◆ SpookStack

we fa oe ie es t a ‘ +o a) BE. ;! Meg tort A. om eect ne es RR ee ne ae ( in the reports the mailman bri.,s are whipped into final shape in the pub- lic-relations office of the corporation. There, during annual-report season, one of the classic rites of American busi- ness is consummated. Behind an array of paper cups and butt-littered ashtrays cowers the directcr of public relations. Through the haze he hoarsely argues with himself about the net figures. “It's too much. I can just see the headlines: “All Time Profit’Record Topped Again By... .’ No, we've got to bury it some- where... .” By now his assembled staff is feeble from weeks of this same ' procedure, but not too weak for some- one to remind: “Yeah, but the boss says we got to-show a better earnings ratio than... . Yeah, I know. . . . But, God, when the goddam union sees... . And the League of Women Shoppers called again today. ... Yeah, I know... . Oh, what the hell, pour me another, Harry.” Behind those dull columns of “As- sets” and “Liabilities” there are dram, blood and sweat—and many a stomach ulcer. Usually the making of the annual feport starts with a memorandum ad- dressed to each of the company officers, asking for suggestions. Then the fur starts flying. Smith, with an eye on that soon-to-be-vacant first- vice-presidency, wants it proclaimed to the world that his new synthetic- girdle operation is doing 12.6 percent of the gross but earning 17.2 of the profit, Jones, whose corset operation is going the way of all flesh, would just as soon keep the details unpub- lished. Brown, whom the boys call familiarly “vice-president in charge of finger waving,” mutters some- thing about “why tell the bastards any- thing ?"—the epithet including broad!y the stockholders, the competition and, of course, the union wage negotiators. A product of artistry CCASIONALLY, there emerges from this miasma a real triumph of pub- lic relations over-the hush-hush, or os- trich, attitude. The annual report of the Caterpillar Tractor Company is frankly | | NEW REPUBLIC ¥j -; addressed to both stockholders and em- J ployees. Assuming a normal interest and IQ, it can be read without the aid of slide rule or Icgarithmic tables. It shows how Caterpillar business is re- lated to national trends in business volume, in employment, in wages. The same high standards are to be found in the current Borden report, which, ia addition, offers the most informative. breakdown of sales in the histcry of large corporation reporting. But these are exceptions, The reader who plows through an average report is dealing with the product of artistry rather than of factual technique. A group of extremely shrewd men have tried-to arrive at a compromise which will satisfy the stockholders’ curiosity while revealing no information of vital importance. This practice has led the dean of the American accounting pro- fession, George O. May of Price, Waterhouse and Company, an outstand- ing firm in this field, to warn that one of the great dangers of our present financial setup under the SEC is the mis- taken idea that stockholders are now necessarily better informed than they used to be. Another highly successful public accountant, Kenneth Mac<Neal, writes that, “The publication of a profit- . and-loss statement which is complete and truthful in the economic sense must be a rare ac- cident.” And the Amer- ican Institute of Ac- countants has urged the New York Stack Ex- _ change to “bring about a better recognition by the investing public of the fact that the balance shect of a large corpora- tion does not and should not be ex- pected to show the present values of the assets and liabilities of the corporation.” For those who want to learn how to read annual reports, a guide is of- fered by H. A. Finney, Ph.B., CPA, a noted accountant and teacher with long experience in the preparation cf these documents. He says, “Read them with a grain of salt,” and adds these warnings: 1. Some men are liars. 2. Two equally able and equally hon- est accountants may differ widely. Pe “ WHICH PAGE DO YOU READ? First, as to the ugly matter of lying. Every annual report bears some kind of ; “certification.” This is a sort of invo- cation by the acccuntants who audit the report, and, on the surface, sounds like a promise to tell the truth, the whole truth, and nothing but the truth, so help them God. Once over lightly N close examination, the letter = of certification often reveals what _ the auditcrs do not wish to be held re- sponsible for. Thus in the current GE report the auditor's letter says: “We have examined the balance sheet of the General Electric Company . . . without making a detailed audit of the transac- tions.” This rather frank statement points up the fact that the independent auditors who prepare the annual report often merely review the company’s figures and see to it that they have made no mistakes in arithmetic. And, at that —in the case cf GE-—they want it known that they did not confirm the details; they saw only the gross totals after the corporation's high-level ac countants had finished setting the fig- ures. To take an extreme case of what “certification” may actually mean, remember the famous McKessor and Robbins swindle which came to light in 1938. Over a period cf many years the firm’s president, an ex-convict oper ating under an alias, had defrauded his t TR reenter ee Hien mt Renu: TEE eC epree: ae ese see rant 4 ret ears ; . eran tag gi et a os nin a 1 alte! * eT eee, ‘ aM BY vg eer, ts VO ASL tee RY de id Tare ies es eee eae es at! yea Ty OWE 8 a diss)