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REMARKS OF MR. BROWN.
REMARKS OF MR. BEERSTECHER.
while we are endeavoring to phrase an idea in order to meet what is man desires to be an innocent purchaser, let him be a sensible puracknowledged to be a mischief in the business of our corporations, I chaser. It is very well known that the great bulk of the stock of corthink it is just as well to phrase it, if we can, so that it will cover the porations is negotiated, not directly by the officers of the corporation, evil intended to be corrected. Now, I will suggest this to the Chairman but is negotiated through the medium of brokers or agents. Whoever of the committee. Of course, it may be crude and perhaps not couched desires to buy stock, let him examine whether the act creating the stock in the most fitting language. I remember hearing-if the Convention is a valid act in law. Let the business be done through the medium of will pardon me one moment -- I remember hearing it said that the elder banks of financial ability ; let them go to institutions and to men that John Adams, who wrote the Preamble and Bill of Rights for the Con. they know to be solvent, and before purchasing let them require these stitution of Massachusetts, gave to that great work at the ripe age of negotiating agents to indorse the paper. Then, if the paper is wortheighty-nine years, after twenty-five or thirty years study of republican less, they can come back upon the indorsers. There is no trouble about institutions, after vast travel and experience to live and to learn, with a protecting innocent purchasers at all. And if the history of the railroad thorough knowledge of everything that relates to the rights of the peo- corporations of the United States, if the history of the corporations of ple that could be drawn from the earliest existence of republics to the the State of California is studied, it will be found that the great evil charter that has been so often spoken of here, which was wrung from always has been the watering of stock. And it is to prevent the waterKing John by the Barons at Runemede-that he was occupied seven ing of stock, to prevent the fictitious issue of stock, that we desire to months, in the solitude of his chamber, in writing the Preamble and have this section inserted in the new Constitution. Bill of Rights of the Constitution of Massachusetts, around which all The gentleman from Sacramento, Judge McFarland, says that a numthese other Constitutions have clustered. But we seem to think that we ber of corporations are started in this state without any principal at all can come upon the floor of this Convention and suck a stump of lead except a place to prospect. Mr. President, I have known a number of pencil for five minutes, take an old scrap of paper and prepare any corporations to be starte and run in this State for a number of months amendment for the Constitution of the State.
that did not even have a place to prospect. I know one company that MR. HEISKELL. We have the benefit of his vast wisdom.
was called the English Mine. When a certain newspaper in San FranMR. BARNES. The work is altogether too hurriedly done; and cisco sent its correspondents, to ascertain where that mine was located, therefore I say in apology for any amendment of mine, that I would they were unable to find that they had any location or that they had much prefer that amendments should go to a committee for study and any place to prospect at all, and yet their stock sold in San Francisco, examination. It is very easy to use language, but it is not so easy to and was purchased. It is in order to break down this wildcat system of construe it when it has to be investigated. IIere is my suggestion : doing business, and in order to protect the citizens of this State and all
“ No corporation shall issue capital stock, or any evidence of corporate other States against these corporations without any financial ability indebtedness, except for money paid to, work or labor done for, or prop- whatever. If a corporation desires to do business let it do business as a erty actually received by it in the course of its business. No corpora- copartnership does business. Let it have money to do its business with, tion shall increase its capital stock, except for the acquisition of property, and let it have something to represent its capital stock; and if it has no or for the appointment of property among its stockholders, actually held financial ability, no principal, no means, then let there be no corporation. and owned by said corporation at the time of such increase. No corporation shall create any indebtedness except as herein provided for the issue of capital stock; provided, that nothing herein contained shall to a considerable extent, and it appears to me that new light has been
MR. BROWN. Mr. Chairman: We have heard this matter discussed affect any bona fide holder for value of any evidence of corporate shown with regard to the principles set forth in section eleven. Now, indebtedness."
Now, that would cover the fictitious indebtedness by defining what for instance, when we read this, on the first few lines, which has been they might contract a debt for, and the fictitious stock by defining that is sinister in its tendency. It appears to be broad, correct, honest,
under discussion, we cannot discover anything inconsistent or anything what they might increase their stock for, with a proper reservation in and what might be wished for. cases of indebtedness only.
“No corporation shall issue stock or bonds except for money paid, labor done, or property actually received.”
That looks like starting out upon a solid basis. It looks after the old MR. BEERSTECHER. Mr. President: The learned and eloquent style of honesty, and it would appear at first review that it would be acgentleman from San Francisco has told us what a gentleman from Mas- cepted and acted upon, but we find that there are members who can see sachusetts did, and how many years it took that man to finally get something deeply sinister in it where common minds cannot, and if such into condition to be able to frame the Preamble and Bill of Rights of gentlemen can make it plainly appear that there is something wrong, the Constitution of Massachusetts, but I must say that I was unable to something radical, something sinister in its tendency, it is well for us to see what pertinence these remarks had to the subject in hand. But, start out and act accordingly. But if, after due effort, there is a failure in when the gentleman from San Francisco said that the Constitutions of that regard and nothing really wrong, nothing inconsistent, nothing corall the other States clustered around the Constitution of Massachusetts, rupting, nothing contrary to our Constitution is shown up, why I think the only reason for that clustering that I can see is, that the gentleman we may pronounce that nothing has been accomplished against what is from San Francisco happens to be born in Massachusetts himself, and
here presented. that probably accounts for the clustering business around Massachusetts.
