The citizen. (Frederick City, Md.) 1895-1923, 1910-12-09
NEW ERA IN FINANCE
ACCURACY AND PUBLIcIra
PROVES TO BE A POPULAR J
MOTTO.

Prompt Response to Bold Nov. "a
President VCiI-"Accuracy" R.duo
ed Western Unions Surplus s1aI
ooo,ooo.-"PubIlclty" Restored CO.
fidence and Its Stock Went Tn.
Are the great f1nanciers Of tho
country beginning to see a new livht ,
Time was, until recently in fact WIZ
the men at the head of the big Co..
porations kept their business a.
themselves" as far as the law woulo
allow. Capable men at the head of tbo
big concerns, long realized the veal
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 tbo
American Telephone and TelegranM
company, and the man appeared ~
Theodore N. Vail, President Of tho
purchasing corporation.
1t was last December when p.aI,o
announcement was made that +bo
Gould holdings Of Western Union haa
been taken over by the Telephone
company
On account Of the high esteem m
which the management of the toIol
phone company is so generally held
great things were predicted az ra.
suit of the absorption of Western
Union. By the press of the country
the deal was most favorably com.
mented on, 1t being widely pointea
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 M.
sltion where 1t could offer the public
far more efficient service than It baA
ever before been able to offer.
But very few months had elapsed
when it became apparent to the new
management that a modern and I'm
to-date appraisal of the comnanvs
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 lust
how valuable. These appraisals OF
real estate and securities owned were
made long time ago. If we have
complete inventory made of every
thing we've got we can announce the
facts to the public, start new set pf
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 publt.
cation by the company marks an ep.
och in finance.
1t began by recommending an ad.
justment Of the difference between
the appraised and book values by a
charge of s5,595,OS9 against sur
plus. Book values of securities held
were reduced to market values, bad
and doubtful accounts were "charg
ed off" an allowance of S2.0000Oo
was made for depreciation, another
OF 100000 for reserve" and SO on
until the old surplus of $1S.S67,OOO
came down to $5,136,000
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.
lieve, 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 a right to know. The
shares of this company are scatter
ed from one end Of the Union to tho
other. This is more than a private
corporation. It is a great national
enterprise. The public is entitled to
the facts"
The report was ordered published
forthwith. F1nanciers of the old
school and spectators generally were
aghast. What would happen? Would
|. the bottom drop out Of Western
Union when the shareholders realif
ed that their property was worm
$1S,0OO,O00 less than they had sup
posed? But the amazing thing
happened. The stock went up and
stayed up. The public had respond.
ed 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 concisey
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 oln'
er big corporations? Certainly 1t Is
to be hoped that it is. In the case
of these big companies, dependen'
upon public patronage and doing Ousr
ness under public franchise, cav
there be any question of the slgnt
the people to know?
THAT right is being recognize,
1t is recognized now in this epocua,
act on the part of the telephone ans
telegraph interests. 1t is the aaNs
Of new era in corporation finance