the company, and, usually, for which stock certificates have been duly made out and delivered to the subscribers. It is à liability of the company and the subscriptions or the cash and property received should be an equivalent asset.

Full Paid Stock.-Stock which has been subscribed, issued, and fully paid is termed full paid stock, and the words "Full-paid and Non-assessable" should always appear plainly printed upon the face of its certificates.

Treasury Stock. This term is commonly but erroneously applied to unissued stock, or even to stock subscribed but unpaid. Strictly speaking, it is such stock which has been issued, paid for-usually in fulland then by gift or purchase has come back into possession of the company. It may be taken in the name of the treasurer, or of a trustee, or may be held in the name of the corporation itself. In either case it is accounted an asset of the company and may be held or sold at the discretion of the board of directors. When sold below par the purchaser incurs no liability, for the stock if once full paid, remains so. So long as held by the company, it can neither vote nor participate in dividends, but remains lifeless and without rights or powers. It is issued stock, but, being in the treasury. is not outstanding stock. This distinction does not, however, exempt such stock from the franchise taxes imposed under the laws of certain states, as New Jersey and Delaware.

Common Stock.-Stock issued without special privileges or restrictions-general or ordinary stock-is embraced in the term common stock. Unless special stock of some kind is issued by the company, all its stock is common stock. The owner of common stock has the right to attend and vote at all meetings of stockholders, to share in the profits of the business, and on the dissolution of the company, to have his due proportion of the final assets.

Preferred Stock.-This is a stock issued under an agreement that it is to receive a stated dividend from the profits before anything is allotted to the common stock. It is sometimes called guaranteed stock, though

this term is more properly applied to stock issued by one company with a certain dividend guaranteed by another company.

Preferred stock, unlike a bond, does not in any way represent a debt or liability of the corporation. It is merely an investment; its owners are but stockholders; its dividends, while payable before anything is given the common stock, may be paid only out of profits, and the failure of dividends gives no ground of action against the corporation. For these reasons preferred stock, if it can be sold, is much preferable to bonds as a means of raising money. Should the corporation become insolvent, usage as to preferred stock is not uniform. Under the laws of New Jersey and certain other states, should the assets be sufficient, it is redeemed at its face value, after the debts are paid, and before the common stock receives anything.

Watered Stock.-That which purports to represent, but does not represent in good faith, money paid into the treasury of the company, or money's worth actually contributed to the working capital of the corporation, is watered stock. For instance, if a certain stock is paying annual dividends of 10 per cent, as much more stock may be issued, giving each stockholder twice as many shares of stock bearing 5 per cent. Companies having municipal franchises for lighting, water supply, street railways, transportation and other semi-public functions, always, as a matter of policy, issue sufficient "fictitious" stock to keep their dividends down to an apparently low figure. In many cases, corporations judiciously "water" their stock to prevent rivals, or possible competitors, from knowing the real profits of the business.

Generally there is no legal prohibition against the "watering" of stocks, provided no one is defrauded thereby. In many states, however, all such issues of "fictitiously paid-up" stock are prohibited. These statutes, however, are frequently evaded.

Certificates of Stock.-The stock certificate is documentary evidence of ownership of stock in the corporation issuing such certificate, by certifying that the person named therein is the owner of record of a certain

number of shares of the company's stock. The ownership of the stock goes with the certificate and its signed indorsement, but the ownership of record remains with the original holder till the transfer is made upon the books of the company. In the meantime the original holder has power to exercise all the rights of a stockholder. For this reason transfers should be made without delay.

Subscriptions to Stock.-A subscription to the stock of a corporation is an agreement on the part of the subscriber to take a specified number of its shares and if unqualified, is held to mean at par and for cash. Stock subscriptions may be paid in property, and in most of the states, in labor or services when it has been so agreed. Stock may be issued in this way for mines, factories, patent rights, the good will and other assets of a business, and for any other kind of property that might be purchased for cash. The privilege of safely issuing stock for property is often of the greatest importance in the exploitation of mines, inventions and other speculative enterprises. It is so often abused that in some states it is most rigorously hedged about, and any over-valuation is made dangerous for both the officials of the company and the holders of its stock.

