158 BONUS SHARES

were extremely well managed and financed, and
although it still does a most usefuL-work for the
community, its earning power has suffered con-
siderably. But this is only an extreme example of a
system which is reasonable enough if it is not carried
too far. The Canadian Pacific Railway, for instance,
has for many years adopted a very moderate use of
this system, making new issues to its shareholders
on terms rather cheaper than it could have obtained
by a public issue, but not giving away enough to
impair its future seriously in order to make presents
to the existing stockholders by this means. ,By the
continued making of small presents to their con-
stituents the directors of the company have obtained
the support of a very loyal body of stockholders, who
feel that they are being well treated but not pam-
pered. This system of granting a small bonus to
existing shareholders on occasions when the company
has to issue new capital is one which is quite unob-
jectionable as long as it is not abused. If, owing
to the use of it, the directors are encouraged to
finance themselves badly, that is to say, to pay out
of new capital for improvements and extensions
which a more prudent policy would have financed
out of earnings, just because they find that these
issues carrying a small bonus makes them popular
with the stockholders, then the system is being
abused. Otherwise there seems no reason to object
to a measure which keeps the shareholders happy
and does not do any harm to the concern so long as
it is worked in moderation.

Finally, there is a Bonus share or stock which