Evening star. [volume] (Washington, D.C.) 1854-1972, 1907-07-12
ILLINOIS STATE BAR
ADDRESS BY EDWARD NJ. SHEP-
ARD ON CORPORATIONS.

GALESBURG, H.. July 12.-An address
by Edward NJ. Shepard of New York on
Corporate Capitalization and Public Nor
ais was the feature of todays session of
the annual meeting of the Illinois State
Bar Association. Preceding this address
the subject of Railroad Rate Regulation"
was thrown open for general discussion by
members of the association.
Edward M. Shepard's Remarks.
The abolition of, the purely nominal
money capitalization of business corpora
tons as cure for the evils of overcapi-
taization was set forth by Mr.. Shepard
The removal OF the dollar mark from CAPT.
tai stock, will, he believes, go far toward
solving the problem.
1T is the falsity of the present plan of
corporate capitalization which condemns
it, he said For the very reason that it
facilitates deceit the delus!on of investors
and insincere dealing with public sentiment
or public officers, it should be ended, if
there be better plan. l think there is.
l propose that the share of stock shall have
no dollar mark; that its only essential fea-
ture shall be the truthful certiticaton that
1t is one of a given total number of equal
shares into which the enterprise is di-
videG.
Who lends a corporation money upon
the nominal amount of its capitalization?
The creditor, who is sane, considers, not
concern IS with the companys reaiZable
property. its mortgage or lien debts, its
floating debt its gross income, its net in
come. Is it. however. the creditor en-
titled to know that the amount of which
he has been assured shall not, until he is
paid, be taken from the company in divi-
dents. but remain fund for his security.
Indeed, he is entitled to that. Our sys-
TEN of nominal capitalization does not
give him that assurance"
Mr.. Shepard also spoke of the common
idea that the profits of railroads and other
public-service corporations should be re-
strcted to per cent. This. in his opin-
Ion is fallacy. and if so restricted would
prevent industrial advancement.
Private Capital Uses.
Private capital will not go into new and
untried enterprises unless upon a promise
that, in case of success, the profits shall
exceed the rate of interest which could
be earned upon assured investments" he
said
Sensible capitalists will never take the
risk of total of partial loss unless paid
for the risk in the magnitude of probable
or possible profit. 1t is absurd to suppose
that constructive genius and financial and
even moral courage would have carried
railroads over the Allegheny mountains or
the Rockies or the Sierras on the assump-
ton that, If the enterprise failed, great
loss should be borne by the promoters,
but that If the enterprise succeeded then
that their profit should be limited to what
they could have earned without risk by
lending their capital on bond and mort
gage.
However. the owners of railroads and
other like properties, in considerable part,
have themselves to thank. If from the
beginning they had openly insisted that
their risks should be compensated by large
profits, just as would be the risks OF a
pioneer manufacturer or the merchant
who loads ship for Cathay-if in this
matter there had been neither concealment
not insincereity, nor juggling. of figures
there would today be less of the notion
that railroad rates ought to be adjusted
to produce not more than or 5 or per
cent"