The Scranton tribune. [volume] (Scranton, Pa.) 1891-1910, 1902-10-15
Aitorney General
Knox on Trusts

|
These great combinations now number
| ing thousands, are the instrumentalitic'
| of modern commercial activity. Theii
| number and size alone appnll no healthy
| American. We are accustomed tn large
| things and TO do them In II large way
| We are accustomed to speak with u jus
| tifiable pride of our great institutions
| and what we have fairly accomplished
| through them, M right-thinking men de-
| sres to impair the efficiency of the great
| corporations as Observation-Disclosures of ma
| tional commercial development. Because
| they are great und prosperous Is no suffi.
| cient reason for their destruction. II
| that greatness and prosperity are not
| the result of the defiance of the natural
| rights ur recorded viii of tho people
| there Is no Just cause of complaint
| That there are evils and abuses IN
| trust promotions. purposes orghniHa-
| tions. methods. management and effects
none questions except those who have
protted by those evils.
Conspicuous Evils.
The conspicuous noXious features of
trusts existent ana possible are these:
Ovorcapil ali2ation. lack of publicity of
operation. discrimination IN prices to de-
stroy competition. insufficient personal
responsibility of officers and directors for
corporate management. tendency to
monopoly and lack of appreciation In their
management Of their relations to the
people. for whose benefit they are per
mittcd to exist
capitalization iH the chief of these
and the source from which the minor
ones flow. 1t is the possibility of over
capitalization that furnishes the tempta-
tiOns and opportunities for most of the
Others. Ovcrcapitalzatlon does not mean
large capitalization or capitalization
adequate for the greatest undertakings.
1t is the imposition upon an undertaking
Of II liability without corresponding
asset to represent it. Therefore over
capitalization is Il fraud upon those who
contribute the real capital. either origin
ally or by purchase. and the efforts to
realize dividends thereon from operations
is Il fraudulent imposition of burden
upon the public. When II property worth
Il million dollars upon ali the sober tests
of value IS capitalized at five millions and
sold to the public. 1t is rational To as
sumo that its purchasers will exert every
effort to keep its earnings up to the
basis Of their capitalization. When the
inevitable depression comes. wages must
be reduced prices enhanced. or dividends
forcgone. AS prices are naturally not in
creased but lowered M dull periods. 1t
usually resolves Itself into Il question of
wages or diyidends.
W me tillS tOllulllOn nllN tSlSl Nil'ti
amy circumstances. it is exaggerated by
ovcrcapitaliZatiou in the illustrating case
five to one. The overcaptalZed securi-
ties enter into the general budget of the
country are bought and sold, rise and
fail. ana thcy nuctuate between wider
ranges. and are more sensitive in proper
ton as they are further removed from
intrinsic values. and, in short. are liable
to be storm ccnters of financial disturb
# fan
also. in the same proportion increase
the temptation to miSmanagcmcnt and
manipulation by corporate administra-
tors.
Corporations and join, stock or other
associations. depending upon any stat,l-
tory law for their existence or prvil-
rsCs, trading beyond their own states
SHOULD he REQUIRED to do business in every
state and locality upon precisely the same
terms and conditions. There should he
no discrimination in prices: no prefer
enccS in service. Such corporations aerV-
ing the public as carriers and in similar
capacities should be compelled to keep
the avenues Of commerce free and open
to all upon the same terms and to OBJ
serve the lHw as to its iniunctions against
sitting competitinn. Moreover. corpora
tions upon which the people depend for
the nece.saricS of life should be required
to conlu:1 their business so as regularly
ana reasonably TO supply the public
needs. They should he subject to visi-
torial supervision. and fun ana accur-
ate information as 10 their operations
should he maize regularly ut reasonable
intervals. Secrecy in the conduct and
results Of operation is unfair to the non
managing stockholders, and should, as
well for reasons of state, be prohibited
by law.
If these serious evils were eradicated
and II higher measure of administrative
responsibility required in corporate Oni-
GERS. Il long step would be taken toward
alaying the reasonable apprehension that
the unchecked aggression of the trusts
will result in practical monopoly of the
important business Of the, country.
The Question of Remedy.
Less difficulty is encountered in describ-
ing the mischief of trusts than in sug-
gesting IA rational and practical remedy.
The Constitution provides (Sec s, art. -:
The congress shall have power ito regu-
late commerce with foreign nations and
among the several states and with the
Indian tribes
Congress rJuly !. 1S90) enacted that
every contract combination in the form
of trust or otherwise. or conspiracy in
restraint of trade or commerce among the
several states. is illegal. providing pun
ishments and comforting jurisdiction
upon Federal circuit courts To prevent
and restrain violations OF the act. 1t
was commonly supposed rt the time of
the passage of this act that its provis-
ions forbade the existence of trusts that
We're engaged in mon0polizinG the pro-
duction throughout the country of var-
ious articles of general consumption and
the government shared in this View, Ac-
tion was begun by the United States
,,,,. i,st Y,rlh. I'm,
trust. This was II corporation of The
state of New Jersey which had acquired
the stock of Il number of Sugar-reflnng
corporations in another state by an eS-
change of its own shares for the shares
of the vending stockholders of those COM
panics. 1t was formed, as It's charter
stated, for the purpose of "buying,
manufacturing, refining and selling
sugar in different parts of the country"
The governments contention was that
the purpose of the purchase was to ac-
quire II substantial monopoly OF sugar
refining. and as The product Was for safe
and distribution among Inc states and to
foreign countries, that the arrangement
was violation of the law cited. The
contract challenged was one vesting in
the trust the last of the independent re-
fneries but one in the United States,
thereby giving 1t the almost complete
monopoly of necessary of life. Its
control was 0S per cent. of the whole.
The Supreme court decided that as the
monopoly was in the procuction or manu-
facturc of sugar and its sale or dstribu-
tion among the states and To foreign
countries was but incidental thereto, il
was not within the prohibition of the
law, saying that manufacturing, al
though 1t prccedes commerce, IL not
part of IT, and that the act only applied
to restraints of commerce
This distinction is easily understood
when IL is recOllected that commerce