this (practical) respect it amounts to a debenture. Its practical character as a debenture is shown by the Btated rate of dividends, and where it is " cumulative " that feature adds a further step of assimilation to the ordinary class of debentures. Indeed, in point of practical effect preferred stock is in some respects commonly a more pronounced credit instrument than the ordinary mortgage ; it alienates the control of the property which it represents more effectually than the ordinary bond or mortgage loan, in that it may practically be a debt which, by its own terms, cannot be collected, so that by its own terms it may convey a credit extension from the holder to the issuing corporation in perpetuity. Its effect ia to convey the discretionary control of the material properties which it is held to represent into the hands of the holders of the common stock of the concern. The discretionary management of the corporate capital is, by this device, quite as effectually as by the use of ordinary credit instruments, vested in the common stock, which is held to represent the corporation's goodwill. The discretionary disposal of the entire capital vests in securities representing the intangible assets. In this sense, then, the nucleus of the modem corporate capitalization is the immaterial goods covered by the common stock.'
■ As one ot m&ny illiutraUve caseg, the Rubber Ooodi M&nuf&ctnriDg Compuiy may be taken m a typical iiutaiice of a corporatloo
146 THE THEORY OF BUSINESS ENTERPRISK ■
This method of capitalization, therefore, effects a ^M Bomewhat thoroughgoing separation between the ^| management and the