THE REPORT SHAREHOLDERS' COMMITTEE BANK OF NEW ZEALAND.

New Zealand Herald, Volume XXV, Issue 9182, 11 October 1888, Page 6

THE REPORT SHAREHOLDERS' COMMITTEE BANK OF NEW ZEALAND.

TO THE EDITOR. Sir, —The report has now been for some time before the public, long enough to enable the opinions of even the London press to be quoted to our newspapers. Of course, the strictures by our New Zealand prints have reached us in fuller comment, and it may be said the subject has been pronounced upon. , . . It is to be regretted that no criticism as to the manner in which the report has been drawn up appeared in time to be transmitted with it to the colonies and England save the few remarks in Mr. Murdochs letter in the Herald of the Bth instant, and which dealt with some of the unfair statements as set forth by the Committee. There can be no doubt that "either too much is disclosed or not enough, as the Canterbury Press says; and it further asks, " Who are the clique with whom we are told there are certain transactions which have come under the notice of the Committee calling for gravest censure, if not for more specific action ? It is necessary that the guilty parties, whoever they are, should be exposed and followed up." Now, the report justifies these remarks, for it has gone forth darkly hinting that there has been little less than swindling going on. It is too late in the day, after the report has been circulated broadcast to shareholders and others, for the Committee to give forth now that no such meaning was intended to be conveyed. It has been conveyed only too evidently, as proved by the public and private comments now in circulation. It becomes necessary, therefore, to see how this has arisen, and it may simplify the inquiry by making a running commentary on the different paragraphs, enlarging upon those which appear to demand condemnation. Nos. 1 and 2 paragraphs are perfunctory. No. 3.—"lnvolving losses which the directors had not faced, but which, upon a rigorous examination, we feel convinced wfll absorb not only the whole of the reserve fund, but also nearly one-third of the paid-up capital of the Bank, £800,000 in all." From this wording an inference may be drawn that the directors had concealed, and but for the Committee would have concealed and not faced the loss. I have not been in the directorate for a year, but on retiring by rotation, it fell to my lot, as the then president, to announce the " no dividend" for the half-year then concluded, and that an appropriation of £125,000 had been made from the reserve fund on account of losses. I understood that further appropriation would have to be made next halfyear. Since that date the Board has certainly faced the necessity, for it asked shareholders to appoint this very Committee to do so, and thus bringing from outside an unprejudiced report, so that those under whose management the losses had arisen should not have any say in the assessment. The " conviction" in the closing sentence that £800,000 will be absorbed remains to be verified, for it is fair to conclude that good care has been taken to make _ the margin so ample that by no probability will any supplementary demand ever require to be asked. And sound policy, too, to have done so. Nos. 4, 5, and 6 may pass without comment. No. 7.—" The principal Australian losses have been made in Sydney and Adelaide, where the selection of managers was in each case, to say the least, unfortunate. In Sydney, after a gambling career long known to most people, the manager was convicted of embezzling the Bank's funds ; and in Adelaide money appears to have been advanced, or rather squandered, in a way which can only be characterised as reckless and disastrous," This has been dealt with by Mr. Murdoch : and I can only further remark that what is true and what is not true seems to be purposely mixed up in a manner to produce an unfavourable impression against the directorate. No. B.— The policy pursued is open to grave censure. Inflated schemes, or pro- | posals coming from, or influenced by, certain persons, appear to have met with ready support by lavish advances to companies and individuals without adequate security or warrantable prospect of advantage, or even safety to the Bank." This may be accepted as a sufficiently ■wholesale accusation and condemnation, but it is only, after all, the individual opinions of the Committee; but it does not follow that what they chose thus to set down in such conclusive language is to be accepted as an infallible judgment. If the accusations are to be read within their strict meaning, the most grave of them receives an extraordinary confutation in the report itself. This grave accusation is again repeated in No. 12, in these significant words : —" The real control of the Bank's policy appears to have been for many years" — remark, many years — "in the hands of a limited circle, with which the late general manager was intimately associated." How has this " policy pursued and open to grave censure " resulted—outside the immediate losses discussed, and brought about solely by the grave depression the colony has been labouring under ? It has resulted "in the goodwill of the Bank's business being of great value" (No. 18). Who built up the Bank's business to make it so, to make it of such value that " firms and persons of the very highest financial standing " (No. 15) in London come forward and say, Do you want money ? here it is for you ; you have a splendid institution—the losses you have made are only " like other banks, now strong and prosperous, and which have had trying episodes in their history" (No. 18). And so much is the future of the institution good, that " 25,000 shares will be offered in London at £1 premium." One report makes it an accusation " that the real control of the Bank's policy appears to have been for many years in the hands of a limited circle with which the late manager was intimately associated." Happy accusation ! the limited circle and manager who guided this policy have handed down an institution "which commends itself to firms and persons of the very highest financial standing" in the metropolis of the world. And the report seeks to damn the good repute of those who have done this. No. 9 requires no comment, which is more than can be said for No. 10.— And, finally, we find that advances have been made to some of the directors upon insufficient security, and from these advances heavy loss has arisen, estimated by us as over £160,000, while certain transactions have come under our notice calling for the gravest censure, if not for more specific action." This certainly of all the paragraphs is the one calling for " gravest censure," to use its own language. The way this paragraph is worded justifies the interpretation which has been put upon it, and simply reads thus :— " Advances have been made to some directors upon insufficient security, that is, upon security known by them to be insufficient, and these advances were sanctioned by the Board, knowing the securities to be insufficient." That the paragraph is so read by the public, the press comments _ prove, for the question is asked, " Is it not possible to recover some of the money thus improperly got hold of?" The Committee may no doubt pronounce, now, that the securities are insufficient, but were they insufficient at the value of the day when the advances were made ? It is easy to sit in judgment and be wise after the event; we can all do that, with or without virtuous indignation ; but let the Committee boldly state that the securities and position of the applicants did not warrant the particular advance, individualise them, and then judgment can be pronounced whether a due precaution was exercised, or whether it was that a director wanted an advance that it was given, and would not have been given to another applicant on said security. The closing sentence of this same No. 10 is certainly the head and front of the offending, and well merits "grave censure," because it forms part of the whole paragraph without break, and therefore must be read as a concluding charge against the " same directors." These are the words " While certain transactions have come under our notice calling" for the gravest censure, if not for more specific action," and which words follow those stating that £160,000 was estimated as the loss arising upon the advances on insufficient security :— so, besides that loss, there was something much worse behind, even requiring "specific action." It is difficult to find fitting words in which to condemn the putting these two statements in juxtaposition, and it will be equally difficult to believe it was not done with malice aforethought. And what was this " transaction ?" I do nob write with authority, but have