Now, for instance, with regard to another portion of this section eleven: MR. BARNES. I beg leave to correct the gentleman. I was not
“And all fictitious increase of stock or indebtedness shall be void.” born in Massachusetts. I think it is as good a place to come from, That looks to be correct; and, in fact, the gentleman from San Francisco, however, as - I do not remember where the gentleman came from, Mr. Barnes, says that it is a principle that does exist. Well, now I am and I have not yet known him long enough in this state to know satisfied that the minds of the members of this Convention would inquire where he lives here. I think all this is out of the question-we are if this is a principle in law, why is it that it becomes so dangerous and not discussing that subject.
subversive in section eleven, as to change the order of business. It is MR. BEERSTECHER. I stand corrected. I understood the gentle
said the it would change the order of siness. Now we are desiring man to tell me the other day that he was born in the State of Ben. to change this, and we think this reaches it. In the midst of everyButler.
thing I am convinced that this has been thought of before. MR. BARNES. I never could have said that, for Ben. Butler has not
Here, gentlemen say, that men come here and chaw the stump of a got any State. He certainly did not get the State of Massachusetts at lead pencil, and think upon matters for a moment, and conclude that the last election. I am aware that the Convention biographer has they know more than men whose mighty minds have been engaged in located me in Massachusetts, and he also gave my age and previous con
the investigation of these matters. Now, for instance, I have nothing dition of servitude, but he was incorrect about them. But that has in particular to say with regard to the men who have sat in any Connothing to do with this amendment.
vention, but I would suppose that the gentleman would admit at once Mr. BEERSTECHER. I call the attention of the Convention to sec
that the men assembled even in the Constitutional Convention of Mistion seven of article sixteen of the Constitution of Pennsylvania. Sec-souri would know as much as members who have chawed a pencil here tion seven of article sixteen of that Constitution is the exact counter for a short time, and who oppose the measures which are presented here. part of the present section before this Convention; or, I should say, the We have also the Convention of Pennsylvania, which has investigated present section is the exact counterpart of the section in the Constitu- these things. These new deleterious effects that he speaks of as being tion of Pennsylvania. Section seven reads as follows:
introduced into business, have not been dragged to light before this body “No corporation shall issue stocks or bonds except for money, labor to show that there is something injurious in the article under discusdone, or money or property actually received ; and all fictitious increase sion. With these matters before us, and being convinced that nothing of stock or indebtedness shall be void. The stock and indebtedness of has been shown against the proposition contained in section eleven, I am corporations shall not be increased except in pursuance of general in hopes that the members of this Convention will consider it on its true law, nor without the consent of the persons holding the larger amount merits, not particularly because it has been adopted in the Constitution in value of the stock first obtained, at a meeting to be held after sixty of Missouri, not particularly because able men in Pennsylvania have days' notice, given in pursuance of law."
adopted the saine thing, but because it will prevent fraud in the State Ít seems to me that we can well afford to copy a Constitution, such as
of California. was formed by the men who sat in Convention in Pennsylvania. The
THE PREVIOUS QUESTION. present section is a direct blow at the whole system of corporate compa- MR. KEYES. Mr. Chairman: I move the previous question. nies in the State of California. A great talk is made here about inno- Seconded by Messrs. Lindow, Larkin, Smith, of Santa Clara, and cent purchasers. Mr. President, in my humble opinion, I consider this Smith, of Kern. talk about innocent purchasers as all bosh and bombast. Innocent pur- The main question was ordered, on a division, by a vote of 52 ayes chasers! If men desire to be innocent, then let them not be stupid and to 39 noes. foolish. If a man desires to purchase a promissory note, he naturally THE CHAIRMAN. The main question has been ordered. The first looks into the financial responsibility of the maker and the indorsers of that question is on the amendment offered by the gentleman from Sacranote. He naturally desires to ascertain whether the note is based upon mento, Mr. McFarland, to strike out section eleven. any financial responsibility. If he does not do that, if his own igno- The amendment was lost. rance and stupidity leads him to purchase a worthless piece of paper, he THE CHAIRMAN. The question now recurs on the amendment inuet suffer the consequences. We never can make laws to protect fools offered by the gentleman from San Francisco, Mr. Barnes. The Secreagainst their own foolishness. Talk about innocent purchasers! If a tary will read the amendment for information.
REMARKS OF MR. BLACKMER.
THE SECRETARY read:
The object of my amendment is to make it apply to other corporations “No corporation shall issue capital stock or any evidence of corporate than merely pecuniary corporations. indebtedness except for money paid to, work or labor done for, or property actually received by it in the course of its business. No corporation shall increase its capital stock, except for the acquisition of property
MR. BLACKMER. Mr. Chairman: I desire to say a word upon the or for the apportionment of property among its stockholders actually amendment as proposed by the Committee on Corporations. It is a fact held and owned by said corporation at the time of such increase. No that there are a great number of people in different parts of the State corporation shall create any indebtedness, except as herein provided for who have desired to organize coöperative societies, wherein they could the issue of capital stock; provided, that nothing herein contained shall distribute the profit arising from the business; if it was a mercantile affect any bona fide holder for value of any evidence of corporate business, between those who patronized the corporation and also those indebtedness.”
who had furnished capital for it, it was found necessary, in order to The amendment was lost.
keep these corporations, when they came to be prosperous, in the hands MR. WILSON, of San Francisco. I desire to offer an amendment.
of those who were receiving the benefits, to limit the votes of stockMR. BEERSTECHER. Can an amendment be offered now?
holders to a certain number, and not have it based upon the amount of THE CHAIRMAN. The Chair has not heard the proposition of the the thing came to be a success, stepping in and buying up a majority of
stock that they owned. This was to prevent large stockholders, when gentleman from San Francisco.
MR. WILSON, of San Francisco. I desire to offer an amendment to the stock, and then control it in their own interest. The last Legislasection eleven,
ture adopted a provision which covers the ground covered by the amendTHE CHAIRMAN. That is one of the anomalies of having the pre may be formed, and by their by-laws regulate the number of votes that
ment offered by the Committee on Corporations, that these corporations vious question in Committee of the Whole. There can be no more each stockholder might cast at an election; and these organizations have amendments.
