NOTES AND ABSTRACTS 275
merce is so broad that the ownership of the stock of corporations engaging in that commerce is subject to federal regulation, to some extent at least.
Each state can regulate the membership and powers of its own corporations. But the present decision seems to indicate that all state corporations engaging in interstate or foreign transportation do so by the implied permission of the nation , and that that implied permission can be subjected, to a certain degree at least, to restrictive regulation. I see no reason why Congress, if it so willed, could not, under this decision, prohibit any corporation whatever from holding stock in any interstate transportation company ; although it should not do so, and there is no reason to suppose that it ever will.
Since 1893 New Jersey has conducted a very lucrative business in the char- tering of holding companies. Of course, if the several states in which these holding companies operate should see fit, they could enact that no corporation can hold in the future more than a given proportion of the stock of their own chartered corporations, thus making the control of these local corporations not purchasable by holding companies. The power of Congress to legislate is limited by the consti- tution to corporations engaged in transportation, either pure and simple, or com- bined with the work of production, as in the United States Steel Corporation. Without going into the question of interstate commerce and the sort of national legislation desirable in that connection, I will confine my attention to the question of legislation by the several states in the matter of the holding company.
I believe we have had sufficient experience of the corporation organized " for control " to warrant us in condemning it as on the whole contrary to the public interest, inasmuch as it has proved a most effective instrument of fraud upon stockholders, investors, and the outside public. The complexity of organization is such as effectively to keep the stockholders and investors, as well as the outside public, in ignorance of what they ought to know. Concealment of profits in the treasuries of subcompanies " as a part of a plan to buy out all but the insiders, and the payment of dividends out of capital antecedent to a mysterious " selling movement " on the part of the insiders, are among the abuses practiced.
As the holding-corporation system has been developing, publicity has been diminishing. Difficulties are piled in the way of one seeking to investigate what is actually behind the illusory annual report. But there is now no reason why the state should guard from the real owners of a corporation the secrets of its managers. If a corporation large enough in its capitalization to be a matter of interest to the whole public is not able to compete in the open, then there is no sufficient natural demand for its existence to justify its survival.
The minority stockholder in a great " trust " is especially at a disadvantage in protecting himself in the event of some suddenly proposed, though carefully devised, plan, which those on the inside are prepared to rush through the stock- holders' meeting against the feeble protests of the smaller stockholders, who are unorganized and in the dark as to where to find each other out.
The right way to remove an evil is to remove its cause. Account books should be opened, not closed. It should be a criminal act for a director to speculate in the stock of his own company. He should be held as strictly to his duty as is the executor or trustee under a will. He should account to the company for all profits made by him as a result of secret information. He should be responsible for all damage caused to the investor by any prospectus, report, or public statement whose issuance and whose falsity he should have known. EDWARD B. WHITNEY, in Yale Review, May, 1904. E. B. W
The Moral Values in the Life of the Workingman. Everyone feels that, among the items which make up the wealth of a nation, there are values which cannot be expressed in dollars and cents, but which are nevertheless of the greatest worth in the progress of the nation. Counsel, instruction, cheer, the example of a sober and well-regulated life, the friendly visit, the encouraging word these are bequests no less rich in social value than those which can be reduced to figures, and summed up in an annual report. What a difference in social value there is between the workman of intelligence and sound morals, and the workman who is ignorant, brutal, and debauched!
