undertaking and the risks involved in it. If a capitalist lends his money on insufficient security he gets higher interest. But this higher interest is really not pure interest; it is interest proper together with an additional premium (part of the profit in its narrower sense) paid for the risk run by the man who makes the loan.
In a corporation the work of supervising the undertaking engaged in by the concern is not done by the stockholders, but by paid officers and employes. These officers and employes are always the rich who organize and control it, and they not only eat up all that part of the profits which goes to the capitalist for his work of supervision, but usually a great deal more in the shape of high salaries and incidental expenses. This part of the profit of all of the capital interested goes to the big capitalists only, the small fry get none of it. And if by some chance a small capitalist should get this (which would only be possible in the exceptional case where all stockholders are small men) it would still remain true that only one would get it, and the remaining stockholders would not get that part of the profit which goes to every independent capitalist.
There remains, therefore, to the stockholding capitalist only the interest proper and that part of the profit which goes as compensation for risk. In this respect the stockholding capitalist is placed in the same position as the lending capitalist; the greater the risk involved in holding stock in a certain corporation the greater will be his return (if he gets any), and the smaller the risk the less his return, in the shape of dividends. But the risks which he takes here are not only the risks of the business venture, but also those of dishonest corporate management. Besides, even in the question of the profitableness of the business there is the possibility of fraud, for he is obliged to rely on the judgment of others who may be interested only in the venture to the extent of their ability to draw large salaries. The result of all this is that the prospective stockholder is desirous of investing in a safe corporation, that is to say, in cor-
