JOINT-STOCK COMPANY, an association of individuals who unite to carry out a. particular object of a private nature by each taking and paying for shares in the common. stock. The object of the association may be to manufacture some species of article, to. conduct some branch of trade or commerce, the business of banking or insurance, or in general to do whatever work of a private nature any individual can do; but when the object is to execute a public undertaking, such as a railway, a canal, harbor, or other work of importance, the company is not called a joint-stock company, but a public com pany, and a special act of parliament is required in order to establish it and regulate its. proceedings. In many respects the proceedings of railway, canal, and public companies. resemble those of what are called joint-stock companies. In ordinary circumstances, the capital or stock of a joint-stock company is beyond what any single individual, how ever wealthy, would be able or inclined to adventure; it is mainly on this account that the joining of parties together to undertake risks is expedient and unavoidable; though there may be instances, as in the case of co-operation (q.v.), where a union of small sums. by a large number of persons is for peculiar reasons recommendable. Joint-stock companies are of comparatively modern origin, and they can exist with a chance of success only in a community possessing good business notions and habits, along with a spirit of enterprise, and where there is that degree of mutual confidence which will give stability to the concern. Accordingly, from a concurrence of favorable circumstances, Great Britain has taken the lead in this kind of undertakings, which, however, have also been carried to maturity on a comprehensive plan in the Netherlands and United States. In France this method of commercial association is of more recent growth, and appears. still to require the fostering care of the state.
The usual process of commencing a joint-stock company is to issue a prospectus, detailing the object of the undertaking, inviting the subscription of shares, and specify ing the probable profits. As the proposed company necessarily requires a paid secretary, who is in effect to be its constructer and future attaché, it too frequently happens that in periods of ease in the money market, scheming solicitors and others devise projects of this kind, and induce inexperienced capitalists to take shares; the result often being a collapse of the company, to the loss of all concerned, the projector alone excepted. On
this account scrupulous care is necessary in making such investments, to see that the proposed companies are of gesuine worth, and to be administered by persons of thorough integrity.
Every joint-stock company sets out on certain rules of management, which receive the approval of the shareholders, who name a chairman and board of directors, and these, on being appointed, choose subordinate officials. Whatever be the rules, and also the implied responsibilities, the practice is to allow considerable latitude to the chairman and other directors in conducting the affairs of the company, for they alone are in a position to form a correct judgment on points deeply concerning the character and welfare of the association. As, with the best intentions, the3% may fall. into error, and thereby incur heavy losses of capital, it is reasonable to hold them blameless, miles' chargeable with fraud in their representations • and general dealings. Ordinarily, and with reckless imprudence, shareholders ask no questions. and experience no suspicions as long as they are getting satisfactory dividends—an indifference to consequences which sometimes suffers a severe retribution.
• Joint-stock companies are at best a clumsy and often not very satisfactory method for accomplishing a particular purpose. Conducted by directors or managers with whatever dexterity, they fall immeasurably behind as regards the energy, breadth of calculation, vigilance, and promptitude with which a business may be conducted by a single individual, or by two or three active partners, ready on the instant to take advan tage of every important turn in the market. Unless, therefore, in the exceptional circumstances referred to, and also in gigantic concerns which no single individual or ordinary copartnery would undertake, joint-stock companies are economically inexpe dient.