MR. WILSON, of San Francisco. I simply give notice that I will been extended in different parts of the State. It is desirable, I think, offer an amendment to line three, section eleven, after the word "void," to recognize that principle in this Constitution, in connection with the to say that nothing herein contained shall affect bona fide holders for other; to provide that they may organize, and by their by-laws deter
mine that each stockholder shall, perhaps, have only one vote in the value paid without notice.
election of the directors, and thus to cover that ground. I hope it will
be adopted. MR. REYNOLDS. I rise to a question of privilege. I desire to enter
REMARKS OF MR. MCFARLAND. my protest against the action of the Committee of the Whole in ordering the previous question. It is subversive of the popular rights. It is sub
Mr. McFARLAND. Mr. Chairman: This second amendment shows versive of the rights of the minority in the committee. it is subversive the difficulty of trying to put a code into the Constitution. You provide, of the rights of the minority of the Convention.
in the first place, that in corporations votes shall be had in a certain Mr. TINNIN. I rise to a point of order. It is that the protest must way, and that the directors shall not be elected in any other way. Now be sent up in writing.
you propose that corporate societies may be formed with the privilege of THE CHAIRMAN. The rule allows it either in writing or verbally. electing their directors as they please. A corporation is a coöperative
MR. BEERSTECHER. The previous question being called, I think society, and a coöperative society, having any privilege that private indicuts off all debate upon all subjects.
viduals do not have, is a corporation. If you put in this provision you THE CHAIRMAN. The previous question has already exhausted that must define what kind of corporations you mean. If you don't you section. The gentleman will state his question of privilege.
leave the whole matter to the Legislature in the future, because the Mr. REYNOLDS. I have nothing more to say. I have stated my kind of cooperative societies that are spoken of are all corporations, and whole objection.
the corporations are all cooperative societies. MR. AYERS. I rise for information. Is there any such thing as a
REMARKS OF MR. HALE. question of privilege in the Committee of the Whole? Mr. REYNOLDS. Is there any such thing as the previous question tion raised to this proposition hy Judge MeFarland is well taken. Šee
MR. HALE. Mr. Chairman: I am inclined to think that the objecin Committee of the Whole ? THE CHAIRMAN. The gentleman will state his question of privilege the term corporations, as used in this article, shall be construed to
tion four of the report of the Committee on Corporation provides that, if he desires to speak to it. MR. REYNOLDS. I have stated the whole of it.
include all associations and joint stock companies having any of the THE CHAIRMAN. The Secretary will read the next section.
powers or privileges of corporations not possessed by individuals or partnerships.” I would inquire of the Chairman of the Committee on
Corporations, if a cooperative society would not necessarily be a corpoTHE SECRETARY read :
ration, and a corporation a coöperative society, under this definition. All Sec. 12. The Legislature shall provide by law that in all elections for of us who possess a knowledge of current history know that this plan directors or managers of incorporated companies, every stockholder shall of corporate functions are not being tried alone in this State. In fact it have the right to vote, in person or by proxy, for the number of shares did not originate here. It is an importation from abroad. I doubt not of stock owned by him, for as many persons as there are directors or that the ideas concentrated and crystallized in this term have been managers to be elected, or to cumulate said shares and give one candi- already and will in the future prove to be very beneficial, and the case, date as many votes as the number of directors multiplied by the num- in the mind of the Chairman of the Committee on Corporations, is all ber of his shares of stock shall equal, or to distribute them, on the same well enough in itself, but will involve the Constitution in an inextriprinciple, among as many candidates as he shall think fit; and such cable confusion if section four stands as we have passed it. In other directors or managers shall not be elected in any other manner.
words, we shall be saying that corporations may elect their trustees and MR. ESTEE. Mr. Chairman : By direction of the Committee on Cor- managing Boards only in one way, which we have prescribed, or which porations, I offer an amendment to that section.
we propose to prescribe in section twelve, and then go on and say that a THE SECRETARY read :
certain class of these corporations may adopt their own rules. Now
that is to break down the rule itseli. “ Provided, that coöperative societies may be formed under general laws, which may provide by by-laws of their own for limiting the representa- of section twelve, with the amendment proposed by the gentleman
I am in favor of this rule as it is contained in the committee's report tion of shareholders of their stock, and the number of shares that may from San Francisco, Mr. Wilson. I see no objection to that. I think be held; and the Legislature shall enact such laws as may be necessary the language adopted in the Constitution of Pennsylvania, from which for their faithful management and protection, and may limit the liabil- he read, probably is a better form than that proposed by himself. It ities of their members."
can be easily conformed to that mode of expression. But the object of Mr. WILSON, of First District. Mr. Chairman: I have another that is sufficiently accomplished by his proposed amendment. I am amendment, not at all in conflict with the one offered by the Chairman not in favor of the amendment suggested by the Chairman of the comof the committee, to this effect:
inittee, because it breaks down the rule which the Convention has “ Add to the section, “and in elections for directors and trustees of cor- intended to establish in the government of corporations. Now, what is porations having no capital stock, each member may cast the whole the reason? These managing Boards of a corporation constitute the number of his votes for one candidate, or distribute them upon two or authority by which all its business is transacted, all its property is more candidates, as he may prefer.'”
