CAPITALIZATION AND OVERCAPITALIZATION. Of late years there has been a strong tendency toward overcapitalization. The promoters have ordinarily adopted secret methods in the or ganization of their companies, and many of the larger Trusts have not been ready to give much information, even to the stockholders them selves. In consequence, large blocks of stock have at times been unloaded upon the public in prosperous times which have proved to have comparatively little value. It is usually stated by business men that ha", practically no influence upon wages or upon prices of products—that in a comparatively short time the stocks are estimated at substantially their true value, and that in consequence an overissue of stock does little harm. On the other hand, it is asserted by many, and there is certainly reason in their contention, that the overissue of stock by somewhat secret methods gives a decided advantage to those who are man aging the organization, and Wat in many cases without laying themselves open to legal attack the promoters may easily secure from the public much more capital than the actual business would justify. Moreover, even when the organi zation is running, if secret methods are adopted, the directors who know the exact conditions of the business are often tempted to manage the business for their own benefit as dealers in stocks, rather than for the legitimate profit that would come only from manufacturing.
When a company has once been overcapitalized, also, there is naturally and properly a desire on the part of the directors to pay reasonable divi dends to the stockholders. This temptation is at times so great or the pressure from the stock holders themselves is so insistent, that often, es pecially when competition is not severe, prices will be held at rates higher than would be bene ficial to the business in the long run. So, also, efforts to reduce wages may often he attempted temporarily, in order to secure dividends before the next election of directors. While this policy must in the long run prove unwise, and while in the long run stocks will doubtless exchange for something like their actual value, for consider able periods of time, if secret methods are prac ticed, overcapitalization may do harm not only to investors, but also to laborers and to the gen eral consumers.