The Dominon SATUKDAY, JULY 5, 1813. THE BANK AND THE STATE.

Dominion, Volume 6, Issue 1794, 5 July 1913, Page 4

The Dominon SATUKDAY, JULY 5, 1813. THE BANK AND THE STATE.

The proceedings at tho meeting of shareholders of the Bank of New Zealand yesterday should receive the careful attention of the Government. The case for the shareholders was vory ably stated by Mb. C. P. Skerrett ancl by the shareholders' representatives on the Board of Directors, and every possible point in support of the claims now put forward was clearly and emphatically made. It is generally conceded that the capital of tho bank can with advantage to the institution itself and with benefit to the country generally be substantially increased. This course is not only desirable, but it, would be rendered necessary if at the date of expiry next year the million of Govern-ment-guaranteed stock were paid off, as the bank, is able and anxious to do. It is only just, and wo thiiik it is not disputed, that in any readjustment of the bank's capital the shareholders should receive every reasonable advantage which can fairly bo granted them, in the way of taking up the new share capital and in resuming control of the bank's management. There is a tendency on the part of some of those who are voicing 1 tho views of the shareholders to make undue capital out of tho past misfortunes-of" those holding shares in the bank. It is true, of course, that a fair number of tnose now holding shares did suffer; through tho bank's losses in tho early 'nineties, but tho majority of the present shareholders have no claims to consideration on that account. Moreover, those who have been ablo, to • hold their shares throughout have been to a 1 large extent recouped for their past losses, and have every prospect of being completely compensated by the great development which has taken place in the financial position and earning, power of the bank. We do not wish in any way to underrate their losses, nor to minimise the intense anxiety which many of them must have suffered at tho time of tho bank's threatened collapse, and during the early years, of its recovery. But it is proper that the should be fairly faced from all points of view. It is unquestionably duo to the State that tho bank was able to redeem its position, and its shareholders to recoup themselves for their' earlier losses. State control, it is to be assumed, has been mainly responsible for the highly satisfactoryposition which the institution has now reached, for during recent yoars, when its progress has been most marked, tho controlling influence on the Board of Directors has been the State nominees, who outnumbered the shareholders' representatives there by two to one. In these circumstances the shareholders cannot be accused of any undue sense, of gratitude in the attitude which they adopt towards the State and its nominees on the Board. Nor do we think they are wise in laying so much stress on the fact that the Government camo to the assistance of the bank in the interests of the oountry and not in the interests of shareholders. The shareholders in any case have profited handsomely by the action of the Government. But more important than this is the obvious conclusion that if the Government in 1904 was prompted, and rightly so, to come to the assistance of the bank in the interests of the country, and not to benefit the shareholders, surely in oonsidering the proposals now under review it must bo governed by the same considerations. The bank is so largo and important a factor in the financial and business life of the Dominion 'that in any change affecting its control the Government owes a duty to the peoplo of New Zealand to safeguard their interests in every way; and it is quite possible that in providing those safeguards they may find that the desires of the shareholders run counter, in some directions, to the judgment of the Government and Parliament. In most respects, however, it seems to us that a mutually satisfactory basis of agreement might be arrived at without very much trouble. It must be conceded that the objections raised to the State continuing to nominate a majority of the Board of Directors aro weighty ones, and cannot be lightly passed over. While the bank has so far prospered under dual control, with the Government's nominees dominating the Board, the danger under existing conditions of political influence being exercised to the detriment of. the institution is not au imaginary one. We are not, of course, referring to the present personnel of the lioard, nor do <wo suggest for a single moment that the Massey Government would be likely to abuse its trust in this particular. But, as was pointed out yesterday and at previous meetings, Governments change, and while the Government to-day may be above suspicion, no one can foretell the future. Tho real problem ahead of the shareholders and the Government is to devise a means whereby tho control of thn linnfc can bo returned to the shareholders while.

the State will still be able to reasonably safeguard the interests of the public. The proposals of the shareholders cannot bo said to do this; while the basis of readjustment recommended by the Board of Directors takes it for granted that the State will continue to nominate tlio majority of members constituting the Board. Neither the proposals of the shareholders nor the recommendations of the Board meet the situation in this, the most important question to be decided.