Evening star. [volume] (Washington, D.C.) 1854-1972, 1898-05-26
'-IMITED COMPANY CRAZE
Effect 1t Has Had on the Business Inter
ests of England.
Cess of the Personal Ownership in
business and the Disappear
ance of Small Traders.
81. Van oss in the NIX Century.

itSoS men, dOh dutillS 1T years,
wishing for rest and retirement, o. DESTROYS
of going from business into politics, meet
ing an opportunity OF exchanging, on ex-
cellent terms, the cares of commerce for
the comforts of private life; on the other
hand W. have investors. ready to employ
their rcney at small return; and between
them We have the promoter. anxious to
bring the two together TO mutual advantage
and his own. Hence, exit the man whose
personal care made and maintained the
business, and enter the shareholder or his
nominal representative, the director. And
with business men anxious to capitalize
their interest" to sell out upoa good terms
10 TAX. money. capital which they will keep
instead of income which they may lose:
with moneyed people exposed to veritable
Investment famine; with promoters always
on the alert, there is, alas LITTLE hope that
we shall see a cessation of company pro-
melting And even if Their, were To be q
pause Il would not matter much. 1t is too
late to retrace the steps have taken.
BY this time the lions share of our bust
ness is in limited hands. For better or
for worse. the shareholder has for good
supplanted the old privale proprietor. and
d permanent chang. has come over British
business.
Lack of Personal Interest.
1t can scarcely be doubted that this
Change has, 20 put it mildly. been a change
for the worse Persona! ownership has
ceased TO be the controlling power in trade;
and wk-n it left ii took along with it that
personal care, personal supervision and per-
sonal responsibility whicl male our bust
ness great, and which SO long kept it great
The old generation Of solid. sturdy business
men IS practically gone. Where formerly
W. had many mighty lords of commerce
we now have, in thousands of instances,
mere Corporations without bodies to be
kicked or souls to be damned And those
VINO know human nature need not be told
what that means. Instead of men who de-
pend Tor thar very living upon the zeal
their energy and their judsmcn: we have,
except in those rare cases where directors
are also large shareholders, maa who de-
pend for their living upon the salaries paid
10 them by companies. Instead OF people
who think of and work for their business
day and night we have people who as 1t
were stand outside the business they gov
ern, VINO take things easy, meet once a
week or once fortnight, and leave the rest
10 hirelings who, though they may 10 their
best, must in the nature of things b. less
efficient than direct owners, and who must
become commercially demoralized by the
knowledge that they serve a concern which
virtually has no supervising head, and
which neither restraints by rigid discipline
nor encourages with the prospect of graf
itude- Instead Of a proprietor who, so to
speak, looks after every piece of string.
every sheet of paper and every postage
stamp. you have only Il man who has the
dangerous knowledge that behind him is
board of directors who, though they must
rely upon him, relieve him of direct re-
sponsfbility TO the proprietors. This fact
alone explains why many limited con-
Germs come to grief-so many that successes
amongst these enterprises are exceptions
well-nIgh lost in an almost general rule.
And. in my view, it also explains why Brit
1sh business L. losing ground Pirate not to
me of new markets. open doors, or made
in Germany Far be il from me to deny
TO these things their legitimate place in
economic proof ms. But if you wish to
grasp the position of British business you
must understand that if 1t be really de-
terioratlng it deteriorates chiefly because
the system of personal responsibility which
made it, and which SO long kept it great,
is gone: that, f trade does not expand
as,much could wish il does not ex-
pane because ii is no longer nurtured by
that con ant personal care and energy
which the primary condition for COM
nercial success, and which placed US SO
far ahead Of other trading nations that to
this day We have retained our lead in spite
OF the impeachment of limited liability.
Disappearance of the Small Trade.
This drying up of "a once bountiful spring
of commercial efficiency is, however, not
by any means the only evil result of the
company craze. 1t, has many other grave
consequences The gradual disappearance
of the small trader who finds it impossible
TO compete with the mercless limited con-
Of questionable advantage as an economic
Development for the small traders disap-
peardncs does not seem due TO that rigor-
Gus law which lets the fittest survive and
the weaker perish, but TO all manner of
artnceS which have nothing to do with
efficiency. The corporate rivals of the
small traders may have some advantage
because of their large resources. their
power to buy large quantities for cash, and
their ability TO sell at smaller profits, and
II need be on credit: but this gain is pre-
sumably more than set off by the greater
waStefulHess characteristic of companies,
and by the lack of personal supervision on
the part of personal owners.
A Premium on Dishonesty
Another bad effect of limited liability is
that ii undermines the confidence which is
an indispensable element of business, and
that IL places a premium upon dishonesty.
II has become practice, even among ere
spectacle" busine SIS men, to start their risky
ventures in the shape of limited companies
that they may avoid liability in case of
failure. Men Of what is nowadays consid-
cred high business honor see no harm in
Eot dlscharging the debts of a collapsed
concern for the creation and management
OF which they bore the sole responsibility
Though presumably they concealed their
identity by employing dummies. In case Of
success they take the profits; in case of
failure unfortunate creditors bear the loss.
way when such iniquity can be committed
In cur midst day after day without leaving
stain upon those who perpetrate il. Nor
Is this the sole manner in which CONNER
cial life Is corrupted. Many trader with
out resources converts his business into a
limited company, partly to attract a public
which believes in the skibboleth and partly
TO obtain credit.
Company Promoting.
have now summarized a few of the
grayest consequences of limited liability
upon our commercial efficiency and bust
ness morality, and i can, therefore. return
10 the promoting aspect. This has already
been briefly touched upon. We have seen
how the difference between the amount for
which business men will sell their concerns
ana the amount for which investors are
ready TO buy them. brings the promoter
upon the scene. and the reader has. no
doubt. perceived That the investor commits
q mistake Il ne assumes that he drives Il
good bargain. To begin with he buys Only
part Of the business he acquires. though
lie does not seem to know it. That business
consists Of a certain form Of capital-Stock