acquired and managed, all its privileges and franchises, when they posSection twelve, as reported by the committee, contains a very impor- sess such, are to be exercised. So it is intended that all the stockholders tant and beneficial proposition, and one which has lately been acted who may not be familiar with the inside manipulations of the corporaupon, allowing parties to cumulate their votes upon one candidate; tion may be enabled to consolidate the number of votes that they are instead of scattering them. The section is good so far as it goes, but entitled to cast upon one or more of their managers, was to obtain
at persons may be members of corporations and not stockholders
. Now, least a minority representation in that Board of managers. Now, sir, this principle is not applied by the committee to corporations of that that reason is just as cogent in respect to the coöperative class as any character. I think the principle ought to be extended also to that class other class. The avowed principle upon which all these corporations of corporations. I find in the Pennsylvania Constitution that the same are founded is upon the coöperative principle. So far as they depart principle is extended to that class of corporations--as well to the ordi- from that they have departed from the principle of corporations. It nary moneyed corporations as to the beneficial and benevolent societies. would be dangerous to break in upon this rule. There would be no Now, if this principle is good in one case it is good in the other. The reason for the adoption of section'twelve. I think te amendment Constitution of Pennsylvania is broad enough to cover all that class of offered by the gentleman from San Francisco, Mr. Wilson, is right, corporations.
though the language in the Pennsylvania Constitution is preferable, but Section four of article sixteen reads as follows:
as to the other, I trust that it will not be adopted. “In all elections for directors or managers of a corporation, each member or shareholder may cast the whole number of his votes for one can
REMARKS OF MR. BARBOUR. didate, or distribute them upon two or more candidates, as he may Mr. BARBOUR. Mr. Chairman: I. only rise for the purpose of prefer."
speaking to the question of the general propriety of provisions concernThere it applies to all corporations as well to this class as the other. ing coöperative societies. I have not understood the amendment offered
ELECTION OF DIRECTORS OF CORPORATIONS.
REMARKS OF MR. TERRY.
REMARKS OF MR. HAGER.
by the gentleman from San Francisco, Mr. Wilson. The minority of THE CHAIRMAN. The question is on the substitute offered by the the Committee on Corporations introduced a proposition, at the request gentleman from San Joaquin. of a number of friends of the principle of cooperation. It is a subject - that I confess I do not fully understand, but it is complained that the present constitutional provision is in their way; that they are subject
Mr. TERRY. Mr. Chairman : That is the clause agreed upon by the always to that difficulty with regard to representation, where the repre- Legislative Committee, and it seems to me to be more full. The proposentation is upon shares. I believe that the main feature of coöperative sition reported by the Committee on Corporations other than Municipal societies is a vote regulated by the membership. If I understand rightly does not go far enough. If it is important that the State should not they are an extremely useful society. They are the means of combining become a stockholder in these corporations, it is equally important that the labor of persons of small means into a society where every member counties and cities should not be permitted to aid them. We know it is entitled to just as much voice as every other inember. And another has been done in this State, and we know that it has resulted in great principle is that members are not allowed to accumulate into their own loss to counties, cities, and municipalities. It is therefore desirable to hands, more than a certain proportion of the principal of the concern.
prohibit it altogether. They have sometimes succeeded; they have sometimes failed. Some of
MR. ESTEE. The general principle is correct. I did not hear the them are very flourishing and they spread around about them a great reading distinctly, but if it is intended to prevent a city like San Frandeal of good.
cisco, for instance, from acquiring and owning its own waterworks, I Now, the one distinctive feature, and the one aimed at in the amendment
cannot sustain it.
MR. TERRY. proposed to this section, is with regard to representation. The present
It only prevents it from owning stock in a corpora
tion. rule contemplates a property qualification, to which I do not object. The share is presumed to be potent. No matter how many shares a
Mr. ESTEE. Does it not probibit it from pledging the credit in any man has, he votes all his shares. The other is the personal representa
MR. TERRY. In aid of any corporation. tion of the cooperative plan permitted by the by-laws of their own. Can there be any objection at all , if every corporation in the State of would object to anything that will restrain large cities like San Fran
Mr. ESTEE. In the fifth line, I do not know what that means. California wishes to call itself a coöperative society, and limit the repre- cisco from owning its own waterworks. I think it is correct in princihe has the same voice in it as any other stockholder in the concern? i ple, provided that coristruction cannot be put upon it. know that they will not do it. There is no possible danger that they
MR. TERRY. It cannot have any effect to prevent the city from will do it. The only trouble is that in that class of corporations they buying and owning its own waterworks exclusively. It prevents the may never be able to induce a man of ordinary means to invest his capi- city from becoming a stockholder in any private corporation, and nothtal in it. On the contrary, the men of large means do invest, because ing else. by reason of the accumulation of stock in a single hand, they soon con
MR. BEERSTECHER. I would inquire if the substitute is section trol a majority of the stock. There is the difference in the two proposi- thirty-eight of the report of the Committee on Legislative Department. tions, and it ought to be recognized, in my opinion.
MR. TERRY. Yes, sir.
MR. ESTEE. It seems to me that we are not throwing open the door to all corpora
think there is probably no objection to it. tions to call themselves coöperative societies and come in and claim the benefit, because they immediately put themselves upon a footing MR. HAGER. Mr. Chairman: I can state in this connection, that with cooperative societies in other respects. The word has a legal defi- the Committee on City, County, and Township Organization bad before nition, I believe. At least they have got to be well known, and the it this section, and have recommended the following: principle upon which they proceed is well known. The main objection
“Sec. 21. No county, city, town, or other public or municipal corwould be to the limitation of their liability: If we proceed entirely poration, by a vote of its citizens or otherwise, shall become a subscriber upon a cash basis there can be no necessity of any provision about the to the capital stock, or a stock holder in any corporation, association, or limitation of the liability of the members. That is my understanding company, or make any appropriation, or donation, or loan its credit to, of it, and that is the reason why I have advocated the adoption of this or in aid of, any person, corporation, association, company, or instiqualification of the rule.
tution." MR. BLACKMER. Mr. Chairman: As there may be a question whether this does conflict with section four that we have already substantially what is here offered. I mention this for the purpose of
We have already adopted the principle that is there offered. It is adopted-this amendment offered by the Committee on Corporations--1 announcing to the Convention the fact that the committee having charge desire to make a motion that this amendment be rereferred to the Com- of this matter have agreed substantially upon the provision here offered. mittee on Corporations for them to report upon. THE CHAIRMAN. That cannot be done in Committee of the Whole. I hope the amended proposition will be adopted.
