-Professor Hadley, of A ale, is known as *one of the ablest publicists of the United -States. Associated with him are other able publicists, and the commission are now dealing with this question. They have had hearings all over the country, and, as far as I can judge, the evidence is all to one effect, and that is that it is absolutely *in the interest of the railroads themselves, of the corporations, of the investors, to have complete regulation and control of securities issued by railroad companies. If you ask me what the ' insurgent ' movement in the United States means, I say it *means a rebellion of the people against -the excessive charges of the railroads and a determined effort to bring about reform. They have come to the conclusion that, to strike the evil at its root, there must be regulation of the finances of the railway. And in the United States it is harder to regulate corporations than it is here; for it is provided under the constitution that in-*vestors must be allowed a fair return on their investment; you cannot injure a man's investment, and if there has been an extravagant issue of securities, the IRailway Commission in the United States is limited by this provision that a reasonable return must be allowed on the investment.
No such law obtains here in Canada fortunately and our commission can Tegulate, but in all fairness the investor ought to be protected and ought to get a reasonable return on his investment. However, before that security issues, it ought to be shown that it is absolutely in the interest of the undertaking, not of some stock operator or Harriman or some one -who wants to make a fortune out of what is called the reorganization of a company. The reason ought to be given and has now to be given in the State of New York, and there is every prospect that the Congress of *he United States will add to the general railway law of that country provisions which will secure control of all railway capital. The same thing has been dealt with by other eminent men in the United States, among them Mr. Woodrow Wilson. "Mr. Woodrow Wilson, Governor of New Jersey, is one of the new type of public men who are coming up in the United "States and Canada ought to watch with "the greatest interest the rise of these new public men in the United States who de-Mr. MACLEAN.
vote themselves to public service; I am glad to say that the legal profession is furnishing the greatest number of these men. Governor Wilson is an excellent sample of this type. At his inauguration as Governor of New Jersey the other day he said that the first thing to which he would devote himself in connection with the legislature of New Jersey would be the regulation of the capitalization of companies chartered in that state. Everybody knows that the State of New Jersey has been abused by men getting corporate powers of every kind with enormous capitalization. The State of New Jersey would give any power to any corporation and give capital by the millions, which onl.t meant water. He is of the opinion that the regulation of the capital of railways must be handled in a scientific way by a well-trained commission, and all the leading magazine articles in the United States dealing with the grievances of the people of the United States in connection with railways have taken the ground that the first essential is the regulation of the capitalization of railways. They have seen that the railway grievance has its origin there, and have come to the conclusion, as was expressed by Mr. Kuhn of the great firm of Kuhn, Loeb & Company, who backed Harriman more than any one else, that the regulation of capital lias got to come. The day when one man like Harriman or the Vanderbilts could reorganize a railway with an enormously increased capital and put the increased stock in his own pocket is over. Harriman's last act in reorganizing the railways of Southern California" and the west was to make such an increase in the stock that the orange and fruit men of California have to-day to pay $12,000,000 of increased railway rates because of his reorganization of the railways he acquired. He accumulated an enormous sum in the four or five years by what he called reorganizing companies, getting control, making a great bond issue which he gave to the public who bought them and then putting the money in his pocket. That is the idea of his gigantic financing for his own benefit, but he had also a good idea of reconstructing and reorganizing railroads and his policy and the policy carried out by his successors has had the effect of greatly improving (ho railways, but at the same time greatly increasing the rates on these railroads so that they have become a public grievance to-day.