reason to believe that all this brutemfulmtn is in allusion to a transaction which, from its inception, was altogether in the Bank's interest, and for the Bank's profit, which io was confidently expected would be large. Unfortunately, it resulted in a loss, and because, in the course of the transaction tho bounds of the Bank's Act had been inadvertently overstepped, the "specific action" intended is to mulct the manager and Board. Would anything have been heard of it had the profit arisen ? No. 11.—"The connection between the Bank and the New Zealand Loan and Mercantile Company." Everyone asks why is thi3 dragged into the report? No. 12.—Question of responsibility, and when did late manager's cease and present manager's begin. Like the last paragraph, it is asked why was this dragged in ? Why was this gauntlet thrown down to create a probable controversy ? The remainder of the report deals solely with the proposed future policy, and speaks for itself, informing the world generally that it cannot do better than invest in an institution the policy of which "appears for many years to have been in the hands of the limited circle and manager," and the result of that policy warranting the Committee in making the recommendation ! It is deeply to be regretted that the report, otherwise valuable and able, should be so utterly wanting in a characteristic which is held in estimation by all rightminded men—manliness ; and it must have been a cruel position if any of the Committee deemed it so and yet had to sign with the majority. Had the colony continued on what was supposed at the time to be a legitimately prosperous career, the Bank's securities would have proved ample cover for the sums advanced. But it piay be said that the bottom of the colony has dropped out in so far as land being a saleable commodity is concerned, and hence the straits which have fallen upon not only the Bank, but the whole community. But for this the 1 Bank would have continued its prosperous course, and no shareholders' committee would ever have existed. Things have gone the other way, kinc iliae lachrymae. While deploring the loss which has fallen upon shareholders, I would ask them to distinguish between error of judgment, which is one thing, and wrong doing,which is a very different thing. I have no wish to evade any share of responsibility which attaches to me whilst holding a seat at tho Bank's board, and, furthermore, I am prepared to justify all my acts while one of its members.—l am, &c., J. Logan Campbell.