of careful governmental control, also uniform, if possible, in all jurisdictions, whereby many of the evils of which complaint is now made may be avoided.

3. The objects of the corporation should be confined within limits definite and certain. The issue of stock and bonds, which has been a matter of so much just criticism and complaint, should be guarded with great strictness. If mortgage bonds seem to be required, they should be allowed only for a moderate fraction of the true cash value of the property that secures them. As for issues of stock, they should be safeguarded in every possible way. They should only be allowed either for the money or for property actually received by the company, and dollar for dollar, and when the property is so conveyed it should be on an honest appraisement of actual value, so that there may be no watering of stock.

4. And finally, there should be a thorough system of reports and governmental inspection, especially as to issues of bonds and stock and the status and value of property, whether corporeal or incorporeal. Yet, at the same time, in the matter of trading and industrial companies, there are legitimate business secrets which must be respected by the general public. In short, we need to frankly recognize the fact that trading and industrial corporations are needed to organize the activities of our country,

and that they are not to be scolded or belied, but controlled, as we control steam and electricity, which are also dangerous, if not carefully managed, but of wonderful usefulness, if rightly harnessed to the car of progress.

APPENDIX B

PRELIMINARY REPORT OF THE INDUSTRIAL COMMISSION

TO THE SENate and House of ReprESENTATIVES, FIFTY-SIXTH CONGRESS :

The act of June 18, 1898, creating the Industrial Commission, authorizes it to "report from time to time to the Congress of the United States. As the subject of "Trusts," or Industrial Combinations, seemed to be one upon which there was pressing demand for trustworthy information, your Commission gave it early attention. Although we have examined sixtytwo witnesses on trust topics, whose testimony is herewith submitted, our inquiry has been limited to eleven of the more prominent, but typical, combinations. This leaves quite a large field for further investigation, but the urgent demand for information leads us to submit what we have in hand at this time. As a result of our investigation of industrial combinations thus far, your Commission are of opinion that certain evils in connection with them should be checked by appropriate legislation. Experience proves

that industrial combinations have become fixtures in our business life. Their power for evil should be destroyed and their means for good preserved. As a result of further investigation on our part, or of further development on the part of the combinations, it may be possible later to propose additional measures for relief without running the risk of increasing the evils. At present we propose the following, which, if severally adopted by the States, or so far as possible by the Federal Government, we are confi. dent will be of great service, and will not endanger business prosperity.

To prevent the organizers of corporations or industrial combinations from deceiving investors and the public, either through suppression of material facts or by making misleading statements, your Commission recommend :

(a) That the promoters and organizers of corporations or industrial combinations which look to the public to purchase or deal in their stocks or securities should be required to furnish full details regarding the organization, the property, or services for which stocks or securities are to be issued, amount and kind of same, and all other material information necessary for safe and intelligent investment;

(b) That any prospectus or announcement of any kind soliciting subscriptions, which fails to make full disclosures as aforesaid, or which is false, should be deemed fraudulent, and the

promoters, with their associates, held legally responsible;

(c) That the nature of the business of the corporation or industrial combination, all powers granted to directors and officers thereof, and all limitations upon them or upon the rights or powers of the members, should be required to be expressed in the certificate of incorporation, which instrument should be open to inspection by any investor.

The affairs of a corporation or industrial combination should be carried on, without detriment to the public, in the interest of its members, and under their lawful control. To this end the directors or trustees should be required:

(a) To report to the members thereof its financial condition in reasonable detail, verified by a competent auditor, at least once each year;

(b) To inform members regarding the method and conduct of business by granting them, under proper restrictions, access to records of directors' meetings, or otherwise e;

(c) To provide for the use of members, before the annual meetings, lists of members, with their addresses, and their several holdings; and

(d) To provide, in whatever other ways may be named in the certificate of incorporation, means whereby the members may prevent the misuse of their property by directors or trustees. The larger corporations-the so-called trusts