Now to bring the case right home to us in Canada and to the people who are served by the Canadian Pacific railway in the east or in the west, I would point out that the Canadian Pacific railway in its original charter was allowed to issue I think $25,000,000 of capital. It has now, according to its statement, $150,000,000 of capital
out. It received from the Governor in Council not long ago authority to issue $50,000,000 more capital and $30,000,000 of that has been issued. The Canadian Pacific railway has to-day a capital stock of $180,000,000. It has of 4 per cent preference stock $55,000,000, and of 4 per cent consolidated debenture stock $136,000,000, or about $200,000,000 in stock and $200,000,000 in debentures and bonds. It still has a right to issue $20,000,000 more under authority given to it by the Governor in Council, two or three years ago. My contention is that a great corporation like the Canadian Pacific railway to-day can finance itself and build every mile of railroad it requires on the issue of 4 per cent debenture stock on which only 4 per cent has to be earned. But they are issuing stock on which 14 per cent has been paid for several years now and that is a tiling which should not be allowed. The Canadian Pacific railway is paying by dividends and bonuses to stockholders on the issue of new stock below the market price, as I can prove by stockholders and the market reports, more than 14 per cent a year on their capital stock. Why should not that money or any new money required by the Canadian Pacific railway be obtained by the issue of 4 per cent debentures if they can float them, and that they can float them is evidenced by the experience in the past. The Canadian Pacific railway is in such a good position to-day that it can put out 4 per cent debentures and get all the money it wants, but instead of doing that it asks to have power to increase its stock. Let me tell you what has happened in regard to this last issue of stock. They came to the Governor in Council and got authority to issue $50,000,000 of stock. If there had been a commission here with full power to investigate, as in New York, they would have gone lo the commission and said: 'We want $50,000,000,' 'What for? For the undertaking? ' ' Yes.' ' Wholly for
the undertaking and no one else?' ' Yes.' When they had proved that that amount was necessary for the undertaking and wras to be devoted to the undertaking, they would ask what form the security was to be in. The road might say: ' Oh, we would like it in stock.' Stock? What about 4 per cent debentures? You have a great many out now and the public are satisfied with them, the investor is satisfied. You must put the securities in the form of 4 per cent debentures or bonds. Under existing conditions they said: ' We want
stock and the government of the day ir the innocence of their hearts, and I knov they are not fully informed as they hav< many things t.o attend to, although the would have avoided the whole responsibi' ity if they had had a public service coir mission, gave them authority to issue $50 000,000 of stock some two years, $30,000,001.
of that stock was put out on the market a short time ago, and it was all allotted to their own shareholders. Every shareholder had a right to take his proportionate share of this new stock. I raised considerable row about it in this House although I had little support, but my complaint had this effect that the Board of Directors of the Canadian Pacific railway decided to make some concession to public opinion and decided at last to issue to their own shareholders at $125, although the market price then was $175, and the law in England is as it is in the state of New York, that if a company issues stock it must issue it at the market price
It is considered a cripie in this country to compel a railway or any corporation that proposes to issue new stock to put it out at the most money it will bring. So, the Canadian Pacific railway which today serves more of the people of Canada than any other railway, is allowed by a law of this kind to sell its shares to its own shareholders at $125 for a hundred dollar share when on the market those shares would be worth $175 each. As a consequence the $30,000,OCX) of shares that were issued put $37,500,000 into the treasury of the company but put $15,000,000 into the pockets of the shareholders as a bonus. That $15,000,000 should have gone into the treasury and been devoted to the purposes of the undertaking. It wTas a breach of public trust, it was a violation of the rights of the people, it was a violation of the rights of the farmers of the west, who are to-day complaining of the freight rates, that that $15,000,000 should be switched away from the purposes of the undertaking and put into the pockets of the shareholders. What is the result? The stock of the Canadian Pacific railway is worth $215 for a hundred dollar share. Why? Because a rumour has gone abroad that another melon is to be cut, that this remaining $20,000,000 of stock is to be issued at an amount below the mar-ktt value and that that money is going to the shareholders as a bonus instead of being concentrated to the reduction of the rates charged by the Canadian Pacific railway to the people of Canada for the transportation of their products. It is a crime against the consumer. It is the man who has to pay for what is transported over the railway, the farmer of the west, the man who raises the grain, or the man who buys it to use it, who has to suffer. He has to pay for this money 'hat the Canadian Pacific railway share-lrlders have unfairly, unjustly, and most mproperly been allowed to put in their *n pockets. I have here a statement * bich I read in the House once before, md which I can read again, in which a shareholder of the railway said that he had