§ IV. Stock Companies

Stock companies require special consideration, since they have been advanced as an argument in favor of socialism, for the reason that the capital invested in them not rarely produces large gains, although it is almost entirely alienated from the hands of the proprietors or shareholders. Extensive enterprises in commerce, industry, mining, railroads, steamboats, etc., prove remarkably successful in companies or syndicates, although their directors have no personal interest in them.

However, the absence of personal interest is but apparent in these cases. In regard to the subordinate officials of such companies the same rule holds good as in the case of state industries—their own personal interest binds them to their position; and the higher authorities or directors confront the laborers in the capacity of proprietors. But the directors of these syndicates have themselves large interests in the enterprises and are, consequently, concerned for their success and prosperity; for in most cases they are among the chief shareholders, and in case the enterprises are prosperous they obtain larger dividends. Even the subordinate officials of such companies have in many cases a share of the profit. Sincetherefore, the directors have an almost absolute power over the officers appointed and the laborers employed by them, it is easy to perceive the reason why such companies, notwithstanding the apparent sequestration of the capital, should realize large profits.

For the rest, it is a well-known fact that stock companies, compared with private enterprises, are at a disadvantage in regard to economy in the use of raw materials, machinery, etc.; and, consequently, such organizations with small capital are generally unsuccessful. But in the case of large syndicates with extensive capital these disadvantages are counterbalanced by still greater advantages.¹

¹ Cf. Leroy-Beaulieu, Le Collectivisme, p. 348 sqq.

Another essential difference between syndicates and the ideal socialistic organization is the circumstance that in syndicates the directors are rarely changed. The permanence of the directors is a necessary condition for the success of large enterprises. If the direction is often changed there is a lack of unity and system, as the opinions of different directors will rarely be found to coincide. What guarantee would there be for this necessary permanence in the direction of the socialist industrial organizations, since the directors would be chosen and deposed by popular vote, and the principle of the equal rights of all would admit of no permanence in the administration of the more influential offices? Would not the continual changes and experiments be a source of endless disturbances and stoppages of the industrial machinery? But if the supreme directors of industrial organizations are not entrusted with sufficient power, if their decision is made dependent upon the consent of the majority, they are thus deprived of the power necessary for the efficient administration of their offices.