20 PATTERSON—THE PROBLEM OF THE TRUSTS.  [April2, 
they endanger the continuance of our present prosperity. Combi- 
nations of laborers for such purposes are monopolies in restraint of 
trade.! The law should clearly recognize the right of association, 
but it should also require the incorporation and registration of 
labor unions in order that there may be legal responsibility for 
broken contracts; it should, in cases of strikes, impartially enforce 
law and maintain order, and it should sternly repress any attempt, 
by whomsoever made and howsoever made, to hinder men in the 
exercise of their right to work. We find nothing in party plat- 
forms, and we hear nothing from executive officers, legislators or 
candidates for office as to the need of legislative or executive action 
to curb the power of the labor leaders or to restrain the excesses of 
their misguided followers. But we hear much of the need of 
executive and legislative control and regulation of industrial corpo- 
rations. 
It is said, and it is doubtless true, that some industrial organiza- 
tions are over-capitalized. In considering the capitalization of a 
corporation, it must be remembered that whatever be the par of a 
share of stock, that par is not, like the par of a bond, a principal 
obligation, to be discharged in a certain number of dollars, but it 
is only the right to an a@/guot proportion of the net assets of the 
corporation, and it really represents an amount in dollars, more or 
less than its par, in proportion as those assets when liquidated shall 
realize more or less than the aggregate capital of the corporation. 
The market price expresses the investors’ valuation of that represen- 
tation as affected by the demand for and supply of the particular 
stock. 
The authorized capitalization of a corporation is, in general, 
determined by the probable cost of the plant, with the addition of 
the amount of working capital in money necessary for the success- 
ful conduct of the business to be transacted, and sometimes with the 
further addition of a capitalization of the estimated earning 
capacity of the plant. Obviously, the issued capital should not, in 
_a properly managed corporation, exceed at any time the actual 
value of the plant and working capital as determined by present 
and not prospective earning capacity. In other words, there 
should be no watered stock. 
1 In re Debs, 64 Fed. Rep., 724, 745, 7553 158 U. S., 564; Zhe Law of 
Contracts in Restraint of Trade, with Special Reference to Trusts, by George 
Stuart Patterson, Esq. 
