The Topeka state journal. [volume] (Topeka, Kansas) 1892-1980, 1907-10-24
Which He Says Is Responsible
for Most of Our Ills.
III WAY WAS BLAZED
BY President Roosevelt i'm His
ProvincetOwn Speech
He Says, for American PeOple's
Retsrn to Their Rights.

CnlcS" Ot. z4-Ine second a OF
the convention of the National Civic
Federation was devoted to the consid-
GRAFTON of the corporation, its construc-
ton and regulation.
The chief speakers on the program
and the subjects they discussed were
as follows:
]. w. jerks, Cornell university. 1.-The
Trust Situation" Edgar A. Bancroft,
Chicago, Destructive versus Regula-
New York, THE Trust Problem;"
Irving Fisher, New Haven, over Cap
italization."
In the aft ernoon the principal speak
ers were Judge Grosscup of Chicago,
who discussed The Construction of a
Corporation" Samuel Gompers. Frank
b. Kellogg. of St. Paul, and E. E.
Prussing, of Chicago.
Judge Grosscup said in part:
THE detailed form that the work of
corporate reconstruction should take
would be best performed. perhaps. by a
national commission; and such a COM
mission would have for precedent the
work one by Germany thirty years
ago-a corporate reform that has al
most disarmed German socialism except
as an agitation against the unjust land
laws of that country.
Nickel in the Slot Plan.
I'm this country the corporation is a
creature Of the executive department
of the several states, and issues out of
such department almost as a matter of
course. Neither the object for which
the corporation is formed. nor the
amount of the capitalization, nor the
~haracte of the securities issued. COM
mands any preliminary attention other
than such as is merely perfunctory.
Put YOU nickel in the slot and take
out a charter, is the invitation that the
states extends; and in line before the
slot machine. entitled, too, to an equal
place in the line. are the corporate pro-
Jects conceived to defraud, as well as
those that have an honest purpose.
Neither is detainea by so much as an
inquiry. For Indifference such as that,
I would substitute at the very threshold
of the corporations application for ex-
istence, an honest careful inquiry by
some bun of overnment-a trib-
unal that will act only after it has
heard-a hearing in which the public
Is represented by a district attorney,
on whom is thus developed the duty,
not merely Of pursuing the horse after
1t is stolen, but of seeing to it that the
door IS locked before the horse is stolen.
And what honest project, L ask, can
obJec- TO such an inquiry?
The corporation as at present or
ganized by the states, has license to
issue all the securities it chooses, and
all the kinds of securities it chooses
securities whose place in the corpo
ate geologic qualification no ordinary
NNAA O~aAS IN OoI VI III nave
come the many Of capital
fzatfons that serve no other
than to exploit with one hand the
consuming public, while batting with
the other that portion of the public
that with hard-earned savings is look
ing for some opportunity to help itself
along in the race of life. No honest
project needs license like that. Let
the initial securities issued be related
in a fair business way to the actual
values put in.
Must Have Room to Grow.
incorporated enterprise, just as
private enterprise, should be given
room to grow. A dollar turned into
two, ten, twenty if turned honestly,
and multiply, is a command without
which economic progress would not
be. But in all this there is no need
that the corporation should initially
capitalize a projected success that if IL
exists at all, exists only in the future.
Let the securities issued on account
of success, be issued only when sue
cess is established; and let them be
fairly related, as the enterprise grows.
to the increased value of the actual
earning power developed. And I can
see no reason why in any honest en-
terprise, the question whether add
tiona1 securities shall be issued,
not be made the subject of Ju-
dicial inquiry.
but the restriction of capitalization
to figures that are fair, will accom-
plish little. if the declaring and pay
ing of unearned dividends be left to
those who are in control of the cor
porations; for it is not on the par val
ue of securities. but upon the size and
regularity of dividend payments, that
the public make up its judgment as
to values; and it is not on mere CAPT.
talization that the schemer in corpor-
ate securities counts, but upon his
ability to make the public believe that
the capitalization has an earning pow
er. Take the well known case of some
of the Chicago traction
without dividends, the securities is
sued would have remained near zero,
and that, too, irrespective OF now
small the issue was: but with h1gh d.
vidends. paid year after yea UNI
they were no longer questioned. the
rose in h stool markets
to par, to double par. and beyond
that. irrespective of how large the Is
sue was.
High Dividends Did It.
cit was not the capitalization. but
the high dividends regularly paid Tor
a long period, that did the trick; not
dividends in any honest applica-
ton of that word to earnings, but trick
that stripped
of its power TO keep up with
it's public duty; that let the enterprise
gradually but surely run down.; n
tina borrowed millions for dividends
on the top OF the depletlon. Inoeeo,
the whole transaction was a moral
.rime-a crime that robbed honest
men and women of the accommodations
of a etime- crime that is not fully
.xpiated by a~rraigning before the bar
Of public opinion the men who got
away with the plumber l arra1gn as
accessory before the fact, the people
Of the great state who, scrupulously
honest in their individual dealings, is |
sued to the projectors of this crime the |
ready made corporate weapo without
the crime could not have been
"One thing more in the line of struc-
principles. h first duty of