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THE GREEN BAG

diverts attention and thought from actual value. And this brings me to deal with the affirmative reasons for the reform which I propose. Since nominal capitalization has now been in vogue for generations, and since business and law are in large measure adjusted to it, the sensible man doubtless will not greatly interest himself in its abolition merely be cause there is at present no substantial reason for continuing it. Inertia carries one on after new motive force has ceased. I believe, however, that there is a weighty affirmative reason against the system. This reason I have just now and, perhaps, suffi ciently suggested. It is that, under our present laws, attention is not directed to actual value of corporate shares, but is rather diverted from actual value to nomi nal or arbitrary value. Every transaction in stocks compels him who sells and him who buys to think of a nominal or arbitrary value which is of no real use or just signifi cance to either party. It is true that Wall Street brokers, in their accounts for stocks sold or bought, do not bother to note the par value of the stocks, but merely state the number of shares. But par value is always assumed at $100, unless some other par is expressly stated. If now the reform were carried through, the corporation, its pro moters, its stockholders, and those who pro pose to be stockholders, would at every stage have to consider the truth of the case, the actual net value of their property or busi ness. If a corporation has been formed to take over a specific property, it must say that it divides net ownership of that prop erty into so many equal shares, and then, without diversion of attention by any nomi nal par of the shares, it must state the justification for the price at which it is pro posed to sell each of such shares. The true underlying nature of the enterprise would be free from a blurring and often deceiving influence. Public indignation would, after the abolition and prevention of this class of

abuses, be under less natural provocation to punish the just with the unjust. Dema gogy would lose part of its food. A corporation, it ought never to be for gotten, is merely a partnership with two or three modifications. It has, first, a per petual or fixed term of life independent of the individual life or solvency of those who compose it; secondly, it exonerates from personal liability unless as a penalty for violation of the law; and, thirdly, it usually facilitates transfer by any proprietor of the whole or any part of his interest to any other person without consultation with his associates. Except in these two or three features which distinguish a business cor poration from a business partnership, and in the results of them, there is no reason for hostility to corporations which does not really exist against partnerships. Eventhing which tends to obscure the fact that the corporation in reality is a joint venture or partnership with nothing of value except its assets and the ability and character of those who run it, is an injury to truth and to the sound interest of legitimate corpora tions. Either corporations and those who promote them do not or they do influence the public by their capitalizations. If they do, the capitalizations are superfluous and irrelevant; if they do not, then the capitali zations are deceitful. The change we are considering would make impossible accusa tion of such deceit. The burden would be upon the investor of ascertaining actual value; and the liability for misrepresentation of actual value or facts bearing upon actual value would be precisely the same with respect to corporate property as with respect to other property. All the wide-spread and real, and often heated and dangerous, public sentiment about over-capitalized stock, divi dends, and the like, would no longer have real or imaginary food to feed on. If the greatest industrial ^corporation yet known have 14,040,000 shares, the fact would, under this reform, signify to no one anything