26 PATTERSON—THE PROBLEM OF THE TRUSTS. [April 2, 
ible,’’ and other ‘‘ assets,’’ and it should compel the publication at 
stated periods of an income account, setting forth the total amounts 
of gross earnings, of operating expenses, interest charges, 
dividends, and undivided profits. It should also protect minority 
shareholders by defining the powers of officers and directors, and 
by requiring due notification of shareholders’ meetings.’ The 
duties imposed upon the corporations and their officers and the 
requirements as to reports should be fixed by law, and should not 
be subjected to the discretion of public officers. If so subjected, 
there will be a possibility of favoritism on the one hand, or of 
political intimidation on the other. 
The officers and directors of a corporation are trustees for its 
creditors and shareholders. It is the duty of such trustees, and the 
interest of their cestud gue trusts, that there should be, on the part 
of the trustees, absolute good faith, and as much frankness as is 
consistent with the protection of the rights of shareholders. No 
other policy will commend the securities of a corporation to the 
favorable consideration of investors. Nevertheless, it is certain 
that no amount of legally enforced publicity will avail to prevent 
unwise investments and consequent loss. ‘Those who may properly 
encounter the risks of investment in industrial securities will not do 
so before they shall have obtained for themselves information as to 
honesty of organization and adequacy of earning capacity. Those 
in whom the haste to become rich, and the disinclination to wait 
for the slow but sure results of industry and frugality have caused a 
fever of speculation, will take the chances and buy for a rise in the 
market without regard to the condition of the corporation, real or 
reported. 
Neither the government, nor the public, nor even the purchasers 
of Trust products provide the capital of the ‘Trusts, but that 
capital is contributed by their bondholders and shareholders. In 
so doing, they are not making investments which are of certain 
return, either in principal or income. As they take the risk of 
loss, they are entitled to security in their business, to protection in 
the use of their properties, and to a return proportioned to the risk 
they have taken and exceeding the current market rate of interest 
upon securities of a higher grade. 
1 1903, Report of the Massachusetts Committee on Corporation Laws, by H. 
M. Knowlton, C. G. Washburn, and Frederic J. Stimson. 
i 
