OCR Text |
Show A NEW PLAN FOR REGULATING HI TRUSTS. In tho current number of tho North HJ American Review a new plan for regu- latlng the trusts Is propounded by Mr. Hi John P. Cronan, a natlvo of Boston, who has been a member of the Suffolk HI bar for a quarter of a century. Tho HJ article deserves tho widespread atten- Hl tlcn which It has received. Instead H of scraping the surface, It goes to the Hi root of tho matter. It proposes, not a HI palliative, but a remedy; or rathor It HJ offers the ounce of prevention which HJ Is proverbially better than a pound of HJ cure. The author begins by Inquiring, HJ What are the evils from which the HJ peoplo suffer, or think they suffer, HJ through tho great agglomerations of HJ capital to which wo give tho name of HJ trusts? Ho enumerates them in what HJ ho believes to bo tho order of im- HJ pcrtanco to-wit, first, overcapitalize HJ tlcn; secondly, the protection afforded HJ the trusts through the tariff; thirdly, HJ tho lack of any substantial or uniform HJ regulation by which tho affairs of cor- HJ porations aro mado known in annual HJ. or moro frequent reports; lastly, tho HJ lack of any legislation affording sub- HJ stantlal safeguards against dlscrlml- HJ nation or injustice, except! by tho cum- Hi bcrsomc process provided by tho Shor- HJ man act. Tho author denies tho truth HJ of tho assertion that tho trusts aro the HJ creatures of tho tariff. Ho concedes, HJ of course, that trusts operating In pro- HJ tected articles, aro no doubt, benefited HJ by tho tariff, but many of tho great HJ trusts aro not affected by it In tho HJ least. Ho reminds us, moreover, that HJ tho peoplo have at all times the power HJi to compel such a revision of tho tariff HJj as will remove any difficulties arising HJ therefrom. A revision of tho tariff HJ may bo deferred, but it cannot be HJ averted permanently by tho ob- HJ st'ift vo resources of allied wealth. HJ r for tho notion that tho remedy for HJ the abuses to which trusts are liable HJ wnild bo found in greater publicity HJ at to corporation matters, Mr. Cronan Hi pronounces such a remedy altogothei HJ too narrow to affect substantially tho HJ conditions which aro at tho foundation HJ of the grievances complained of. HA HJ points cut also that tho adoption of Hi the recent suggestion of Commissioner HJ Garfield that corporations doing an ln- HJ tcrstnto business should procuro a HJ federal license, while It might bo help- HJ ful In removing some of tho dlfllcul- Hi tics incident to tho control of existing HJ trusts, would not prevent tho forma- HJ tlon of now trusts which would bo HJ creatures of tho several states. Td HJ the suggestion of Mr. James B. Dill HJ that congress might pass a law per- HJ mlttlng corporations doing an lntor- HJ stato business to bo chartered by tho HJ federal government, ho opposes a con- HJ stltutional objection. It Is seriously HJ to bo doubted, ho thinks, whether tho HJ federal constitution, which reserved HJ to tho several states tho right to ere- HJ ato corporato existence, does not pre- HJ cludo tho federal government from HJ exercising any powers with respect to HJ tho chartering of corporations not ex- Hi prcssly delegated to it under our fed- HJ oral organic law. If, howover, for tho HJ sako of argument, it bo granted that HJ under tho commercial clauso of tho HJ constitution tho power to control lm- HJ piles a right to create, and that, con- HJ sequontly, congress has power to pro- HJ vido for fedoral incorporation, Mr. HJ Cronan considers It very clear that HJ the sovcral states, speaking through HJ their representatives in congress, HJ would withhold approval from an act HJ which would doprlvo them of tho rove- HJ nues now accruing to them through Hi the creation of corporations. If, on HJ tho other hand, it should bo found HJ that in order to provide for federal ln- HJ corporation an amendment to tho con- HJ stitution would bo indispensable tho HJ hostility of tho several states, prompt- HJ ed by tho motivo just mentioned, would prevent its adoption. HJ In Mr. Cronan's opinion, tho ono HJ drastic and offectlvo measuro would BBL'-. .I, bo a fedoral law that would prevent overcapitalization. If overcapitalization overcapitaliza-tion were prohibited, tho motivo for tho creation of trusts would bo extinguished. extin-guished. Wo aro sometimes told, indeed, in-deed, that tho trusts aro an outcomo of an occult and lrrcslstablo economics force, which itself is tho result of conditions con-ditions characteristic of our time. To Mr. Cronan's oye, there is nothing occult, mysterious, or irrcsistablo about tho force which is credited with tho generation of trusts. Ho asserts that tho only real forco underlying tho trusts Is tho dcslro for power and wealth, which seeks to gratify itself through ability to control tho raw and finished materials whereby tho market mar-ket for tho producer is limited, whilo tho prico to tho consumer is regulated. This deslro could not bo kindled or gratified If overcapitalization wero forbidden. Tho many business establishments estab-lishments which for years have flourished flour-ished in this country could not bo forced out of tho hands of their former conservative controllers without some great and overwhelming inducement. That Inducement is tho power posses-ed posses-ed by tho promoters of a trust to capitalize cap-italize at will. If a corporation or business which promoters sought to morgo into a trust discovered that no substantial advantage beyond tho actual value was to bo obtained by turning over tho corporation or property, prop-erty, there would ordinarily bo no tomptatlon to do so. What would probably bo tho answer, asks Mr. Cronan, of tho president of a well-conducted and paying corporation, who was