THE DUNLOP UNKNOWN.

Auckland Star, Volume LV, Issue 38, 14 February 1924, Page 7

THE DUNLOP UNKNOWN.

A STRANGE TANGLE REVEALED CROSS ACTIONS IN THE COURT. ! (From Our Own Correspondent.) LONDON, January 1. Financial gossip at the moment is centred on vie allairs of the various Dunlop rubber companies, and while certain matters will be brought into Court this week, and are, theretore, sub judice, a survey of this iamuea company's enterprise will not be out of place. The Dunlop Company, which has a present issued share capital of £20,000,000, is an amalgamation of 14 different companies. It comprises eight very large manufacturing companies and six trading companies. It has a plantation which is one ol the largest in the world; it has a Cotton mill which is the largest in England; besides other great undertakings. It has now, in spite of all its difficulties, Government securities and cash on deposit at its bankers of over £1,000,000. The company has issued a writ against Sir Arthur dv Cros, late M.P. and president of the Dunlop Company, and Mr. James White, the well-known financier, racehorse owner, and theatrical entrepreneur, claiming relief in respect of transactions in which those two defendants are specially concerned. It will be recalled that an investigation arose out of the discovery in 1022 that the company had made what the chairman called the '-appalling loss" of £5,320,000, and the shareholders appointed a committee of investigation, who have spent 18 months of arduous labour in producing their report, 150 pages of close print, dealing exhaustively with the whole question. It is enlightening as to the government of such huge industrial corporations to know that its board of ten members are divided into three classes: (1) The board proper, of five directors, of whom the chairman received £2000 a year and the others £1500 each; (2) the executive members of the board, the managing director, the Continental manager, and the general manager, all paid by service contracts with a fixed salary and a commission on profits; (3) the president and vice-president, who held honorary positions, but held contracts with the company as advisers. The president (Sir Arthur dv Cros) receives £12,000 per annum, free of income tax up to 5/ in the £. The vicepresident received £2500 per annum not Iree of tax, and these contracts have 16 years to run. When a shareholder asked what these huge sums were for, the chairman replied that they were "for advising," and Sir Arthur vVheeler expressed the opinion that the company was very fortunate in having Sir Arthur dv Cros' advice, and that "the money had been well earned." The official circular states that the ■board have challenged the validity of the service agreement under which Sir Arthur dv Cross has been drawing a salary of £12,000 a year, free of tax, and a writ has been issued by him against the company asking for a declaration that the ageement is binding. The shareholders appointed Sir Josiah Stamp and two colleagues on the committee of investigation, and instructed them to inquire into the circumstances under which an issue of 3,000,000 shares was made at a premium of 10/ per share in 1920. Sir Arthur has stated that during the war his friends and associates and others decided to part with their controlling interest in the ordinary shares, and ninetenths of those shares passed to a group of investors, including Mr. F. Ormrod and Mr. James White, who became known as the "Dunlop Pool." The old board, of which the brothers dv Cros were the moving spirits, felt that after a period of long and continuous service they could look to others to supply the fresh energy as well as the fresh capital. They reinvested in the Dunlop Prefs. every penny of the £3,000,000 which they received by the sale of their ordinary shares, and they later supplied £1,500,00*0 of preference capital required for their cotton plantation. The original "Dunlop Pool" did not seek to control the company, but it nominated three directors who were acceptable and helpful to thr old board. The "Pool" took charge of affairs in 1920 according to .Sir Arthur's view, and abandoned the cautious policy of the old board in buying materials ahead, and: under the guidance of specially appointed management committees, embarked on an' ambitious policy. "Forward buying on a tremendous scale was embarked upon, according to bir Arthur, to meet an anticipated extension of business that never came \ pood deal of ill-luck as well as ill-jud" ment attached to these contracts, and the actual raisin? O f the capital of tho American subsidiary company formed when money was to be had fnV th* nek m<:. was found to he very difficult when thp flotation actually took place Sir Arthur said ho represented the lanrert investment, in f rw hand* f n «,» company (ouite f3.nn0.000), and he wel- ' corned the investigation.