corporate management of property began when it was found that corporations could borrow. Abuse of the borrowing power is certainly a very common sin among artificial persons, and especially among American railways. When the holders of a small amount of stock, only partially paid in, build a road with borrowed money, the limitation of their liability shields them from personal loss; while their power of voting themselves salaries, and of concluding profitable contracts either with themselves or friends, gives them great opportunities for personal profit irrespective of the success of the road. The last report of the statistician of the Interstate Commerce Commission shows that many of the minor and branch lines of the country have been built wholly with borrowed money—that is, they are bonded to their full cost value. Many of the longer and independent roads are bonded at half to three fourths of their entire capitalization. The total bonded debt of the railroads of the United States is actually greater than the total of their share capital; and this, although the amount of water in the stocks is much larger than in the bonds. As the possession of the majority of the stock gives control over all the capital invested in the roads, it follows, from the figures given in the statistician's report, that the ownership of 81,932,234,128, or 2377 per cent of the total railway capital, insures complete direction over $8,129,787,731 of railway capital, or 136,883·53 miles of line. Massachusetts law forbids the bonding of a road to an amount exceeding the total of paid-up share capital, and this regulation is being introduced by other States. To forbid the issue of bonds that must be sold below par has been found to limit unsatisfactorily legitimate enterprises, but the effect of such a regulation is thought to be good if applied with care to specific classes of corporations. As to what is best in this matter, as in those that have gone before, we need more definite information.
3. How to secure a more representative and more responsible directorate. In regard to the election of directors it may be said that one device to prevent the tyranny of a majority of the stockholders has been frequently tried, and another frequently recommended. The former plan is to limit the number of votes which any one person may cast. In Massachusetts no person except a municipal corporation can vote over one tenth of the capital stock of a railroad corporation. The trouble with this plan, and the variations of it that have been tried, is that evasion is too easy. Dummy stockholders are very easy to manufacture, and it is difficult to unmask them. The much-recommended device for accomplishing a similar purpose is that of cumulative voting. By this device a shareholder is allowed to cast as many votes for any one director as the number of his shares, multiplied by the number of directors to be elected at the given time. Nebraska has a provision
