No one can, with any confidence, predict what the outcome will be, but powerful forces-social, political, and economic-all point toward combination, and these forces have never been so potent as in the last twenty years. Even though we disregard the influence of the promoter and the necessity of combination to avoid competition, nevertheless, economic tendencies are powerfully at work, which forecast future operations in industry and commerce on an even larger scale.

CHAPTER III

THE REGULATION OF CORPORATIONS

THE prominence of the corporation in our American business life is becoming more and more manifest each year. This fact brings into clearer light the necessity for more comprehensive and judicious regulation of corporate activities in the interest of the public. Heretofore two factors have made such regulation difficult of enactment. One, as already stated, has been the disposition of the people to give a free hand and generous franchises to corporate managers, under the impression that such a policy would most rapidly promote the development of the country's resources and thereby greatly increase individual wealth. A second reason is found in the necessity for higher profits in many enterprises than are customary in more settled countries. Business ventures are more varied and less certain of profitable return, also rates of interest and wages of labor are higher. Numerous enterprises have been undertaken here which have proved exceedingly successful as well as beneficial to the public, the capital for which could never have been enlisted by the inducement of profits of 5 or 6 per cent.

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