222 



SCIENCE. 



[Vol. VII. , No. 161 



favor this growth. The steam-engine gave the 

 large establishment its motive power ; the modern 

 transportation system widened its market ; the 

 development of the joint-stock principle gave it 

 the chance to secure the requisite capital from a 

 number of small investors. Under these circum- 

 stances we have seen factories displace home 

 industry, and large factories crowd out small ones ; 

 we have seen turnpikes give place to local rail- 

 roads, aud local railroads consolidate into vast 

 systems. The factory or the railroad may be 

 owned by a large number of stockholders, but it is 

 controlled by a small number of managers. Each 

 factory or railroad is managed as a unit, against a 

 large number of employees on the one hand, or 

 a large number of shippers on the other. This 

 seriously affects the truth of the assumptions on 

 which the system of free contract is based. 



It has been assumed, that, under a system of free 

 contract, competition would take care of prices, 

 and responsibility would take care of itself. But, 

 as a matter of fact, the large concerns have 

 managed to lessen their responsibility as their 

 power increased ; while competition has become 

 so uncertain or spasmodic in its action as not to do 

 the work which was expected of it. Each of these 

 points requires detailed explanation. 



In the first place, the way in which these masses 

 of property are held tends to lessen the responsi- 

 bility of the management. 



When a man manages a private business of his 

 own, he is personally liable for all the debts which 

 may be incurred. When he puts his money into 

 the stock of a corporation, he is liable only to a 

 limited extent. His personal risk is greatly re- 

 duced. But this is not all. As corporations grow 

 larger and larger, the proportion of the stock- 

 holders who can take any active part in the man- 

 agement is constantly reduced. The managers 

 become a distinct body, — an inside ring, whose 

 interests may at times diverge from the true inter- 

 ests of the property. This is especially the case 

 where most of the capital has actually been fur- 

 nished by bondholders, to whom the management 

 is not even nominally responsible. Where a man 

 is handling property of his own, he may be trusted 

 to pursue a more conservative policy : where he is 

 handling property of other men, to whom he feels 

 little or no direct responsibility, his policy will 

 often be speculative in the worst sense of the w^ord. 

 While the railroad inflation schemes of 1882 are 

 fresh in our minds, there is no need of going into 

 detailed illustrations of this fact. 



As long as the chance for making money out of 

 such abuses exceeds the chance for holding the 

 management responsible, self-interest will furnish 

 no cure. And these abuses are clearly fostered by 



unlimited freedom of contract on the part of man- 

 agers. The doctrine of ultra viresis a sound though 

 somewhat clumsy protest against such freedom. 

 The English principle, rigidly forbidding the direct- 

 ors to have a personal interest in contracts with 

 the corporation, is equally sound. Even the most 

 strenuous advocates of non-interference must rec- 

 ognize the necessity of some such restrictions on 

 corporate manage ment. 



There are special reasons why it is easy for a large 

 concern to evade much of its responsibility to its 

 employees. The matter of accidents will serve as 

 an illustration. 



Fifty years ago it was usually not hard to 

 place the responsibility, in case of injury, in the 

 conduct of any business. The employer worked 

 among the men. If he gave an order which re- 

 sulted in injury, it was his fault ; if he allowed 

 the machinery to become grossly defective under 

 his own eye, it was Ins fault. Otherwise the fault 

 was with the men to whom the accident occurred. 

 To-day all this has changed. The employer no 

 longer works among the men. He no longer gives 

 his orders direct. He no longer has the chance to 

 see the defects as they arise. If an order results 

 in accident, it is easy for the employer to shift 

 the responsibility upon a subordinate. If the ma- 

 chinery becomes defective, it is easy to prove that 

 the employee had the chance to see it when the 

 employer was not within a hundred yards of the 

 spot. Even when the processes are dangerous, 

 and are known to be dangerous, the employer can 

 frequently relieve himself of all responsibility. 

 The time when the accident occurs will usually be 

 determined by the negligence of some employee. 

 A momentary inadvertence puts a special strain 

 upon the already weakened machinery. A catas- 

 trophe follows, and a number of men are injured. 

 But the employer can show that his machinery 

 was no worse than that of other factories ; that it 

 was the negligence of some employee that occa- 

 sioned the disaster ; that the men knew what 

 risks they were running, and must take the con- 

 sequences. 



This illustrates the danger of unrestricted bar- 

 gain. It is held that the man who accepts employ- 

 ment in an industry which has been danger- in-lv 

 managed, tacitly bargains to take the consequences. 

 The employer is practically relieved from legal 

 responsibility. And yet morally he is the responsi- 

 ble party. To a far greater degree than the 

 employee, he has the knowledge and the power 

 which should prevent the disaster. The law en- 

 ables him to shift his responsibility upon the 

 weaker party. It will not do to say that the 

 employee takes his own risks. It is not a question 

 between employer and employee alone : it is a 



