The Washington times., 1907-12-15
Lawyer Tells
PHbIic'S Duty;
Defines Stock

To the Editor OF Tho Washington Times:
The public IS always a party interest
ed in additional stock issue. As stated
by the United States Supreme Court IL
the case Of Handley VS.. stutz, l2s L. s.
AZ. 42s, decided In 1881: The stock OF
a corporation is supposed TO stand IN
The place Of actual property OF sub
stantial value. and as being a convent
ent method Of representing the interest
Of each stockholder IN such property.
and 70 the extent 10 which Il fails TO
represent such value II Is either a de-
cepuon and fraud upon the public, or
an evidence that the original value OF
the corporate property has become de-
preciated- II II be once admitted
that a corporation may issue stock
without receiving a consideration there
for, and where It does aOt represent
actual substantial value N corporate
assets, there is apparently no limit to
the extent 10 which the original stock
may be 'watered. except the caprice
OF the stockholders"
AS stated by Cook on corporations,
volume {. section IS: "A share OF stock
Is supposed. IN theory, to represent its
value in money or moneys worth, paid
in or to be paid n the corporation.
The facilities which exist for the
sale Of properly issued stock are equally
available for the sale OF fictiuously
paid-up stock The issue Of fictitiously
paid-up stock IS the favorite device Of
corporate promoters. organizers, and
rlanipulators in carrying out their plans
Of realizing enormous gains from small
investments and in accommodating great
fortunes at the expense Of the public.
Occasionally, too, the issue (of stock
IS made for the purpose Of concealing
large and unreasonable profits. which,
il known. might cause the public 70
regulate and diminish the source Of in
come"
Stock Dividend Device.
\ stock dividend is another method
70 concede excessive profits at the ex-
pense Of those who are compelled TO
patronize the corporation which has Sc
cured by its charter and special legis-
lation special privileges or an exclusive
monopoly.
The manner IN which the public has
or may be still imposed upon by the
issue Of stock. affords additional rea-
sons why corporations, and especially
public utility corporations. such as gas
light companies, should be under the
constant scrutiny Of the public and the
supervision Of the representatives OF the
public.
The issue OF additional stock is the
fulcrum on which TO place the lever
upon which the corporation. its agents.
attorneys, officers, and stockholders
base the argument that, to regulate
and diminish the source Of revenue, will
operate unjustly against the stocl5hold-
ers.
Company's Aim Easy 10 See.
That such an easy method Of per-
petUating an injustice. and thus increase
the wealth of the corporation and its
stockholders at the expense of the pub
lie. should have heretofore often been
invoked by private corporations, is not
10 be wondered at. but 1t is surprising
that Il should be invoked at the Capital
Of the nation in the year 1907. and is
hardly complimentary 10 our national
legislators.
As all legislative power Is derived
from the people, and as the powers ex-
ercised by private corporations are de-
rived through the Legislature or Con-
gress, by means Of charter or legisla-
tive grants. and as the Qcwer thus dele
gated Is subject to recall, modification
or termination, the public is always
party and interested in the question OF
additional stock issue as well as bond
issue. mortgage. or other device for In
creasing the capital Of the corporation
or charging its earning capacity.
One Of the prov'sionS Of section 5 of
the act Of June s. 1886. volume %.
Statutes at Large, page 252. requires
public notice" as a condition precedent
to the issue OF additional evidence OF
indebtedness o. the Washington Gas