New-York tribune., 1921-03-20


dends or to be reinvested and capital
lied at the will Of the corporation. Any
other method penalties efficient, man
agement and discourages initiative.
Such conclusion has it's difficulties
and the commission would doubtless
refrain from stating its position as uu-
equivocally as it has been laid down
here. 1t would leave loophole for
adjustment according to circumstances.
In fact it comes near to reasoning in
circle when it declares that the total
return of the Burlington on the fair
value of it's property does not appear
in large part been created out Of the
reinvested earnings derived from cx-
listing rates.
Burlington Unique
Doubtless the Burlington road is
the country with an equal record for
conservative finance, being due largely
to- the fact that it's stock has been
virtually all held by two railroads, the
interest of which was not primarily in
dividend distributions. But notwith-
standing the extraordinary showing of
the Burlington, which made such fa-
vorable impression upon the commits
sion, the approval thus early in the his
tory Of Its regulation Of security issues,
profoundly significant fact.
But the novel feature of the applics-
ton was in respect to the bonds. Au-
thority was asked to issue per cent
first mortgage bonds, Of which $50, ,OO0,-
600 was to be distributed to the stock
holders as a dividend. Such request
would probably never have been made
had the road possessed the usual long
list Of individual stockholders. This
particular dividend was for particular
purpose-namely, to assist the financ-
road that held nearly 81 per cent Of
it's stock-the Great Northern and
Northern Pacific roads. This stock is
pledged for joint issue Of 4 per cent
bonds amounting to $215, 900 and
maturing on July next. It was argued
that these two roads having been re-
sponsible for the creation Of the sur
plus by the conservatism of their de-
mand for dividends are emitted to the
assistance that they would obtain from
the receipt and use of $80,000,O00 Of
Burlington bonds in effecting refund
ing of the collateral bond issue next
July.
The issue seems to have turned upon
the question whether in determining if
the application is compatible with the
public Interest" necessary or appro-
pirate for or consistent with the proper
performance by the carrier Of service
to the public as q common carrier
and reasonably necessary and appro.
pirate for such service" the Burlington
should be considered by itself or as q
part of system formed of the three
roads concerned. Apparently the ma
jority of the commission sustains tho
objection that the Burlington should
not be allowed to increase it's fixed
charges without a showing Of resulting
benefit to itself, and holds that the car
rier has not justified the authorization
of the bond issue as dividend.
Commissioner Daniels sums up the
issue between the majority and minor
ity of the commission in his dissenting
opinion. "The essential error, as e
appears to me, in the reasoning Of the
majority report is centered in it's too
exclusive consideration of the Burling-
ton as separate and distinct legal en-
tity, and in a disregard Of the essential
factors in the case. Railroad corpora
tions, after all, are but legal instru-
mentalities by which individuals ef-
fecA their ends. To disregard the in
diviNual shippers served and the indi-
vidual investors involved, to say moth
ing of the general status Of railroad
credit, by confning attention to the
legal entity known rs the. Burlington,
is to miss the significance Of the whole
situation"