The Hays free press. [volume] (Hays, Kan.) 1908-1924, 1910-12-10
new ERA IN FINANCE
ACCURACY AND LicITY
PROVES TO BE A POPULAR
MOTTO.

Prompt Response TO Bold Move Of
President VaII.-"Aceuraey" Reduc-
ed Western Unions Surplus $751;
ooo, oOo.@"PubIicIty" Restored Con-
fIdence and Its Stock Went Up.
Are the great f1nanciers Of the
country beginning to see new light?
Time was, until recently in fact, when
the men at the head of the big cor
porations kept their business to
themselves" as far as the law would
allow. Capable men at the head Of the
big concerns, long realized the weak
ness of their position. but what was
needed obviously, as In all great re-
forms, was an unmistakable occasion
and q courageous man The occasion
arose in the purchase Of the Western
Union Telegraph company by the
American Telephone and Telegraph
company, and the man appeared m
Theodore N. Vail, President Of the
purchasing corporation.
It was last December when public
announcement was made that the
Gould holdings of Western Union had
been taken over by the Telephone
company.
On account of the high esteem in
which the management of the tele-
phone company is so generally held,
great things were predicted as a re-
suit Of the absorption of Western
Union. By the press Of the country
the deal" was most favorably COM
mented on, it being widely pointed
out that under the direction of such
men as Theodore N. Vail and his as
soctates, the telegraph company was
bound soon to work itself into a po-
sttion where it could offer the public
far more efficient service than it had
ever before been able to offer.
But a very few months had elapsed
when it became apparent to the new
management that a modern and up
to-date appraisal of the company's
assets would make possible a far
greater degree Of efficiency of oper-
alton. Here" they said to them
selves, we've bought control of this
property and we know it's immensely
valuable, but we don't know just
how valuable. These appraisals of
real estate and securities owned were
made long time ago. If we have
a complete inventory made of every
thing we've got we can announce the
Z facts to the public, start a new set of
books, and begin our responsibility
to stockholders right there"
How Inventory Was Taken.
The most expert accountants and
appraisers to be had were put at the
task. Their labors lasted over eight
months. Their report and it's publ
cation by the company marks an ep-
och in finance.
1t began by recommending an ad
1ustment Of the difference between
the appraised and book values by a
charge Of $5,595,0S9 against sur
/ plus. Book values of securities held
/ were reduced to market values, bad
and doubtful accounts were "charg
ed on" an allowance Of 81, 600 OOC
was made for depreciation" another
OF 100000 for reserve" and so on
until the old surplus of S18,S67. OOC
came down to $5,136, 900.
1t required courage, the publication
OF this statement to stockholders. say
ing in effect: THE property OF
your company has been reval
ued: the surplus isn't nineteen mill
ions, as you have been led to be
Heve, but five millions" but it was
the truth. and President Vail did not
finch. Accuracy ana publicity" he
declared, was essential "The stock
holder has right to know. The
shares of this company are scatter
ed from one end Of the Union to the
other. This is more than a private
corporation 1t is a great nationa
enterprise. The public is entitled t.
the facts"
The report was ordered published
forthwith. Financiers ss the OLD
school and spectators generally wer,
aghast. What would happen? WoulC
the bottom drop out of Western
Union when the shareholders realiz
ed that their property was wortl
$1S.OOO,OoO less than they had SUP
posed? But the amazing thin,
happened. The stock went up AM
stayed up. The public had respond
ed to this remarkable display O
frankness and confidence; to the new
motto, Accuracy and Publicity"
The full significance of the actor
OF the new board is stated concisel,
by Harpers Weekly in these words
rs this policy of publicity and O
open-handed dealing with sharehol6
ers and public the forerunner of
similar movement on the part of ott
er big corporations? Certainly it i
to be hoped that it is. In the cas-
or these big companies, dependen
upon public patronage and doing bus
ness under public franchise, ca
there be any question of the right @
the people to know?
That right is being recognized
1t Is recognized now in this epochs
act on the part Of the telephone an
telegraph interests. It is the daw
OF new era in corporation finance.
Tlmeilness.