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H. L. Stimson A.M. '99, of New York, gave his second lecture on "Federal Control of Corporations" under the auspices of the Graduate School of Business Administration yesterday afternoon.
In the first lecture, given on Tuesday, Mr. Stimson pointed out that the laws regarding this subject are confused and uncertain. They must deal both with the industrial and economic phases of the question as well as with the political and constitutional aspects. Courts have differed on the question as to whether the law should restrict the size of the corporation or whether it should pay attention rather to the use the corporation makes of its size.
It should be remembered that the problem of combination is one that is born of the last century, along with new inventions, and the use of steam and electricity. The fact that modern industry requires so much more capital than formerly eliminates in itself a certain amount of competition. Although there are perfectly justifiable advantages which come from the combination of certain industries before the monopoly stage is reached, the advantages enjoyed by the monopoly in controlling prices and in crowding out small competitors are evils which, although not strictly in violation of present laws, are nevertheless evils which future laws must meet.
Two distinguishing features of the present corporation are the limited liability of its members and the convenience with which it allows the management of business to be concentrated into a few effective hands. The evil of the holding corporation lies largely in the fact that a small number of men direct the policy of a large corporation.
The framers of the Constitution showed wonderful foresight in providing for laws regarding interstate commerce, for corporations have grown since that time from local to national scope. So far as a corporation goes into interstate commerce, the national government is the only government that has any power over it whatever, either to control, regulate, or protect, and with the change of corporations from local to national organization, we have their control coming more and more within the sphere of the federal government where it properly belongs.
Yesterday afternoon, Mr. Stimson analyzed the action of Congress in regard to corporations. There are two methods of treating corporate growth; first, to recognize the necessity of the economic change and to endeavor to regulate and control it; second, to forbid and penalize all combinations. These two methods are diametrically opposed, but Congress, in the Interstate Commerce Act and the Sherman Act, has tried to reconcile them, but without success. When the Sherman Act was passed Congress was aware that an evil existed but did not know how to cope with it. The act was therefore made very vague and the courts were required to interpret it, and by them it has been made to carry too far. There can be no really intelligent legislation on the subject until the public is educated up to it.
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