Fifty years in Wall Street

by Henry Clews

Corporations no less than individuals of course have rights which should be scrupulously respected by both our Federal and State legislators. But one defect in corporation legislation by Congress, as well as the States, has often been that it failed to make a sufficient distinction between what may be called private and public corporations. It stands to reason that railway and industrial corporations, and all public utility companies, that have sold their stocks and bonds to the public, and had them admitted to dealings on the stock exchanges should have their condition subjected to stated periodical examinations and publicity which would be uncalled for in the case of smaller corporations that had not marketed any of their securities, and whose earnings and affairs had no interest for the general public.

The railway companies are now required by law to keep their books and accounts in a certain prescribed form under the supervision of the Interstate Commerce Commissioners, and this is the right kind of publicity, for it permits of no cheating, nor of any neglect to comply with the law. The record of each day’s business tells the story and these books and accounts are all the time open to Government inspection. But such regulations would be unreasonable if applied to the small private industrial corporations.

Honestly managed and solvent corporations have nothing to fear from publicity as to their financial condition, although they have a perfect right to guard their trade secrets from publicity, provided they are free from any dishonest or illegal taint. Well and honestly managed public utility corporations are our best protection against municipal ownership, which in this country would be sure to involve political corruption, and probably poor service.

It would be a step towards socialism, and socialism in this country would be antagonistic to our government, our institutions and our national progress, and should be resolutely resisted and frowned upon by all Americans. It is a weed transplanted from the hotbeds of European despotism that can never flourish here, for our soil is entirely unsuited to it.

Publicity at regular intervals of earnings and conditions by railway, industrial and other corporations creates confidence where confidence is merited, while exposing weakness where weakness exists. By eliminating that which is unsound and dangerous, it benefits the sound and the safe, and removes grounds of suspicion injurious to all.

Secrecy is the defense of the weak, and they naturally shirk the light; but the public interests demand that all the large corporations submit to it, and stand or fall according to their merits. This applies to banking and insurance as well as manufacturing, trading and transportation corporations, all, in this respect being in the same class.

To facilitate this publicity and ensure simplicity and accuracy the books and statistics of corporations should be kept in a clear and systematic manner that any examiner could easily understand. I say this because in some large corporation failures that have occurred much irregularity and confusion of accounts was found.

This not only delayed the receivers in ascertaining the amount of the assets and liabilities, but showed that the officers of the failed concerns could not have been very closely conversant with their precise condition when they suspended. Bad, or careless book keeping, accounting and office management has led to many important corporation failures that good work in that department might have averted.

Corporations should therefore, be careful to supervise their clerical forces closely, and also employ accountants to make periodical examinations and audits of their books, for accounting and statistics in these days have been raised to the importance of a science.

Old fogyism, wherever it still exists, should be made to give place to improved and time saving modern methods. These may be small matters to dwell upon, but a close observance of them is necessary to good corporate management in this age of close competition and aggressive enterprise. All that is out of date, or needless, or a drag upon progress, or which handicaps business development should be promptly discarded.