A Right & a Duty

When a U.S. educator thinks of raising money, his first target is a U.S. corporation. But do corporations have the legal right to give away their stockholders' money? Last week, in a suit brought by a group of stockholders against A. P. Smith Manufacturing Co. (valves and fire hydrants) over a $1,500 gift to Princeton, a New Jersey court answered yes.

The stockholders charged that a company has no right to use its funds for any purpose but furthering the business; in giving money to Princeton, it was violating its contract with its stockholders and depriving them of their property rights in the assets of the company. Judge Alfred A. Stein of the superior court disagreed. Said he: just as a company has the implicit right to advertise its wares, "so in respect of good will, anything that tends to promote with the public a company's good will is a reasonable measure towards the corporate objective of earning profits . . .

"Such giving may be called an incidental power, but when it is considered in its essential character, it may well be regarded as a major . . . corporate power. It is even more than that . . . it amounts to a solemn duty . . . I am strongly persuaded by the evidence that the only hope for the survival of the privately supported American college and university lies in the willingness of corporate wealth to furnish in moderation some support to institutions which are so essential to public welfare, and therefore . . . to corporate welfare. What promotes the general good inescapably advances the corporate weal."

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