The Taranaki Herald. (DAILY EVENING.) MONDAY, JUNE 3O, 1913. BANK OF NEW ZEALAND.

Taranaki Herald, Volume LXI, Issue 144132, 30 June 1913, Page 2

The Taranaki Herald. (DAILY EVENING.) MONDAY, JUNE 30, 1913. BANK OF NEW ZEALAND.

A± ‘the annual meeting of shareholders -of the Bank of Hew Zealand last weekr the chairman ruled Mr. C. P. Skerrett out of order; when.he -wished do move a- series' of resolutions hearing upon the future policy of the hank. We do not propose to question Mr. Beauchamp’s ruling, for he had legal advice on the point which he was bound to follow, but it is to be regretted that the meeting terminated in the manner it did. The questions of policy are of such importance that they should be decided with the very coolest judgment, and incidents such as that of Thursday last certainly do not conduce to sound judgment. The motions which Mr. Skerrett wished to bring forward were, in effect, that the necessary steps be taken to secure that the £1,000,000 debentures guaranteed by the Government be paid off at maturity in July, 1914; that the capital of the bank bo increased by not less than £2,000,000; and that it is desirable that the representation on the directorate he changed in the direction of giving the shareholders four representatives and the Government two, instead of, as at present, the Government having four and the shareholders only two. In a word, Mr. Skerrett’s idea is' to remove the control of the. bank from the Government to the shareholders. When tho State went to the assistance of the. bank in 1894, by guaranteeing new capital for it to carry on with,, it was only right and proper that the Government should hold the balance of power on the directorate. It had assumed the position of a mortgagee and was bound to safeguard the interests of the State in the most effective manner possible. The original guarantee was for £2,000,000, hut in 1904 one million was redeemed, and at the same time the Government was allowed to take up preference shares to the amount of £500,'000 at par, although at that time the ordinary shares were at a premium of from 40 to 50 per cent. AVith this largo capital interest in the hank, and still being in the position-of a guarantor tothe amount of a million, the Government was bound to retain controlling power. How, however, the hank is in a position to redeem the second million guarantee, and it is the wish of a large body of shareholders to do so and thus free the hank from Government control. Both the Act of 1594 and that- of 1903 contemplated the ultimate redemption of, the Government guarantee by the bank, and we cannot think it was ever intended that the State control should continue after the liaMity was discharged. How, however, there is a proposal that the , million guarantee shall be re-: newed and that the Government, shall retain its present control. In other words, the mortgagee does not want his mortgage paid off, hut prefers to let it remain and so enable him to control the business. The shareholders, i.e., the mortgagors, however, desire to pay off the mortgage and he free to manage their own business. Their desire is perfectly reasonable and fair. The State, it is true,, helped the bank out of a difficulty —not, be it noted, for the hank’s sake, but to save the whole community from the disastrous effects that would have followed the closing of tho bank’s doors. It, cost the State nothing, for the money was only guaranteed, not found by the State, and the in-tereflt-has'been-reguiarlypaihLThe

State 3tan a risk, it i» trtre, Bui it has been amply compensated for Sirs by being allowed to buy shares for £500,000 yfSmh are wnrtb over a million to-day and paying the State ten per cent, on its outlay. Thus it may fairly be claimed that the bank has repaid the State for the assistance given it in 1894 and is fairly entitled to pay off the la st million of its mortgage and resume control of its own business. Whether it would be altogether wise to cut entirely adrift from the State is another question. The case might be met fairly to all parties by allotting to the State, in consideration of its continuing to hold its present share capital, a third instead of tw.o-thicds of the representation ; on 'that the Government owes a duty to depositors to prevent, as far as possible., the bank again drifting into the position it was in twenty ;yeai!B ago, that is met by the fact ttet llia Gwemmeni has the right to appoint tie chief auditor, a tight which it is not suggested should bo recalled, and by the other fact that the Government has the power—through the Gov-ornor-in-Council to veto any resolution .passed by shareholders, which also it is not proposed to alter. It must be assumed that the shareholders are as competent as the Government of the day to make a wise selection of directors; while there is this objection to Government appointees, that they may sometimes be appointed for party reasons rather than for their conspicuous financial ability. We do not suggest that this has happened in the past, but one never knows what may happen in the future, and it is extremely desirable that political considerations shall never enter into the control of the bank. While- approving, therefore, of Mr. Skerrett’s proposals in the main, there is one clause which seems to bo open to serious question. He proposes that the new shares “shall bo offered in the first instance to all the holders of ordinary shares

. at par or on such terms as shall be determined by the resolution of shareholders authorising such increase of capital. ” If the present shareholders "were those who lost their money in the crash of 1893 there might be justification for granting them the bight to take up new shares at ■par, but many of the present shareholders have never lost a ■penny by the bank and there is no reason why they should bo allowed to take up the new issue at par when the ordinary shares are worth a premium of fully 200 per cent. At the same time they cannot be expected to pay the full present market value. A rough and ready adjustment might be made by “splitting the difference.” There is just one other matter which calls for comment. The Government directors are appointed for two years at present* That period is not long enough. Ho man who is without some prior inside knowledge of the working of the bank can possibly do justice to the position in so short a time. A new director wants fully a year to make himself thoroughly acquainted with the business of the bank, so that his period of full usefulness is limited at present to a year. The term should be extended.