MR. ESTEE. I think it is correct, and I certainly do not object to it. Mr. BLACKMER. When we get into Convention I will make that
THE CHAIRMAN. The question is on the substitute proposed by the motion. MR. ESTEE. Mr. Chairman: I had not compared it with section
gentleman from San Joaquin. four. This proposition is right, in my judgment, but it seems to me that there would be a doubt about it. Therefore, for the purpose of MR. HERRINGTON. Mr. Chairman: I am opposed to the insertion remodeling that amendment and applying it elsewhere, at the request of of that section in lieu of the section reported by the Committee on Corthose gentlemen who take a special interest in it, I would ask leave to porations. This is not the proper place for the provision as it is prowithdraw the amendment that I proposed. I ask leave to withdraw it, posed by the gentleman from San Joaquin. Very many of the provisions with the understanding that I may present it again.
contemplated in that amendment no doubt will be inserted in the ConMR. WEST. I object.
stitution. But the proper place is in the Legislative Department, where MR. HAGER. I would suggest to the Chairman of the Committee on it has been placed by that committee. I will read section twenty-two. Corporations just to pass over that section for the present.
I know what I am talking about. It reads as follows: MR. ESTEE. I do not suppose there is any objection.
“Sec. 22. No money shall be drawn from the treasury but in conseMR. WEST. Mr. Chairman: There is a diversity of interest that quence of appropriations made by law, and upon warrants duly drawn would be affected by the adoption of these several amendments, and in thereon by the Controller ; and no money shall ever be appropriated or order that the committee may have the privilege of reconsidering the drawn froin the State treasury for the use or benefit of any corporation, proposition, and harmonizing these different and adverse interests, I association, asylum, hospital, or any other institution, not under the move that the committee rise, report progress, and ask leave to sit exclusive management and control of the State as a State institution, again. I do this in order that in Convention we can refer this back to nor shall any grant or donation of property ever be made thereto by the the Committee on Corporations.
State. An accurate statement of the receipts and expenditures of pubMr. SCHIELL. I move that the further consideration of the section lic moneys shall be attached to and published with the laws at every be passed.
regular session of the Legislature.” R. WEST. If it is the sense of the committee we can pass these Now, I submit that section twenty-two is in its proper place, and its amendments for the time being. I will withdraw my motion.
provisions are proper. Now, section thirty-eight has reference to the MR. SCHELL. My object is that it may be referred back to the com- powers delegated to municipal corporations denying the power of the mittee when we get back into Convention.
Legislature to delegate any power whereby they should be permitted to The motion prevailed.
invest money in these corporations in any way. I submit that the proTHE CHAIRMAN. The Secretary will read section thirteen. vision, as it is here reported by the Committee on Corporations, ought to THE SECRETARY read :
be adopted. It is clear and perfectly applicable to the purposes designed SEC. 13. The State shall not subscribe to or be interested in the by the committee, while the other provisions of the proposed amendstock of, or in any manner loan its credit to any person, company, asso- ment are not as proper as under the head of legislative department. ciation, or corporation.
The effect of its being separate only makes it more clear as to the real Mr TERRY. Mr. Chairman: I offer a substitute for the section. intent and purpose of the provision. When you undertake to restrict
"SEC. 13. The Legislature shall have no power to give or to lend, or the legislative power under the head of corporations, you are not applyto authorize the giving or lending of the credit of the State, or of any ing it in the proper place, and I submit that this amendment should not county, city and county, city, township, or other political corporation or be adopted. The provisions are adequately provided for in sections subdivision of the State now existing, or that may be hereafter estab- twenty-two and thirty-eight of the legislative department, and that is lished, in aid of or to any person, association, or corporation, whether the proper place. municipal or otherwise, or to pledge the credit thereof in any manner MR. GRÂCE. Mr. Chairman: Rule Two says the Convention shall whatever, for the payment of the liabilities of any individual, associa- take a recess from twelve o'clock until two, and it is now twelve o'clock. tion, municipal or other corporation whatever ; nor shall it have power Mr. WELLIN. I raise the point of order: the Convention is not in to make any grant, or authorize the making of any grant of any public session. Rule Sixty says this rule shall not be suspended without a twomoney or thing of value to any individual, municipal or other cor- thirds vote, and one day's notice. Now, the vote by which this motion poration whatever; and it shall not have power to authorize the State, was carried was not a two-thirds vote of the members present, and I or any political subdivision thereof, to subscribe for stock or to become therefore move that the committee rise, report progress, and ask leave to a stockholder in any corporation whatever.
REMARKS OF MR. HERRINGTON.
REMARKS OF MR. WILSON.
MR. INMAN. I suggest that the gentleman go out and get his lunch. MR. CHAIRMAN. There is a point of order to be disposed of first. MR. BEERSTECHER. There was no objection at the time. Section thirteen provides that, "the State shall not subscribe to or be The motion was lost.
interested in the stock of, or in any manner loan its credit to, any per
son, company, association. or corporation.” Rule Twenty-eight proMR. WILSON, of First District. Mr. Chairman: The amendment as
vides that," no subject, different from that under consideration shall be proposed by the gentleman from San Joaquin has much in it that is admitted under color of amendment.” The Chair is of the opinion unobjectionable, but it has some things in it which are hardly proper to that the subject-matter is not different from section thirteen. The point act upon now, if I understand it.