invited to turn over his corporation corpora-tion to form, in conjunction with others oth-ers in liko business, a trust, solely upon receiving tho actual cash value thereof at tho tlmo? As a rule, there would bo but ono answer a refusal. Threats of destruction by competition might bo mado, and difficulties might arise from attempts to carry out tho threats; but such things aro ordinary incident of businass. Undoubtedly Mr. Cronan is right in averring that tho promoters of a trust would meet with grave, if not Insurmountable, obstacles, ob-stacles, in forcing a merger or consolidation con-solidation of corporato interests, if tho power to fix tho capital appllcablo to tho payment of tho properties to bo acquired should bo taken from tho Individual In-dividual promoting a trust, and placed in the hands of a commission invested with full power to dotormino tho truo value of tho properties. Whence should como tho commission clothed with such supervisory power? Our author replies that tho wldo differences differ-ences in tho corporation laws of tho various states preclude any hope of roliof from that source, and ho maintains main-tains that tho only hope of dealing with tho problem lies with tho fedoral fed-oral government. Would tho solution proposed by him namely, tho appointment ap-pointment of such a federal commission commis-sion as wo havo described, bo practicable prac-ticable and constitutional? Let us glanco, first, at tho question of practicability. prac-ticability. Mr. Cronan insists that, in defining tho figures at which a given corporation might bo absorbed in a trust, but little difficulty would bo experienced ex-perienced In determining tho tangible, active, or llvo assets of tho business. Tho difficulty would como in determining deter-mining tho value of tho good will, trado marks, patents, otc. In tho absence ab-sence of a supervisory power, tho valuation val-uation of tho latter elements of tho property is left wholly to tho promoters pro-moters of tho enterprise. Tho result is that, as a rule, tho capital applicable applic-able to payment is Inflated to a point m.viy times In oxcitt of tho value of tho assets of the corporation to be absorbed. ab-sorbed. It follows that, to enablo tho artificial capital to net tho promoters a substantial roturn, there must bo manipulation of tho prices at which tho products can bo bought and sold, operating unjustly to the producer and consumer, and tho forcing of economics econo-mics resulting In many instances In losses to employees who aro sacrificed i to pave tho way for dividends in order to give tho Inflated stock a market value. Tho legislation proposed by Mr. Cronan would provldo for tho appointment ap-pointment by tho president of a federal fed-eral commission, or for tho enlarging of tho powers of tho present interstate commerce commission, to which all corporations, hereafter formed to do an interstato business, must first apply ap-ply for a certlflcato of capitalization, which shall determine tho value of the prospective corporato property, and fix tho amount of capitalization and tho method of payment for tho samo in tho Issuo of capital stock or bonds. Armed with certificates of capitalization, capitaliza-tion, tho Incorporators might apply to any stato and secure a charter; but no corporation hereafter formed shall havo tho power to transact business without such a certlflcato. Neither should any Increase or reduction of tho capitalization of any existing corporation cor-poration doing an Interstato business bo mado hereafter without tho commissioner's com-missioner's approval. Nor should any corporation hereafter havo tho power to lease, nor in any way acquire, tho property of another corporation without with-out tho commissioner's approval of tho terms on which tho samo is acquired. ac-quired. Touching the constitutionality of his plan, Mr. Cronan has no doubt that tho proposed legislation would bo sustained sus-tained by tho Supremo court of tho United States in view of its frequent decisions defining tho powers of con-gross con-gross under tho constitution to deal with Interstato business. Wo are reminded re-minded that Senator Knox, when attorney-general, said, not long ago, that if congress under tho power to regulate regu-late interstate commerce, may utterly destroy a combination and forfeit its property in interstato transit, as the Sherman act provides, It seems reson-ablo reson-ablo to say that It can, in tho exercise of tho samo power, deny to a combination combina-tion whoso llfo it cannot reach, if tho combination bo tho creature of a stato tho privilege of engaging in interstate in-terstate commerce, except upon such terms as congress may prescrlbo to protect that commerce from restraint. Wo havo said that tho plan hero outlined out-lined for preventing future mergers contemplating an interstate business Is radical in tho sense that it goes to tho root of tho matter. Tho principle Involved, however, is not novel; all that Is novel is tho application of It by congress to interstato business. So far as interstate business is concerned, con-cerned, tho principlo has been on-forced on-forced In many states, particularly in Massachusetts, whore power Is vested in tho boards of railroad commissioners commission-ers and tho gas an electric light commissioners, com-missioners, not only to fix tho issuo of capital, but also to oxerclso general suporvisicn. In that stato railroad commissioners havo authority to recommend rec-ommend transportation rates, together togeth-er wlt,h tho right to appeal to tho legislature leg-islature if such recommendations aro not adopted; whilo tho gas and electric light commissioners havo authority au-thority to fix tho prico charged for lighting. Harper's. |