The Determination of Stockholder Income.

Abstract The problem of the proper determination of stockholder income hinges upon the concept of the nature of the corporation. In the years that followed, the idea that the corporate form of enterprise constituted an artificial being, in itself apart from its constituent members, grew to a preponderant position not only in legal status, but in accounting and economic thought. If economic significance is measured in terms of total dollars of assets committed to corporate enterprise, the close or private corporation occupies a distinctly secondary position. It is rather the public or widely owned corporation with which we must concern ourselves. The relationship between the corporation and most individual stockholders is in the case of the public corporation only an indirect and ephemeral one. A few owners of concentrated stockholdings exert, as members of the board of directors, a direct influence on management; stockholding for most individuals, however, is just another form of investment. The corporation's financial independence is demonstrated by the fact that about two-thirds of corporate funds are derived from internal sources, undistributed profits, and depreciation and depletion reserves. Furthermore, individuals own not all stock. Corporations own stock of other corporations and often form complex networks of affiliation.