I was not aware that any such of order is overruled. amendment would be presented to the Convention this morning. I had MR. HOWARD. I agree with the gentleman from Santa Clara, that examined section thirteen as reported, but I had not examined section this section should await action until we reach the report of the Comthirty-eight of the legislative report, now before us as a substitute. If mittee on Legislative Department. I move that section thirteen be I understand it, upon a casual reading, it has a wide scope. It reads:
stricken out. “Sec. 38. The Legislature shall have no power to give or to lend, or
THE CHAIRMAN. There is a motion now pending that section to authorize the giving or lending, of the credit of the State, or of any thirteen and the amendment offered by the gentleman from San county, city and county, city, township, or other political corporation or Joaquin, be temporarily postponed, and that the committee proceed to subdivision of the State, now existing, or that may be hereafter estab- the consideration of section fourteen. lished, in aid of or to any person, association, or corporation, whether
MR. HOWARD. Is not my amendment in order ? municipal or otherwise, or to pledge the credit thereof, in any manner
THE CHAIRMAN. No, sir. whatever, for the payment of the liabilities of any individual, associa
MR. HOWARD. I think it had better go out or be postponed, because tion, municipal or other corporation, whatever; nor shall it have power it is too weighty a subject to be considered in haste. to make any grant, or authorize the making of any grant, of any public
THE CHAIRMAN. The question is on the motion to postpone temmoney or thing of value to any individual, municipal or other corpora- porarily. tion, whatever; and it shall not have power to authorize the State, or
The inotion prevailed on a division vote, ayes-43; noes 38. any political subdivision thereof, to subscribe for stock, or to become a
Mr. TINNIN. Did a majority vote? stockholder in any corporation whatever."
THE CHAIRMAN. There were eighty-one votes cast. The Secretary Now, it seems to me, under that portion which says, “nor shall it (the will read section fourteen. Legislature) have power to make any grant, or authorize the making of THE SECRETARY read : any grant, of any public money or thing of value to any individual,
Sec. 14. Every corporation organized or doing business in this state, municipal or other corporation, whatever," the Legislature would be under the laws or authority thereof, shall have and maintain an office deprived of the power to aid any benevolent institution-for instance, or place in this state for the transaction of its business, where transfers orphan asylums—that now receive donations from the State. I do not of stock shall be made, and in which shall be kept, for public inspecthink the Convention expected this section would be precipitated upon tion, books in which shall be recorded the amount of capital stock subthem this morning. It is outside of the ordinary run of the busi- scribed, and by whom; the names of the owners of its stock, and the We are not considering that department, but the department on
amounts owned by them respectively; the amount of stock paid in, corporations. We are considering the matter of corporations other than and by whom; the transfers of said stock; the amount of its assets and municipal; and this now comes in to apply to municipal corporations, liabilities, and the names and place of residence of its officers. and the powers of the Legislature in certain matters which have nothing
MR. ESTEE. Mr. Chairman: I have in my hand an amendment to do with private corporations or corporations other than municipal. which has been agreed upon by the Committee on Corporations other This morning, if I were called upon to vote on this, I would vote against than Municipal. It merely changes a few words. I move that it be it, for this reason: that I am not prepared to say now that this state substituted for the original section. should not assist the orphan asylums, deaf, dumb, and blind asylums,
THE SECRETARY read: and other benevolent institutions; and if this section is passed in the
“Sec. 14. Every corporation, other than religious, educational, or language in which it is couched, it certainly would cut off all aid to such benevolent, organized or doing business in this state, shall have and institutions. There are other portions of it with which I agree; but I maintain an office or place in this State for the transaction of its busiam not now intending to discuss the section, but merely to call the ness, where transfers of stock shall be made, and in which shall be kept, attention of the committee to the fact that it involves this important for public inspection, books in which shall be recorded the amount of question. For that reason, and because I want to reflect upon this capital stock subscribed, and by whom; the names of the owners of its matter, I move that section thirteen and the amendment be temporarily stock, and the amounts owned by them respectively; the amount of postponed.
stock paid in, and by whom; the transfers of said stock; the amount of
its assets and liabilities, and the names and place of residence of its MR. HALE. Mr. Chairman: I hope this motion will not prevail. I
officers." do not see any reason why we should pass it. I do not know why this the Chairman of the Committee on Corporations other than Municipal.
THE CHAIRMAN. The question is on the amendment proposed by committee is not as well prepared now to discuss this question as they will be at any other time. I am quite willing to say that I shall vote striking out, in line four, the word “public," before the word “ inspec
MR. SCHELL. Mr. Chairman: I move to amend the amendment by for this amendment, because it will do precisely what the gentleman
tion." who last spoke fears it will do. Now, if there is any objection this is as good a time to hear it as any other. This is the fiftieth day of the Con
THE CHAIRMAN. The question is on the amendment to the amendvention's session, and it is high time that these matters should be passed upon. I am quite free to admit that I shall vote for this amendment, because it will have precisely the effect that the gentleman attributes to
MR. SCHELL. Mr. Chairman: They should be open for inspection it. In fact, the language is very explicit. There is not much chance by any person interested in the stock. I think it is entirely too broad. for any one to mistake its meaning. Its true inwardness is expressed My recollection is, that in the committee that word "public" was in its words. It is intended to cut off from receiving State aid, those stricken out on my motion. I think it is improperly in there now. institutions which the gentleman has mentioned. I do not know Possibly I am mistaken, but I remember that I made the motion to of any better tiine than the present to discuss the question. If gentle- strike out the word public," and I think it was stricken out; and my men have anything to say, let them say it now. If there are any reasons understanding was that the motion was carried. I think the section is why the system of the past twenty years should be continued, let those entirely too broad. Under our statute, under the Code, every stockreasons be given here and now, so that we may reach a vote.
holder of a corporation has a perfect right to inspect the books of the corporation and see who has made transfers of stock and to see who
the stockholders are. This accomplishes all that is desirable. I think Mr. BARNES. Mr. Chairman: The amendment suggested by the it is too broad, when we say that every man, whether he has any interest gentleman from San Joaquin is not in order, because it is not germane or not, shall be entitled to come into the office and examine the books to the section under consideration, which is confined simply to the ques- of the corporation. I do not think he has any more right to do it than tion of the State becoming a stockholder, or loaning its credit to private he has to come into my private office and demand an inspection of my corporations. The proposition of the gentleman involves not merely books, in which he has no interest and no possible right. I think it is the giving or loaning the credit of the State, but also the credit of any in there improperly; but whether so or not, it ought to be out. city, county, township, or other political subdivision of the State, to any person, association, or corporation, whether municipal or otherwise.
