The Hawaiian star. [volume] (Honolulu [Oahu]) 1893-1912, 1912-02-17

poration it's the public's own fault.
As a result Of that system there is
wide distribution of securities to the
public without large and exorbitant
prices With us the system is en-
tirely different
at is so because the laws cannot be
relied upon, because the investor gets
no protection; because We have so re
Gently grown from a mere debtor
country to a great financial power
that our corporation laws have not
kept pace with our financial growth.
So we have no protection for the mi
nority stockholders. none of the safe
guards that in other countries protect
the great mass of holders of securities
of corporations With us the systems
have to be different because the pub
lie is not protected and does not trust
these public announcements, does not
trust them because it has not ade
quate remedy for the punishment OF
wrong. That is very largely due to
this competition between the states
in laxity of corporation laws
Faults of Law.
1T is a matter of fact that there is
hardly a section of the corporation
law of New Jersey, and some other
States which copied New Jersey, that
have not been dictated and rewritten
by some particular corporate interest.
terest.
q have in mind in the New Jersey
corporation law a variety of thing.
that have been written into it the be
hest of several corporations for parti
cular purposes.
81 remember that when the Amalga
mated Copper Company was exploited
by Lawson, and the enormous profit il
the promotion of that enterprise wa
diclosed, rendering the directors liable
for $50, 1000 or $4O,OOO,O0O, actor
was, stopped by a change in the Law
that prantically took away from the
stockholders any protection befor'
they knew Trey had it.
Later on, when the Steel Corpora
ton wanted to convert its prefeTe
stock into debt of the company
thing that should never he permitte
making it part of the capital deb
when they wanted to convert $3.50 GOO
900 of that stock into five per cen
bonds, the law was changed in orde
to accommodate them in that respect
When it became a question whethe
this initiation of capital did not sui
iect the directors to personal liability
the New Jersey statute was change
in order to make it practically lii
bility upon stockholders for unpai
capital.
And So" exclaimed Mr. Untermye
) we might go down the list of section
= of this New Jersey law. It is a samp
+ of the laws of all the States that hay
5 been bidding for these corporation
= They have had to follow the one thi
+ ronage of the corporations.
s SO long as that goes on and va
t have no protection for the investo
z you cannot have a direct assimilatiC
t of the securities from the vendor
e the public
l. How System Works.
5. 80 we have had to adopt a dine
h cnt method, and it is our method tn
h has built up these great financi
groups that constitute the money po
n er that, / believe, has been concentri
y ed more in the past ten years tn;
y in the preceding fifty, and that is co
II centrating with a rapidity that
If simply appalling.
y Their system in this country
IS this They are given an issue of bon
o of a certain company; the compa
ID wants to make an issue and, sell t
y. bonds; a great banking house TAX
r the issue of bonds and often befC
s or about the time it obligates itself
e buy these bonds it UNDERWRITERS thel
underwriting is a farming out Of
~ legations; frequently it farms out
rs whole issue. If there are 100000
g, or example, it sublets for a comm
ID sion, to bankers, banking institutio
le in New York and elsewhere, the I
e derwriting Of the bonds.
Iy These people agree for a given 60
e, mission that if the banking house do
It not itself dispose of the bonds tn