The new era., 1910-12-15

fdenee and Its Stock Went Up.
Are the great fnanciers 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 mer 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 courageous man. The occasion
arose in the purchase Of the Western
Union Telegraph company by the
I American Telephone and Telegraph
company and the man appeared IN
Theodore n. Vail, President of the
purchasing corporation.
1t 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, 1t being widely pointed
out that under the direction of such
men as Theodore N Vail and his as
sociates. the telegraph company was
bound soon to work itself into a po-
sition where 1t could offer the public
far more efficient service than 1t had
ever before been able to offer
But very few months had elapsed
when 1t became apparent to the new
management that a modern and up
to-date appraisal of the company's
assets would make possible 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 appraisaIs of
real estate and securities owned were
made long time ago. II we have
q complete inventory made of every
thing we've got we can announce the
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 tho
task. Their labors lasted over eight
months. Their report and its publi-
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
charge of $5.5s5.oss against sur
plus. Book values of securities held
were reduced to market values, bad
and doubtful accounts were "charg-
ed off." an allowance of $4,000, 900
was made for Depreciation" another
Of 100000 for reserve" and SO on,
until the old surplus OF 1886, 900
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 fve Millions" but 1t 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. It is great national
enterprise. The public is entitled to
the facts"
The report was ordered published
forthwith. Financiers of the old
school and spectators generally were
aghast What would happen? Would
the bottom drop out of Western
Union when the shareholders realiz-
Cd that their property was worth
tlS,000.000 less than they had sup
posed? But the amazing thing
happened. The stock went up and
stayed up. The public had respond
cd to this remarkable display Of
frankness and confidence; to the new
motto. Accuracy and Publicity"
The full significance of the action
Of the new board is stated concisely
by Harper's Weekly in these words:
rs this policy OF publicity and Of
open-handed dealing with sharehold-
ers and public the forerunner Of .
| similar movement on the part of 9TH
or big corporations? Certainly It is
to be hoped that 1t is. In the case
Of these big companies. dependent
upon public patronage and doing busi-
uess under public franchise, can
there be any question Of the right of
the people to know?
That right is being recognized.
1t is recognized now in this epochal
act on the part Of the telephone and
telegraph interests. It Is the dawn
Of new era in corporation finance"
TImeIIness.