*REMARKS OF MR. WHITE. That is entirely a different subject. That matter was included in the Mr. WHITE. My recollection is that Mr. Schell did put that amendPreamble and Bill of Rights--section twenty-two, I think-and it was ment, and we voted it down. I recollect it was the subject of considerby consent stricken out or withdrawn.
able discussion, and we concluded it would be one of the best means of Mr. TERRY. Because it was in the report of the Legislative Com- preventing fraud, and enable the persons who wish to invest in certain mittee.
companies to judge whether they should do so or not, and so that when MR. BARNES. Well, it formed a part of the Bill of Rights. Under corporations put their stock on the market everybody will know the the head, now, of Corporations other than Municipal, it is sought to position. That is my recollection, that the Judge's amendment was incorporate a clause here which covers, not merely these quasi corpora- voted down. I hope the word will not be stricken out. It is one of the tions, but also municipal corporations, and also cities, counties, and most important words in the whole section. towns all through the State, and also covers the question of making MR. HOWARD. That is my recollection also. donations, which is a very broad question, and not at all involved in
REMARKS OF MR. FILCHER. the question under consideration. There is no other possible limitation upon the legislative power that under this mode of amendment might MR. FILCHER. Mr. Chairman: It seems to me that if we strike not be introduced and debated here. I hope it will be allowed to remain out that word, as suggested by the gentleman, we take the vitality out where it belongs. My point of order is that it is not germane to the of the whole section. You might as well strike out the whole section if subject under consideration.
you are going to make that discrimination. You might as well have Mr. HOWARD. Mr. Chairman: If it is in order, I move to amend nothing at all in there. The books are already open to inspection by the motion of the gentleman from San Francisco—
those directly interested. The stockholders may go in at any time and
REMARKS OF MR. HALE.
REMARKS OF MR. SCHELL.
REMARKS OF MR. BARNES.
REMARKS OF MR. CROSS.
REMARKS OP MR. BARNES.
inspect the books and accounts. I hope the amendment will not be how much is paid in, and by whom, as we have to know the same adopted.
things about the Bank of California, or any of the banks incorporated REMARKS OF MR. HILBORN.
under our own laws. This is a proposition that seems to strike me as Mr. HILBORN. Mr. Chairman: Is it the deliberate purpose of this just and reasonable. I think we ought to have the right to examine section to open the doors of all the corporations in this state to a crowd their books. of curious persons who may take a notion to look at the books? I MR. BARNES. I did not suppose for a moment that it was anything would like to know when and at what time the business of the corpora- more than a misprint. If that is the idea it will have to be considered tion is to be done, if a crowd of men make a break into these offices at any in Great Britain, with a capital of thirty-five or forty millions of dollars,
a little, because it will be impracticable to require corporations organized time they see fit and demand to look at the books? I would like to know when the business is to be done? As the law now stands, any
to comply with the mandates of this provision. It is ridiculous. Who body who has any interest in the corporation may examine the books will be any the wiser by reading over the list of names of stockholders ? at any time they may see fit; but I hope this Couvention will not do How will we know whether they are responsible or not? What does such a foolish thing as to make the books public property.
this section mean? Does it mean that these corporations shall keep a transfer office in San Francisco ?
MR. ESTEE. It means just what it says: “Shall have and maintain Mr. CROSS. Mr. Chairman: There is one portion of this section, it an office in this State for the transaction of the business." That is seems to me, which is of importance. Section three, which we have required under the present law—" where transfers may be made." already passed, is this:
MR. BARNES. Why don't you read it as it is—“shall be made ?" * Each stockholder of a corporation, or joint stock association, shall be MR. ESTEE. Yes, sir; that is a better word. I accept the correction. individually and personally liable for his proportion of all its debts and Where transfers of stock shall be made. That is the proper wordingliabilities."
"shall be made," and in which shall be kept books for public inspection. Now, how is any person to whom there is an indebtedness to know The section reads this way, and says just what it means, and nothing what stockholders are indebted to him, unless he can obtain that infor-else: mation in some way? Now, sir, they must inspect the books in order to “Sec. 14. Every corporation, other than religious, educational, or know who the stockholders are, so as to enforce the responsibility. There benevolent, organized or doing business in this state, shall have and must be some way of ascertaining who the stockholders are. if this sec- maintain an office or place in this state for the transaction of its busition is adopted they will have the means of obtaining that information ness, where transfers of stock shall be made, and in which shall be at all times. The section provides:
kept, for public inspection, books in which shall be recorded the amount * Sec. 14. Every corporation organized or doing business in this State, of capital stock subscribed, and by whom; the names of the owners of its under the laws or authority thereof, shall have and maintain an office stock, and the amounts owned by them respectively; the amount of or place in this State for the transaction of its business, where transfers stock paid in, and by whom;
the transfers of said stock; the amount of of stock shall be made, and in which shall be kept, for public inspection, its assets and liabilities, and the names and place of residence of its books in which shall be recorded the amount of capital stock subscribed, officers." and by whom; the names of the owners of its stock, and the amounts We are entitled to this information. The people of San Francisco are owned by them respectively; the amount of stock paid in, and by entitled to know how much of the capital stock of the London and San whom; the transfers of said stock; the amounts of its assets and liabili-Francisco Bank is subscribed. That institution no doubts is perfectly ties, and the names and place of residence of its officers."
responsible, but we claim the same right to investigate for ourselves, as Now, it seems to me that another great advantage is this: that if par- we do in regard to any other bank located there. I claim that we should ties should wish to become owners in the corporation, they should have treat foreign corporations and local corporations exactly alike, and theirs the privilege of investigating the affairs of the corporation, so as to should not be put on a more favorable basis than ours. We do business know how to invest. I think it will have a tendency to make these with them, and their securities and their business should be known just corporations more honest in their accounts, and they will not be so as much as the affairs of our local corporations. likely to charge so much to “ India rubber account.”
