THE New Zealand Herald AND DAILY SOUTHERN CROSS FRIDAY, AUGUST 10, 1934 BUSINESS MORALITY

New Zealand Herald, Volume LXXI, Issue 21875, 10 August 1934, Page 10

THE New Zealand Herald AND DAILY SOUTHERN CROSS FRIDAY, AUGUST 10, 1934 BUSINESS MORALITY

The passing of the Companies (Special Investigations) Act will take an important place in the annals of legislation in this country. As an instance of strict and efficient attention to parliamentary duty it deserves long remembrance, and the celerity with which the right thing was done should remain as a shining example. Both Houses had the spur, of course, of a serious position. In the interim report of the Company Promotion Commission was presented an issue that could neither be ignored nor postponed if the economic interests of the country were to be properly served. That commission, appointed to make a general inquiry, inter alia, into the financial structure of investment and trust companies, had found itself without powers to compel production of evidence essential to the completion of its task. It had been baulked by the attitude of a group of companies reluctant to comply with requests to furnish information from their books and documents. Therefore it felt it to be its-duty to make recommendations calculated to remove the obstruction, and accordingly asked for the passage of legislation to ensure a full disclosure of particulars relevant to the inquiry. The situation faced by the commission was, in its expressed opinion, sufficiently grave to demand special consideration. As an outcome, the Government prepared the necessary measure and Parliament accepted it without demur or delay, after opportunity to make itself acquainted with the need. Credit is due to all connected with the passing of the legislation. The commission is entitled to thanks for its recommendation; the Minister of Finance is especially to be commended for his sureness and firmness of touch in handling the request for legislative aid and for his capable presenting of the measure; and all parties in Parliament showed an equal zeal to do the right thing. In particular, having in view the desirability of simultaneous action in Australia, the Minister of Finance deserves credit for the way in which this aspect of the matter had attention. With the means since taken to make the measure immediately operative satisfaction is to be expressed.

Nothing can be said at this juncture concerning the sphere of the task committed to the inspectors Appointed under the Act. That .sphere is outside the range of comment, and there ought not, it is clear, to be the slightest attempt to prejudice their specific inquiries. The task is theirs, and theirs alone. But it is well that the situation creating the task should have its importance emphasised. An economic necessity urges what has been done. Unless what may be called financial orthodoxy—using the term in application to the probity of financial methods, not to any monetary theory—be observed in all business transactions, the whole industrial and commercial good of the community will be jeopardised. At the bottom of the economic fabric is something more than skill, something more vital than the utmost cleverness; it is a confidence created by an assurance of absolute honesty in all dealings. Without this, business will lack stability and investment in it will be robbed of resilience. This fact had recognition in the appointment of the commissioners, and they were rightly concerned when their investigations, at one point, were brought to a halt. So has it been with the passing of the requested legislation: Parliament manifested the moral sensitiveness that is expected of it. Facing it is the requirement to do all possible to lift business back to a prosperous level, and here was a hindrance at the very foundation of the need. General confidence would be shaken if such an inquiry as had been instituted were even momentarily or partially frustrated. Much more was realised to be at stake than technicalities of finance, and the only course morally possible was taken at once.

It is well that prompt action followed the request of the commission. This country is justified in caring for its good name. Sundry happenings elsewhere suggest that in these times of fluid economic conditions there is a special rigk of unrighteous dealing. The risk is never absent, but recent events, associated with the business of investment, indicate that unscrupulous advantage is readily taken of changing circumstances occasioned by marked rises or falls in commerce. Hence the need <to be

vigilantly on guard when periods of fluctuation >are experienced. At present, with a renewal of hope of prosperity, the temptation to try attractive avenues of moneymaking is likely to be particularly ■seductive, and from this temptation the community ought assiduously to protect itself. Nothing could be worse, from the point of view of investors, than a shadow of suspicion that dishonesty is abroad. They cannot afford a setback of this sort. " Opening the abscess " is a phrase that has been much used in Paris of late in connection with one unhappy experience in finance; but New Zealand must see to it that no abscess has here a chance to form. In the steps now taken is a salutary precaution.