ed from in practice in this country, and
though not affirmatively recognized in most statutes--the Massachusetts
statute, for instance, carefully avoids providing that the corporation
may own stock in other companies--yet the practice has been universally
ratified by the courts, if not by the implications of legislation. This
new tendency to forbid it therefore is merely a return to common-law
doctrine. Thus,[2] in 1903 only five States--Connecticut, Delaware,
Maine, New Jersey, and Pennsylvania--provided generally that a
corporation might own stock in another corporation; two States--Indiana
and Minnesota--so provided as to manufacturing or mining companies. In
New York, Ohio, and other States, a corporation could only own stock in
another corporation engaged in a similar business, or a business useful
or subsidiary, or in a corporation (New York) with which it was legally
entitled to consolidate; but the tendency of recent legislation is
precisely opposite on this point, forbidding stockholding by all
corporations in similar or competing companies, or more specifically
forbidding stockholding in similar or competing companies, as well as
stockholding by railroads in railroad companies.

[Footnote 1: See below, chap. 16.]

[Footnote 2: MacLeod, p. 203.]

The practice of permitting the free holding of stock by corporations,
and especially by holding corporations, has been undoubtedly harmful
to the public, and to the public morals, and has been the main cause
making possible the speedy acquisition of immense private fortunes.
The stockholding trust or the device by which (as in the Rock Island
Railway system) a corporation is created for the purpose of holding
half the stock of the real corporation and then possibly a third
corporation, still to hold half the stock in the second, each of them
parting with the other half, obviously makes possible the control
of immense properties by persons having a comparatively small real
interest. It is a mere arithmetical proposition, for instance, in the
case mentioned, that whereas in one corporation it takes one-half of
the stock to control it, the first holding company will enable it
to be controlled by one-fourth and the second by one-eighth of the
original stock. Legislation should properly be much more drastic on
this point; but indeed our whole corporation legislation seems rather
to have been drawn by able lawyers with a view of protecting the
corporation or the person wh