The Washington herald., 1907-06-09

Mr.. J. Selwin Tait's paper on "Ouy
Financial Upheayals, Their Cause and
Cure. 10 which editorial reference was
made In The Washington Herald some
time ago, has been published In pamphlet
form. That reform Of corporation laws
is Of the greatest Importance not only to
the public, but 10 the corporations them
selves and to financial interests general
". is what Mr.. TAFT undertakes to demon
strate. He discusses the railroad situs-
tion. but his main topic is corporation
management in general, which he regards
as open e. Improvement i'm a number
Of respects. The present public distrust
Of investme is In railroad and other cor
porate sec titles Mr. TAFT thinks a
natural outg-owth Of bad corporate prac-
tees. particularly the imitation of CAPT
talized issues The money that should
have gone into these securities has been
diverted TO savings bank deposits and
real estate investments with Il resulting
rise in the price Of realty values and an
immense expansion of savings bank funds
which in turn have been largely put into
real property. Mr. TAFT does not look
upon this diversion Of funds from corpo-
rate investments to realty Investments as
altogether a good thing. rs it has af-
fected rents and forced overcrowding IN
our cities. while enterprises Of national
importance have been starved because Of
lack Of funds 10 finance them.
British Companies Acts.
Mr.. TAFT is strongly impressed with the
efficacy Of the British companies acts the
essential features of which ne believes
should be incorporated into American
law. These acts prescribe stringent rules
for the organization of corporations. max
FMS il difficult 20 overissue stock. 20 issue
deceptive and misleading prospectuses, or
10 manipulate the control Of the corpora
tion so as 10 sWinlle the stockholders. As
70 practical legislation along the lines of
the British acts. Mr.. Talt recommends
that Congress should enact for interstate
corporations a Federal law similar 90 OUR
national bank act which should include
all the protection and privileges Of that
act without government supervision or
responsibility. There should he no at
tempt at government inspection. If the
laws regulating the organization and
management of our corporations are wise
~ enacted. the stOcbholdeT with his en-
laTged rights and powers may he trusted
10 do the rest The trouble has been In
the past that the stOckholjer has had no
rights of self-proteCti0n. These are i'm
portant points, but the efficiency and
prompritude Of our courts is perhaps the
most important point Of ALL I'm order to
give effect 90 the remedies devised
StockhoIder to Protect Himself.
The ability Of the stockholdar to protect
himself under corporate legislation IS a
point on which Mr.. TAFT lays especial
stress. He asserts that the "fallacy
which England exposed a half century
ago that the strrkholder was able % pro-
tect himself. apparently exists here still.
and il is the first delusion the country
should get rid Of The stockholder has
10 be protected by a law from dangers
arising from his own CUnidity and care
lsssness as well as from fraud on the
part of the promoters With the proper
safeguards afforded by stringent Iegisla-
tion. Mr.. TAFT thinks the stockholder
would be able o. take care Of himself
and so obviate the necessity Of govern
ment supervision in his behalf In other
words. with the publicity which ought to
be required OF the operations of all cor
pOratiOns. the stOckhOldeT Will be IN as
good position TO know what is going on
as the government
On the subject Of publicity NIr TAFT
says: Every new company launched. or
every new issue of stock or bonds should
-.F4.s
est terms. II we cannot give TO our
varied securities the fixed value we give
10 our moneys, We can at least ear-mark
them so that the investing public will
know that one hundred dollars I'm actual
cash has been paid for each one hundred
dollar share, or that value 20 that
amount. fixed by competent and independ-
ent valuers. has been given In exchange.
No law can be made retroactive 50 as to
injure the innocent holder. and If we
would avoid a still worse condition Of
affairs than has existed IN The past few
weeks. we must confine our suggestions
10 the future. And these suggestions. il
must be understood cover all bonds or
stocks, whether issued direct by the pub
lie or through the medium Of banking
houses"
In order 10 give the public full conf
dence in our corporate enterprises so that
they may be able to raise the funds they
need, Mr.. TAFT says. such legal safe
guards viii have o. be thrown around all
OF them. and not around railroad secur-
tiles only. as will serve TO protect the
public. which neither in this country nor
anywhere else, has ever been able TO pro-
~ Fa-rs- At
resent actual existing values, not n more
or less optimistic estimate Of future
profits or the fictitious value placed on
his property by the owner and his promo
ters. II proper remedies be applied at once.
Mr.. TAFT is confident that "a reaction will
set in which VIII be healthful and bene-
fetal, and the wound TO our country's
commerce and finances will close from
the bottom IN a natural way. Any laws
enacted must clearly define how inter-
state and State corporations are to be in
corpOrated and managed. Let this be
done with great CleaTness and detail. and
let the stockholder be clothed with ample
powers 70 protect his own interests at ali
points, so that the cure OF our existing
evils may be automatic. Encourage The
fullest publicity I'm the organization and
conduct Of corporations, for In that. more
than anything else, as a molder OF public
opinion and encoura cement Of fiduciary
honesty. viii the most successful remedy
be found"
Mr.. TAFT crlticises the proposal for
Tevaluati0n Of our railroads as tending
toward a hurtful depreciation of securi-
ties. but he favors examinations for the
purpose Of showing the condition and
earning capacity Of the roads.
Hnnnrn AM iIrIInIrn