MR. BARNES. Why?
MR. ESTEE. Because it is a business proposition, that we should
know just as much about them as we do about our own corporations. MR. BARNES. Mr. Chairman: I understood the amendment of the They come here and do business. We deal with them; we trust them, Chairman of the Committee on Corporations to make an exception in and we have a right to know. favor of benevolent and charitable institutions. It reads:
MR. BARNES. What object could there be in knowing the names of “Sec. 14. Every corporation, other than religious, educational, or the stockholders? We would not know whether they were responsible benevolent, organized or doing business in this Štate, shall have and men or not. maintain an office or place in this State for the transaction of its business,
MR. ESTEE. Of course that is one object, but not the entire object. where transfers of stock shall be made, and in which shall be kept, for We want to know who the men are, where they live, and all about it. public inspection, books in which shall be recorded the amount of capital MR. BARNES. What sort of good will it do a man to know who the stock subscribed, and by whom; the names of the owners of its stock, stockholders are in the London and Globe Insurance Company, who are and the amounts owned by them respectively; the amount of stock paid scattered all over Great Britain. in, and by whom; the transfers of said stock; the amount of its assets
MR. ESTEE. We may not know as to that, but we should know as and liabilities, and the names and places of residence of its officers."
to a great many other insurance companies scattered over different secI think it would be much better to say, "corporations having capital tions of this Union. We want to know how much stock has been paid stock.” That covers it. These societies do not have capital stock. up, and the names of the owners of this stock. It is true we may not Churches, so far as my limited experience goes, have no capital stock. know them; we may not know whether they are responsible or not, There is another objection to this, if I understand it. “Every corpora- but we might go to people who are well known in the commercial tion organized or doing business in this State shall maintain an office world-in New York, Boston, Liverpool, and London. It says: “and the for the transaction of business, etc., where transfers of stock shall be amounts owned by them respectively." They might publish a circular made.” Now, that refers to two classes; one class organized under the stating that well known capitalists of London own stock in the comlaws of this state, and another class doing business in this state. I sup- pany. A great many business men might say, they are perfectly responpose that covers every case-foreign insurance companies, the Liverpool, sible, and when we come to look at the books it might be found that London, and Globe, and all the companies doing business here. They these capitalists did not own any stock. “ The amount of stock paid in, must all get and keep an office in this state, where transfers of stock and by whom ; the transfers of said stock.” This is a general provision shall be made. Then they are to keep books for public inspection. It intended to apply to all corporations, and your committee thought it seems to me that there are several words which do not belong there. was just. If the section can be improved, I shall be glad to hear any The word " and " should be substituted for the word “or," so as to refer amendments or suggestions from the gentlemen who are finding fault to corporations native and to the manner born. But this covers the case with it. of every corporation, wherever organized, that does business in this State. It would compel them to keep a record here of all transfers MR. FILCHER. Are there not corporations doing business in this to become a part of the Constitution. My experience as a legislator is
MR. LARKIN. Mr. Chairman: I believe this section to be important State that have no capital stock, and yet do business?
Mr. BARNES. I know of one recently exploded in San Francisco. that it has been heretofore impossible to get any information in relation If it has no capital stock, why then you cannot require them to make to corporations. They refuse to allow their books to be inspected. transfers of stick; it cannot transfer what it does not have. It seems to Under the provisions of this section I have no fears of curious men me that it should relate to corporations organized and doing business in annoying the companies, only those men who own stock, or those repthis state, and having capital stock, and I move to amend by substitut-right to know all about them, because they are all more or less inter
resenting owners, would examine the books. People should bave the ing for the word “or” the word “and,” in the first line.
THE CHAIRMAN. There is an amendment to an amendment ested in their actions in the policy and success of these corporations. I pending.
deem the section just. It protects the people, and I believe it should be
adopted as a part of the Constitution. MR. ESTEE. Mr. Chairman: The committee, by this amendment, provides that every corporation other than religious, educational, or MR. HAGER. Mr. Chairman: I am in favor of the section, provided benevolent, doing business in this state, shall have and maintain an it be made applicable only to corporations formed under the laws of this office, etc. Now, the criticisms of Col. Barnes, upon the wording there, State. This State ought to have a general supervision over, and control in relation to foreign corporations, I think will convince every thoughtful of her own corporations, and I am in favor of placing in the Constituman that we should compel them to have and maintain offices in this tion provisions amply sufficient to effect this purpose; but the proposed State. Why not? Why, for instance, if the Liverpool, London, and section not only applies to all domestic corporations but also to all forGlobe Insurance Company is perfectly solvent-why should not the eign corporations that may do business in this State. Now, suppose the people of this State who patronize it, know the stockholders. Also the Bank of England, or any other foreign corporation, should, for business London and San Francisco Bank-why are we not just as much entitled purposes, have an agency in this State; ought we to require them to to know who the stockholders are, and how much stock they have, and keep their records here, with their books of transfer, list of stockholders,
REMARKS OF MR. LARKIN.
REMARKS OF MR. ESTEE.
SPEECH OF MR. HAGER.