20 6 PHILANDER C. KNOX 



corresponding asset to represent it. Therefore overcapitaliza- 

 tion is a fraud upon those who contribute the real capital 

 either originally or by purchase, and the efforts to realize 

 dividends thereon from operations is a fraudulent imposition 

 of a burden upon the public. When a property worth a 

 million dollars upon all the sober tests of value is capitalized 

 at five millions and sold to the public, it is rational to assume 

 that its purchasers will exert every effort to keep its earnings 

 up to the basis of their capitalization. When the inevitable 

 depression comes, wages must be reduced, prices enhanced, or 

 dividends foregone. As prices are naturally not increased 

 but lowered in dull periods, it usually resolves itself into a 

 question of wages or dividends. 



While this condition may exist under any circumstances, 

 it is exaggerated by overcapitalization in the illustrating case 

 five to one. The overcapitalization securities enter into the 

 general budget of the country, are bought and sold, rise and 

 fall, and they fluctuate between wider ranges, and are more 

 sensitive in proportion as they are further removed from in- 

 trinsic values, and, in short, are liable to be storm centers of 

 financial disturbances of far-reaching consequence. They 

 also, in the same proportion, increase the temptation to mis- 

 management and manipulation by corporate administrators. 



Corporations and joint stock or other associations, de- 

 pending upon any statutory law for their existence or privi- 

 leges, trading beyond their own state, should be required to 

 do business in every state and locality upon precisely the same 

 terms and conditions. There should be no discrimination 

 in prices; no preferences in service. Such corporations serv- 

 ing the public as carriers and in similar capacities should be 

 compelled to keep the avenues of commerce free and open to 

 all upon the same terms and to observe the law as to its in- 

 junctions against stifling competition. Moreover, corpora- 

 tions upon which the people depend for the necessaries of 

 life should be required to conduct their business so as regularly 

 and reasonably to supply the public needs. They should be 

 subject to visitorial supervision, and full and accurate infor- 

 mation as to their operations should be made regularly at 

 reasonable intervals. Secrecy in the conduct and results of 