STOCKHOLDERS.

The subscribers to the capital stock of a corporation are accounted stockholders even before the permanent organization of the company and the delivery of their stock, and have the right to participate in stockholders' meetings.

Rights of Stockholders.-The individual rights of holders of common stock are, briefly: (1) To participate in stockholders' meetings, in person or by proxy, and to cast one vote for each share of stock held; (2) to participate, according to the amount of stock owned, in dividends; (3) in the event of the dissolution of the corporation, to participate, in due proportion, in any assets that may remain after paying the corporate debts. The individual rights of holders of preferred stock are governed by the conditions of issue which should be inscribed in full on the face of preferred

stock certificates. In the absence of conditions, preferred stock carries all the rights of common stock, including participation in stockholders' meetings and in general dividends after the common stock has received a dividend equal to the preferred dividend.

A stockholder, as such, has absolutely no voice in the management of the company beyond his individual stock vote on matters brought before the stockholders' meetings. The subjects upon which action can be taken at these meetings may be summed up as follows: (1) Adoption or amendment of by-laws, and the passage of resolutions; (2) election of directors; (3) amendment of the charter; (4) dissolution of the company; (5) sale of the entire assets; (6) any vital or radical action; (7) exercise of any statutory or specially conferred charter powers.

BY-LAWS.

By-laws are the permanent rules of corporate action as distinguished from resolutions, which are but temporary in their effect and apply only to the particular occasions for which they are passed.

Sources of Authority.-The general management of a corporation must, as a matter of course, conform to: (1) The constitution and laws of the state of incorporation; (2) the provisions of its charter; (3) the provisions of the common or general corporation law; (4) the regulations of its by-laws; (5) the rules of parliamentary law so far as applicable. In the by-laws it is desirable to collate and repeat the provisions from these several sources that bear most directly on the management and procedure of the corporation.

Irregularities.-Any stockholder or creditor of a corporation has the right to demand the regular and lawful conduct of its business, and hence any irregularities of procedure may lead to legal interference. Many irregularities in corporation organization and procedure are passed over or legalized by the acquiescence or assent of all the parties concerned, as in the waiving of the legal formalities of the first meeting or, as is often the case in small corporations, the formal regulations are quite commonly waived at convenience.

Classification.-By-laws are usually grouped under the following heads: (1) Stock; (2) Stockholders; (3) Directors; (4) Officers; (5) Dividends and Finances; (6) Sundry Provisions; (7) Amendments.

GOVERNMENT SUPERVISION OF CORPORATIONS.

The bureau of corporations as a part of the department of commerce and labor has, as its main purpose, authority "to gather, compile, publish, and supply useful information concerning corporations doing business within the limits of the United States that shall engage in interstate commerce or commerce between the United States and any foreign country, including corporations engaged in insurance." The bureau of corporations has nothing whatever to do with common carriers. It cannot investigate the Standard Oil company's rebate system on railroads nor the operations of tank cars and ships. It cannot touch private car lines nor any subsidiary corporations on railroads by means of which the beef trust, steel trust, and almost every other trust manages to do business to the exclusion of smaller rivals. All that belongs to the interstate commerce commission, and the bureau of corporations is by law forbidden to investigate common carriers.

Trusts. The modern industrial trust is merely a large corporation composed of a number of smaller corporations, enterprises previously separate, and, usually, under independent management.

Cumulative Voting.-Certain states permit the option of "bunching" or distributing votes, at the will of the voter. This is permissible in New York, West Virginia, and Pennsylvania, the constitution of the New York law reading, "That at all elections of directors of such corporation each stockholder shall be entitled to as many votes as shall equal the number of his shares of stock, multiplied by the number of directors to be elected, and that he may cast all of such votes for a single director or may distribute them among the number to be voted for, or any two or more of them, as he sees fit, which right when exercised shall be termed cumulative voting."