◆ SpookStack

in the reports the mailman brings ‘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- hess is consummated. Behind an array of paper cups and butt-littered ashtrays cowers the director 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. . 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 drama, ‘blood and sweat—and many a stomach ulcer, Usually the making of the annual report 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 broadly the stockholders, the competition and, of course, the union wage negotiators... A product of artistry CCASIONALLY, there emerges from O 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 .. But, God, addressed to both stockholders and em- ployees. Assuming a normal interest and IQ, it can be read without the aid of slide rule or logarithmic 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, ig addition, offers the most informative . breakdown of sales in the histery 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, Georgé 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 MacNeal, writes that, “The publication of a profit- and-loss statement which is complete and truthful in the economic sense must be a rare ac- -cidént.”” And the Amer- ican Institute of <Ac- countants has urged the New York Stock Ex- change to “bring about a better recognition by the investing public of the fact that the balance sheet 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 of 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. 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 accountants 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 li ghtly N close examination, the letter O 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 of 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 McKesson and Robbins swindle which came to light in 1938. Over a period of many years the firm's president, an ex-convict oper- ating under an alias, had defrauded his