Strictly speaking, there is no undertaker or business man in a corporation. His functions of ownership, responsibility, and direction are exercised by the whole body of stockholders through the board of directors and other officers. It is true that in very many, probably in most corporations, one or a very few of the largest stockholders dominate the policies of the concern, and exercise almost as much power and authority as though they were the sole owners. Neither these, however, nor any other officer in a corporation receives profits in the same sense as the independent owner of a business. For their active services the officers of the corporation are given salaries; for the risks that they undergo as owners of the stock they are compensated in the same way as all the other stockholders, that is, through a sufficiently high rate of dividend. For example, in railroads the bonds usually pay from four to five per cent., the stock from five to six per cent. The bonds represent borrowed money, and are secured by a mortgage on the physical property. The stock represents the money invested by the owners, and is subject to all the risks of ownership; hence its holders require the protection which is afforded by the extra one per cent. which they obtain over that paid to the bondholders. While a corporation has no profits in the sense of a reward for directive activity or a protection against risk, it frequently possesses profits in the sense of a surplus which remains after costs and expenses of every kind have been defrayed. These profits are ordinarily distributed pro rata among the stockholders, either outright in the form of an extra dividend, or indirectly through enlargement of the property and business of the company. They are surplus gains or profits having the same intermittent and speculative character as the extra gains which the individual business man sometimes obtains in addition to those profits which are necessary to remunerate him for his labour, and protect him against risks. They are not profits in the ordinary economic sense of the term. FOOTNOTES: [160] "The Wealth and Income of the People of the United States," 158, 160. [161] Idem, p. 218. CHAPTER XVI THE PRINCIPAL CANONS OF DISTRIBUTIVE JUSTICE