CARRYING YOUR BRIDE across the threshold is still very romantic-and no penalty is imposed even though the reason for the ritual has long since disappeared. But in economic life action based on outmoded theory does not go unpunished. We are engulfed in a knowledge explosion which is both cause and consequence of economic, social and technological changes taking place at an unprecedented rate. Those who would prosper in this turbulent environment cannot rely on economic folk-wisdom. In the conditions of modern life, the rule is absolute wrote Alfred North Whitehead . there will be no appeal from the judgment which will be pronounced on the uneducated. The absurd but widely held belief that common stocks should yield more than bonds is a dinosaur idea which will impair the successful management of wealth by those who continue to believe it. For some years now, the Dow-Jones Industrials' yield has been below that of high grade bonds. This has caused much cluckclucking by traditionalist commentators. Sociologists report an incident of a man arrested at a riot who expostulated, You can't arrest me! I have to follow that mob, I'm their leader. Unfortunately, our tuttutting analysts haven't yet realized that if they want to be leaders of investment thought, they had better-it this case-follow the crowd. Nothing is so impotent as an idea whose time has gone. What is this idea whose time has gone? It is the dividend! The objective conditions which gave rise to the idea of the dividend have gone, but the idea itself lingers on. Three basic economic conditions of long ago gave firm support to the significance of the substantial and regular dividend payment. These three conditions were: the absence of income taxes; the virtual absence of financial reporting or disclosure; and the more static nature of the general economy which was then prevalent. Today when a company pays out a dollar in dividends, it automatically requires its shareholders to part with substantial sums-depending on the bracket of the recipient and the state in which he lives-to federal and state governments. At a time when there were no income taxes at all, this heavy penalty on the distribution of corporate wealth in the form of dividends did not exist. It was not, therefore, then a reason against the declaration of dividends. But times have changed. The securities legislation of the early Roosevelt years brought a substantial increase in the scope and regularity of reports on the financial position of major corporations. Partly as a result of the economic crises out of which that legislation grew, and the law itself, a climate of opinion has grown rapidly since that time which has resulted in even those corporations not directly covered by the securities laws making adequate disclosures of their operating results. But 20, 40 or 100 years earlier, virtually nothing was disclosed. The individual who bought a share of stock might well find that one of the few indices-and even here there were pitfalls-of the performance of the corporation was the amount and regularity of dividend payments. Dividends then could serve, for lack of anything much better, as a criterion for judging the value of a stock and the underlying performance of the issuing company. Again, as in the case of income taxes, major changes which have taken place in legal requirements and the general mores of the investment community and the corresponding stockholder expectations, have rendered the dividend as an index of company performance a clumsy and antiquated tool. There are far better methods available for the appraisal of corporate performance and prospects. Today we have an impressive amount of economic growth behind us, and all of us are aware that a substantial amount of additional capital is required for our important corporations to maintain their share of market in a continually expanding economy. The greatest portion of these funds are contributed right now through the reinvestment of earnings. To the extent that a dollar retained in the business as will be seen is a more effective method of financing expansion, that extra efficiency constitutes an argument against the declaration of an increased dividend. Why is a dollar of retained earnings a more effective Joseph Morse is Vice President, Finance, of the Sun Chemical Corporation. He is a frequent lecturer on finance for the American Management Association. Mr. Morse studied both at the Columbia School of Business and the Columbia School of Law where he was named a Kent Scholar.