GOVERNOR HUGHES AND WALL STREET.
In respect to the present agitation at Albany, as recommended by Governor Hughes, to investigate Wall Street methods, I do not hesitate to say that as the head of the firm of Henry Clews & Co. I am perfectly willing at any time to allow a representative, appointed by either the Federal or State authorities, to examine the books of my firm, as the result of such an examination can reflect nothing but credit on our business methods. I should, however, object and refuse to show, in any instance, the names of our customers, as our relations with them are confidential and will not be betrayed. Ever since our firm was established we have made a practice of issuing notices of purchases or sales to clients, giving in each case the name of the broker from whom bought, or to whom sold. This is now, I believe, the custom in other offices, and is a guarantee that brokers execute the orders on the floor of the New York Stock Exchange.
CHAPTER LXXIV.
NEEDED PUBLICITY AND REFORM IN CORPORATIONS.
Years ago I saw the inevitable end of the methods of some of the unscrupulous managers and manipulators of corporations, and began to agitate the employment of certified public accountants to examine into, and report to the stockholders, the true condition of the companies involved. Had my suggestions been adopted there would have been little cause for the recent investigation by the government officials, as the reform now sought would have been accomplished long before the present stringency of money became a disturbing element all over the world, and would not have led to the semi-panicky conditions which prevailed so disastrously in 1907. An address on “Publicity and Reform,” which I delivered before the Wharton School of Finance, University of Pennsylvania, in April, 1906, includes my urgent adoption of the policy I have referred to, and reads as follows:
We live in a progressive age, and we are at present passing through a period of salutary business reform. This reform means improvement, and business men of all kinds should help and not retard it. The banking, railway, and insurance communities should, in particular, do all they can to promote it and invite the fullest publicity as to their transactions and methods of doing business. In this connection the opposition developed in the New York Legislature to the investigation of the banks was a mistake of judgment, because it was calculated to excite distrust, whereas willingness to submit to thorough investigation would allay it.
This opposition drew more public attention to the agitation for a general bank department examination than would otherwise have been attracted to it, and the unwillingness to submit to it suggested that there was a screw loose, or something to conceal in connection with some of the State banks; and that they were therefore vulnerable to attack, or at least open to criticism. This suspicion those concerned should have avoided by not only boldly facing the legislative music, but inviting it and leaving everything open and above board. Corporations and banking and mercantile firms that become at all objects of suspicion should, in their own interests, speedily clear themselves, by inviting the fullest examination and publicity. Unsoundness and irregularity, if such existed, would thus be exposed and weeded out, instead of being nursed in secret, and so doing harm and impairing confidence in corporations and firms perfectly sound and regular in their methods and practices. The sound concerns would stand better than ever after passing through this ordeal of publicity. The New York Legislature, as well as the Legislatures of the other States, should respond to the popular agitation for publicity by passing laws requiring all corporations, including banks and trust companies, to make at least semi-annual reports of their condition, certified to by registered public accountants, with power invested in the State Superintendents to order special examinations by such accountants, at any time, when deemed necessary; that is, whenever they were suspected of being unsound or irregular in their business methods. This should be done for the protection of others as well as to clear them of suspicion and restore their credit, if found to be sound and straight. Only the insolvent and the crooked would have anything to fear from this wholesome publicity.
In this way disaster might be averted and impaired confidence promptly restored. I lay stress upon the employment of skilled accountants because the certified results of their examinations would be accepted as conclusive of the actual conditions being as they stated or described. They would speak with authority. It should be made a felony for an accountant to make a false or misleading report, and he should ever after be disqualified from practising.
To meet the growing demand for them, every college and university should have a department for the special training of accountants, who on graduating should receive a diploma or degree, as in the medical or legal profession. Already the position held by certified accountants is high, but it should be raised still more by the action of the universities and colleges. Some of these have established departments for accountants, where the students undergo thorough training by men who have had practical experience in the profession, but all institutions of learning ought to have them and maintain them in a high state of efficiency in view of their importance to the business community. The opposition to publicity shown by the New York State banking interest, as represented in the Legislature, where it has choked off probing, has thereby aroused fresh suspicions and much adverse criticism. It is not surprising that many are led to suspect that there is much concealed that ought to be revealed.
The strong desire for secrecy in the management of corporations, especially with life insurance companies, is obviously in defiance of public sentiment, and the Legislature should now make the house-cleaning thorough while it is about it. If it does less it will fail in its duty.