BUSINESS ETHICS

New Zealand Herald, Volume LXX, Issue 21554, 27 July 1933, Page 10

BUSINESS ETHICS

CREDIT AND HONOUR SOUND TRADING CANONS LIMITING OVERHEAD COST LORD BLEDISLOE'S ADVICE Sympathy with the beneficent objects and activities of the New Zealand Creditmen's Association and Club was expressed by the Governor-General, Lord Bledisloe, ,in addressing a luncheon gathering under the auspices of that organisation yesterday. Those objects, he said, Mere beneficent alike not only to vendors and purchasers, creditors and debtors, but to the whole economic stability and welfare of the .Dominion. "Tho sanctity of contract is of the very essence of the credit of a nation or an individual," said His Excellenev. "Nations have in recent years discovered a variety of expedients to defeat or modify the degree of debtedness originally contemplated when entering into international obligations. This has not only undermined confidence among friendly peoples, but has materially impaired the strict sense of mutual obligation in the commercial intercourse of their respective nationals Deterrent Forces "Thero are four possible deterrent forces which restrain the average citizen from violating his contractual obligations. The first is his own integrity and sense of honour; the second is the common practice obtaining in his geographical environment and the sphere of society in which he moves; the third is anticipation of the effects of non-fuliilment upon his future" material well-being; and the fourth is tho prospect of legal penalisation of j his default. "The species of control beneficently ! exercised by your association combines the second and the third deterrents to the advantage, not only of the borrower and lender, but of the State also, in that it enhances the reputation for commercial integrity of its citizens, and consequently the readiI ncss of other States confidently to | transact business with it. j "It has no doubt been alleged in some quarters that the work of this | association is an 'interference with the j liberty of tho subject,' a phrase i which used to cause me some alarm i in the days of my early youth, but which, with the lapse of time and riper experience, has evoked an ever-lessen-ing measure of apprehension," continued His Excellency. Regulation ol Liberty "The liberty of the imprudent, the ignorant, the dilatory, the unbusinesslike or the selfish may become a national menace, and if such libertycan be regulated or directed, not by Government interference, but by individual organisation 011 the part of experienced and far-sighted citizens, this cannot fail to conduce to the public benefit. I am particularly impressed bv the recognition on the part of your association of the importance of givers of credit honouring; their credit obligations as well as receivers. "It is truly said that 'short reckonings make lone friends.' It mav, with equal truth, be said that lonecredit undermines sound business, increases the cost of commodities to the public without any benefit to their producers, and, while demoralising the well-to-do, imposes an unfair burden on the poor. The latter, to whom credit is of necessity most sparingly allowed, have to pay relatively ntqre for their goods to compensate for long-deferred payment by their more affluent neighbours, if the trader is to reap a fair reward for his commercial enterprise. Overlong Credit Dangers "Quick turnover and prompt payment are of the very essence of success in modern trading, and conduce materially to the prosperity of the whole community. The trader, therefore, is under an obligation to the nation at large (even if. from his own knowledge or with the helpful counsel of your association, his customer can be trusted ultimately to discharge his trade debts) to limit drastically and inflexibly the period within which credit is allowed. "Traders who, possibly through good nature or through fear of losing a customer, are prone to allow overlong credit are lowering tho canons of orthodox business and are doing real disservice to the whole body politic. Debtors, on tho otjier hand, who, in perfect good faith, enter into obligations which they find that they cannot meet, are wise in their own interests if, instead of drifting into insolvency or mental despair or having to face tho publicity of legal proceedings, thej' meet their creditors, explain their and invite their sympathetic consideration. Frankness ol Debtors Urged "Such a course has in many cases saved the honour and reputation of an imprudent or unlucky customer. Speaking as a former director of one of the large banking corporations of England—one of 'the big five'—l can testify that many a great business firm, which has entered into financial commitments to their bankers which unlooked-for circumstances have prevented their meeting at due date, has been saved from bankruptcy, with resulting shock and dislocation to tho whole fabric of British industry, by a frank disclosure, without undue delay, of its position and consequent sympathetic treatment on tho part of its creditors, founded on their wider knowledge of finance, and 11 clearer vision of the trend of world markets or of the prospective requirements of the trading community. One of the professed aims of vour association is to assist in the reduction the cost ol living by roducing the o\ erhead costs of businesses, through bad debts or otherwise. This is a truly patriotic task, and, one which, under existing world conditions, merits the serious attention of tho whole industrial and commercial communitv if this Dominion is to establish and maintain economic stability 111 a highly competitive world in which not even the Empire, still less one of its component nations, but the world itself is tho unit of commercial activity. "Excessively high overhead costs, whether in productive industry, transport or wholesale or retail trade, have become a burden too heavy for any community comfortably to carry without 'tho prospect of ultimate economic collapse, and least of all in a now, thinly populated country whoso capacity for local commodity consumption is limited, and which is fnr remote from tho great centres of population sens"lt is because your association is cognisant of these matters and is carrying on a most useful educational work in enlightening the trading public regarding them that it has my most earnest good wishes for its eontinuod success," concluded His Excellency. The thanks of the association to His Excellency for his "clear, concise and businesslike address" were ~ expressed by the chairman, Mr. C. J. Tunks, 011 whoso proposal a vote of thanks was earned with hearty acclamation. The function was held in Milne and Chovce's Reception Hall, which was filled" to capacity.