FACTS FOR INVESTORS.

Auckland Star, Volume LX, Issue 46, 23 February 1929, Page 4

FACTS FOR INVESTORS.

EXPLOITING THE PUBLIC,

USE OF DIRECTORS' NAMES,

hi a recent issue the "Mercantile Gazette" draws attention to a weakness in the system of company promotion whereby names of prominent citizens arc utilised to assist in attracting the general public as investors. The "Gazette'' says:— "During the past dozen years we have kept on file the prospectuses oi most public companies registered iu New Zealand which have appealed to the public for capital, and, recently, when going through the list, we were forcibly struck with the high mortality rate of the companies concerned. This partieulail.\ applies in the case of new companies formed with the idea of exploiting patents and patented processes. In most instances we regret to state that the names of wellknown and highly respected citizens appear as provisional directors, and, no doubt, it was largely on _ the strength of such men being associated with the enterprises that the average investor responded with his cash. Looking back now upon the position, and in the light, maybe, of wider experience, many of these men regret that their good names were used in this way; but it is a pity that they did not look more closely into the position at the time. "When a man hac had an honoured position for a number 0: years and is going to retire, or is reaching that time oi life when he feels that he can occupy a little of his leisure in other congenial pursuits, he is apt to be flattered when an astute company promoter suggests that lie allow his name to be cited as a director in some company that is to be formed. It is 110 doubt explained to him that his qualifying shares will only represent a few hundred pounds, while his directors' fee aloue will return him 15 to 30 per cent on his investment, apart from the high dividends that the concern is likely to earn. Most business men know the story only too well, and the successful and the more highly esteemed a man is the greater the number of these propositions that are submitted to him/'