Evening star., 1921-04-03
By 1. A. FLEMING.

70 n
Stockholders in corporation arr
unauestionably entitled to som nethi' 8
more in the way OF protection to'
their investments than that furnishtt
by, the annual meeting, Away:
sparseIy attended. and the annual re-
pats of directors and officials wht
have been advanced to their pos
tiarS., as insiders largely by the
p&:.y vote.
Shareholders should be taken intt
the confidence of the officials and di'
rectors OF corporation at leas'
quarterly. and even monthly state
ment of business conditions with the
corporation might be made with goot
grace and certainly with due appre'
citation.
Investors in the big corporations
are. perforce. compelled to trust tG
the integrity. good management anc
honesty of the officials of the cor
porations in whose shares they nave
placed their money-as partners In
the business.
AS a real matter of fact the average
shareholder knows little. if anything
about the business affairs of the cor
posed to be working for him. one
NAV at least notice strenuous at
tempts of an oil concern of ques ;ion-
able reputation to strike oil. and may
in these efforts, if futile. rea.lze
where his cash has gone
The first indication of anything
wrong in the affairs of the corpora
ton in which one is interested Is
shown in the gradual drop in the
market quotation of the stock, and
then. Unexpectedly. smashing de-
cline. which emphasizes the degree
of the depression that has developed
Directors should direct.
They should be compelled to retain
q certain amount of stock to hold
their positions.
Any one who thinks that the in
siders in a great corporation whose
business has Slumped. whose inven-
tory has been swollen in an attempt
to maintain work and in anticipation
of an immediate resumption of busi-
ness, necessitating big bank loans,
are so conscientious that they Will
not take advantage of their hrst
knowledge of these affairs to reduce
their holdings. is giving weak human
nature too much credit.
The railroads of the country are
compelled to make weekly and
monthly reports to the Interstate
Commerce Commission. Even this
has not saved them from trouble
and their stocks from the bargain
counter. but at least the sharehold-
ers have been informed of conditions
with fair regularity.
States and the general government
guard the banks Of the nation. The
controller keeps a close touch on
the large number of national banks
and.- through examinations conducted
under his supervision. has prevented
large public loss on the part of either
shareholders or depositors. Directors
must swear to conditions at least
five times a year.
In Washington state banks and
trust companies are similarly guard
ed from misdirection.
Information anent the public utili-
ties Is reasonably easy to obtain, but
. letter from the president OF cor
poration to its shareholders every
two months would not be an unrea-
sonable request.
Insiders are the first out when
unfavorable conditions develop. and
the story Of depression they tell to 70
only after 20 to so point decline
In the market value of their security,
which the directors have avoided.
The greatest corporation in bust
ness in the United States makes
filled orders on its books. This is
one of the reasons why the United
States Steel Corporation is consid-
cred one Of the best managed insti-
tutions in the world. by reason Of
its publicity and its above-b1a.d
did not prevent the stock from go
ing down In the debacle. but its
shareholders were not deceived, as
were some others that might be
named.
AS before stated. directors should
experience in the industry or acquire
II as quickly as possible, and should
he men of sufficient knowledge OF
things economical as to be able to
Judge at least a few weeks ahead
of their market.
1t is not good Judgment to assert
that the slump in business of 1920
was "out Of a clear sky"
1t was nothing of the kind The
sky has not been clear for many and
men understood the character Of the
subsoii under their feets
Every one had a right to know that
Europe was piling up debts in the
United States: that Europe was a
seething turmoil of uneasiness and
unrest: that the nations Of the world.
other than the United States, that
were participants in the world war,
were in serious financial condition.
That the era of reckless extrava-
rance-the sink shirt era as it has
heen called-could not go on unre-
stricted: that poverty stricken Europe
could not continue a supplicant for
credit and get ii. and, therefore. that
there must be a slump, turning
from unwonted activity to depres-
sion.
Industry could not keen up the pace
unless there was market.
Some corporation directors utterly
failed to realize these threats under
the skin of prosperity until they
developed with Q dull fhud
The so-called panics OF 1898 and
,9n7 were neither SO severe nor 80
Vudden." says David Forgan. This
time" he added. I'VE fell from the
heights of seeming prosperity to the
depths of depression almost over
night
But any one accustomed to reading
signs OF the times even fairly well.
should have known that the fall was
past due.
Not . s-eeiAe Plaint.
The above suggestions are not per-
tinent to any single corporation. They
seem to fit in many cases. but are not
intended to particularize in the
IL might suggest. however. that the
average iayman should talk over his
Investments with his banker.
Stockholders go to enormous ex-
rense to protect their client They
furnish all possible statistics and all
reports that are made public. They
Will obtain the current view. OF a
number of leaders on the street but
they rarely give direct advice.
They want you to be responsible
Tor your own action. and therein they
are cautious. for they never share l.,
either gains or losses At that. their
advice might be better than th,,
bankers because thew are eouinna1