Honolulu star-bulletin. [volume] (Honolulu [Oahu, Hawaii]) 1912-2010, 1913-04-02
governor AND RAPID TRANSIT
HEAD in WARM INTERCHANGES

allowing the directors to do it for
them en- masse. T.
The following are the questions by
Mr.. Peck and the answers Of the gov
ernor which led up to his reply speech:
@. IF the railway was built by
stockholders and the railway was pro-
fitable, could eight per cent then be
withdrawn by the stockholders as
dividends"
A. Yes" ...: .. ..
@. "If after receiving the dividends
could stockholders put back the divi-
bends and have new stock Issued on
it?"
A. Yes" ......*.. .
Q. Gould twenty-five per cent be
added to the stock given sto.khold-
Iers?'' ..<.< Z
A. Yes" =. -
Q. "Then they may either with
draw the dividends or may Leave them
in and have stock issued on them with
the extra twenty-five per cent? -. -=
A. Yes. But you overlook
paint!" =.
R6fe Mr. Peck broke in loudly:
That is what want to know. What
ever is right want to do. Senator
Brown here, Governor Frear and you
all know that what ] am convinced is
right will do If it takes every cent
have, or can get, or ii bust IN
doing it. That is what ! want to
know-about the point / have over
looked, and I'll wait until the gov
ernor has told me-" 49, @
Said the governor in reply:
1T is an important question wheth-
err company may issue stock on in
terest of the money invested Some
corporations cannot. but under the
present statute it is doubtful ques-
ton. The law provides that the
Rapid Transit may issue 100000 of
stock. That means real money, and
the object of the statute was to as
sure the public that the company mad
the money to carry on its business.
BY Mr.. Peck's process the company
could 60 on paying dividends and
issuing stock on it, and the govern
ment would get nothing"
Peck Asks Distinction
Mr.. Peck asked:
us there a. distinction between
whether the stockholders take the
dividends and get stock and the
twenty-five per cent additional, or
leave it with the company and let the
directors issue stock pro rata?"
Mr.. Peck repeated the. question
again, and when he found he was
unable to get a yes or no answer
from the chief executive, he turned to
the blackboard and had figures put
on, from chart he had prepared, to
show the financial condition of the
company in 1902, and after compIet-
ing them for that year, he showed
figures for. 1910.
The figures showed that in 1902
the working capital was S343,S37, and
that no money had been set aside
for sinking fund for that period.
In 1910 the working capital was
shown to be s1,29S,901, and that
$4,000 sinking fund had been set
aside.
What do you think of those
figures?" he demanded CT the gov
ernor, who replied that he wished
time to study them. Richard Ivers
volunteered that it was unfair to ask
the opinion of the governor at that
time. Give him time to study the
figures" said Mr.. Ivers, amid ap-
plause.
Senator Judd asked Mr.. Peck to ex.
plain on what principle the deferred
reserve theory rested on .
1T rests" replied the head of the
railway, ION good business principles.
Good business principles gives the
company the right to put that money
in the working capital"
When it was suggested that at the
close of Mrs Peck's speech that the
governor be given more time before
calling on him to reply, he observed,
as he rose to speak, that he might
give the other side something to- think
over while he was studying their
figures.
The first question he was asked
called for his understanding of
watered stock" whether such stock
was legitimate or not.
Frear's Bon. Mot
Well, the law permits twenty-five
per cent of watered stock, so it is
plainly legal. 1t is sometimes called
H2O stock, which has been defined
as meaning two parts of humbug and
one part of optimism.
In working out the present prob
lem there are several theories which
one might follow. 1t is essential that
one theory be picked out and fol-
lowed to the end, and the question
to decide is which theory to take up.
There is one theory we might adopt
which permits the company to issue
stock up to the cost of the property
and then twenty-five per cent This
is the extreme theory against the cor
poration, for it CONSTITUTES the statute |
to mean that the stock issued must
not exceed the value of the railroad
property itself. But if the company
is going on to do the public then it !
is right that the statute be construed |
against them. The courts construe |
against the grantee. By this extreme
theory the increase in stock is limited |