The Washington herald., 1914-07-28
MINORITY STOCK RIGHTS.
Majority stockholders May Not Ab-
sorb the Lions share.

.
The New York Court Of Appeals has
rendered decision upholding the rights
Of minority stockholders TO sue for resti-
tuition when the directors or executive
ofhclals OF q corporation convert money
or property Of the corporation to their
own use without rendering adequate
services therefor. Most cases Of this
kind are attended with fraud, but the
Court OF Appeals has based its rulings
on the broader ground OF the obligation
of trustees to act In the best interests Of
those WHOSE property II is their duty to
guard. The case In point Is Cooley vs..
Crandali & Cooley Company and others
and the damages awarded to the plaintiff
cover acts which were In part performed
as long ago as 1897. recovery on which
would be barred in ordinary cases by the
statute OF limitations.
In this case, persons having a beneficial
interest in the estate Of a dead stock
holder and oficeholder In the company
received only per cent dividends on the
stock owned by the estate, whereas the
directors and employees Of the company
who were stockholders. received addi-
tional dividends or payments out OF the
compahy's treasury. amounting TO per
cent a year in addition to the 6 per cent
dividend paid to all These extra pay
ments were made under pretence OF re-
court held that this was a colorado
claim. and without equity.
Corporations and joint stock companies
are formed very frequently for the pur-
pose of safeguarding the estates OF dead
members Of an ordinary partnership.
Death usually dIssolves a partnership au-
tomatically. but a corporation carries on
It's business without interruption so far
as the law is concerned, even when the
NKyhn RnnNFnllNnU NnNaFGET
In u. or perhaps owns 80 per cent OF the
stock outstanding dies. A business. the
good will of which is very valuable. may
be conducted as corporation in the in
terest OF minor heirs, and this is one Of
the strongest reasons why important
business enterprises are generally turned
into joint stock companies. when the
men who build them up find the weight
OF years pressing upon them.
II the United States Supreme Court
should take a similar view Of the liability
OF directors OF railroads and other great
corporations engaged in interstate COM
rierce, this exposition OF the law would
be Of interest TO the unfortunate holders
Of the securities of the Rock Island Com
pany. and some other railroads that
could be mentioned. Directors and other
officlals who secured the authority or
consent Of the board Of directors to the
yielded vast profits TO men who stood in
the position Of trustees in accordance
with the view Of the New York Court Of
Appeals, may find themselves liable for
the repayment into the treasury OF the
company of their ill-gotten gains. II
would put a check on interlocking di-
rectorates that would protect holders of
shares or bonds without interfering with
the desirable features of common con-
troll Of allied corporations. As far as the
New York courts are concerned. minority
stockholders now know where they stand.
The air has been cleared, and their po-
sition has been much improved now that
they may recover from directors repre-
senting a majority OF the stock Of
company who have in bad faith con-
spired to wind up the company for their
own benefit, or who have paid them
selves or any OF their number money not
Justly earned in the performance OF ade-
quate and necessary services. 1t knocks
on the head the old and apparently safe
system of swindling minority stockhold-
ers by giving to those in control ex-
salaries for pretended sery-
ices.-New York Commercial.