The Birmingham age-herald. [volume] (Birmingham, Ala.) 1902-1950, 1906-07-15
Directors and the Market.

From the Wall Street Journal
A subscriber, in commenting upon a
recent analysis of United States steel in
these columns. asks why the directors
should permit" the almost disgraceful
fluctuations In their common stock"
Without admitting that there is any,
thing particularly disgraceful in the de-
cline of United States steel common, when
all the rest of the market has been sell
Ing off as If there were no hereafter, the
subscriber will surely not take offense
II 1t Is pointed out that he entirely mis-
interprets the function of directors
So far as quotations are concerned 1t
Is the business of directors in connection
with their company to see that their
bonds are established on a sound basis of
credit, SO far as this may be done with
out manipulation of the stock market
Such credit Is one of the assets of
any properly conducted corporation is
suing bonds, and to this extent careful
note of the market position of the securi-
ties is eminently proper. So far as the
stock of the company Is concerned the
directors can give 1t value on Its gnerts
by the proper conduct of the company's
affairs, and they have no business what
ever with the stock exchange quotation
There Is great deal too much running
OF corporations with one eye on the ticker
tape, and there is no instance where the
stockholders do not suffer thereby The
market Is the true test of value. II the
company is properly conducted its stock
will take care of itself. There is always
plenty of capital for sound proposition,
and plenty of investors willing to buy
securities of a company which is proper
ly conducted. This correspondent, and
others like him. who are apparently will
ing to take a manipufated quotation as
a true standard of value, have nobody
but themselves to. blame If they lose
money.
The stock market exists for the bene-
fit of the stockholders and not for the
benefit of the directors. Under the cor
poration acts in England, directors who
traded on early information, acquired
through their position as trustees for the
stockholders, have ,been required to re-
fund such speculative profits to the cor
poration for the benefit of the stockhold-
ers. 1t Is very certain that II operations
to support or advance the price are un-
dertaken by the directors, at time when
the price Is declining on general market
conditions beyond their control there will
also be selling by directors for their own
benefit at prices which they have the
best reasons for knowing are fictitious.
The remedy of the stakeholder is so
ridiculously simple that 1t Is usually over
looked. 1t Is his business to take a direct
personal interest in the company in which
he has invested. The law will protect him
from everybody but himself If he will
hold his directors strictly accountable by
demanding the fullest possible publicity
and the strictest responsibility from the
officers he elects he may trust the stock
to take care Of itself in the market. The
United States Steel corporation Is well
managed. 1t publishes fuller details OF its
business than most industrial corpora
tions The stock Is widely held and. If
the subscriber who writes to us Is
stockholder he may congratulate himself
that these very methods have created a
market for his stock not at present open
to- the suspicion of manipulation.