WELLINGTON NEWS

Hokitika Guardian, 1 May 1928, Page 4

WELLINGTON NEWS

DECORATIVE “ GUINEA PIGS.”

(Special to “ Guardian.”)

WELLINGTON, April 28

Tin. term “ guinea pig,” applied to dire, tors, was invented long ago, and is !pv no means it term ol endearment. I ; ut is intended to indicate that the director wallows in gathering guineas for very little services rendered. It is a title conferred humorously and is not deserved in all ease. Directors of joint Stock companies have their responsibilities. although they may appear to sit on them very lightly. Shareholders seldom make mistakes in choosing then directors, hut cases have heen known where, like the fly in the ointment, one wonders how they got there. It is difficult to know what, special qualifications a man requires to he regarded as a useful and efficient director. As ; role with a hoard ol directors, the heaviest work falls upon the chairman hut that is not saying much, for the actual work falls upon the manage, and the secretary. It is the executive officers who do the work, and the I'unc lion of the direstors is to scrutinise and supervise and sign cheques. As ; general rule the members of a hoard ol directors work harmoniously when :■ breach does occur, the bickerings arc generally harmful to the interest ol tin shareholders. Some companies pa; their directors handsomely, hut sue! directors generally have the control o important concerns, and their responsibilties arc great. Other concerns pa\ small fees. Generally a certain amount is allowed for directors’ Ices, and this s cut up between them, the chairman receiving a larger amount than the ithers. Broadly speaking the directors earn their fees very easily, especially ii the executive officers are efficient. It s a question how many directorships i man may hold and render efficient service. In the larger cities of the Dominion there are men who are on the director ite of ten or a dozen companies, and t is obviously impossible that sued men can give that close attention t, the afiairs of all the companies. It would appear that such men deserve the appelation of “ guinea pig.’ Tf Is the honorarium they are after and not the interests of the shareholders or the progress of the company. Share liol,levs, however, are generally apntli■tic. and so long as dividends are iortli lining they do not worry themselves ivcr the constitution of the hoard; hut let. the dividend he withheld or reduced. they display a wonderful interest in the affairs ol the company, and that interest often verifies the old saying ol shutting the stable door after the equine has vanished. It may ho said that ■ guinea pig” directors merely lend their mimes and pocket the lees, hut render little or no service.

We think it was the late -Mr I erali ( | Oolt’V . the company plunger, who first directed attention to the importance of directors’ names, lie was responsible in his day for the dotation of many large capital and well-watered companies. and lie held the opinion that all depended oil the front page ol the prospectus whether the public subscribed for the share or otherwise. On the front page of the prospectus appear the names ol the provisional directors and if the names are owned hv prominent men the gullible public rise to the bait like hungry trout, attracted by the names of the directors and not. by the merits or worth of the proposed undertaking. Since the war the public lias become rather enretu! about taking uj> shares in new companies, and promoters have accordingly become more careful. It is now becoming the rule rather than the exception for the shares of a proposed company or its debentures to he underwritten, and when this is the ease there is some guarantee that the venture is worth while. The underwriters in their own interest iimk,' a thorough and exhaustive examination ot the undertaking, and must he absolutely satisfied that tlie venture will he taken up by the public. The underwriters guarantee the issue of shares, consequently what is not taken up the public must he taken up by the underwriters. There!,ire underwritten shares are the saiest to take up, and the most risky shares to subscribe for are those hawked about town and country by share-pushers who have no interest, whatever beyond earning a commission. For samples ol decorative directors ” one must look to Germany. that wonderful land of efficient organisation. According to the newly issued German 11 Directory of Directors ” Dr Jacob Goldscmidt, of the Darnistaedtcr and National Hank, has established a unique record, for he is a director of 9-1 concerns; Dr Louis Hagen, the Cologne hanker, has a mere (>2 directorships to his credit. The Dromon hanker, Herr Johan I*. Sehroeder, is director of 50 companies; another hanker hold -19 directorships, yet another -18, two hold Id each, and one holds 12. It is obviously quite impossible for one man to keep in touch with the development of so many companies. Ihe position of such directors while remunerative, is described as being only decorative. They are veritable “guinea pigs.”