Finance—Public and Private
An Unhappy Story—The Marconi Report
To the very many instances (unfortunately) of heavy losses suffered by British shareholders in big industrial concerns must now be added that of Marconi's Wireless Telegraph Company, which has been the subject of attention and discussion during the past week. During the last few days shareholders have received two documents inviting their proxies at the meeting to be held on the 15th instant. The directors' report was in their hands on Monday, March 7th, but twenty-four hours earlier the chairman of the sub-committee of the English shareholders, Mr. Charles Nordon, had antici- pated the report by issuing a circular opposing the anticipated proposals of the directors and also soliciting proxies. While, on the one hand, the directors endorsed recommendations by an investigating committee to the effect that the ordinary share capital should be cut by one half, at the same time indicating the names of five new directors, including Lord Inverforth, Mr. Nordon, on the other hand, in his cireular opposed the proposals for reducing the ordinary £1 shares to 10s. and recommended nearly a clean sweep of the present Board, intimating, at the same time, that Lord St. Davids had agreed to accept the position of chairman provided that it was the general wish of the shareholders and that he was supported by a Board of whom he approved.
CONFLICTING PROPOSALS.
With almost complete unanimity the Press has supported the recommendations of the directors and opposed those of Mr. Nordon, basing their conclusions apparently upon the fact that for much of the losses sustained members of the present Board cannot be held responsible; that the directors appointed two first-class auditors to investigate the position and have apparently accepted in Iota their findings and recommendations ; that Senator Marconi, the chairman of the company, supports the present Board, and, finally,-that Mr. Nordon, although in a position to bring forward so important a name as that of Lord St. Davids, was not prepared with 'any precise cut-and-dried -scheme as an alternative to the 'writing down of the capital, although . that, perhaps, ..could hardly have been expected at this juncture from -anyone outside the directorate itself. Moreover, I think that in his anxiety to secure the attention of shareholders twenty-four hours &fore the directors' report was issued, Mr. Nordon allowed zeal to outrun discretion and that it 'would have been better to have had the full official state- -meat first from the directors and then the reply from the ;shareholders' committee, inasmuch as there was an interval of more than a week before the shareholders' 'meeting.
• GIGANTIC LOSSES.
But while not differing from other critics in suggesting that the shareholders may do well to accept-the proposals of the directors, I think that in fairness to Mr. Nordon's Committee it should also be recognized that if ever there was a case when shareholders were suffering under the strongest possible provocation, it is furnished by Mar- coni's Wireless Telegraph Company. As recently as two years ago we have the company issuing Ordinary 11 shares at 27s. 6d., with the most optimistic forecasts, hnd to-day we have the proposal to write these same shares down to 10s. Moreover, I fancy that to shareholders who may have acquired not only these shares but others Ut high premiums, there must be something a little exasperating in the calm reference in the directors' Report to a cutting-down of the Ordinary Shares from $3,750,000 to one-half that amount without any reference to the fact that, in addition to the 23,750,000. Ordinary shares the company had received in premiums an amount totalling over £4,000,000, so that the net loss of investors' Imoncy' (less debentures redeemed) was over £5,500,000. Such losses as these seem to .represent something more Than the ordinary fortunes of war in an industrial under- taking.
DIVIDEND RESUMPTION FORESHADOWED.
Although for two years previously the reports of the company had shown that heavy amounts had had to hE written off assets, it was not until March of last year that the Board came to the conclusion that there must be a special examination into the accounts, and Sir Gilbert Garnsey and the company's auditors were then instructed to prepare such a Report. This was received by the directors on January 20th last, and the losses now being dealt 'with and the recommendations made as to the writing down of the capital constitute the findings and the recommendations of those investigators. If these ari accepted, the directors state that they will be in a-position to recommend the payment of a dividend out of the trading profits earned during 1926 as soon as the accounts for that year are available. . The proposals of the investigators are endorsed by the directors who speak in hopeful terms with regard to the future, though, having regard to the fact that the present Report is only made up to December, 1925, more details with regard to progress in 1926 would, I think, have been helpful at this juncture.
• ADVISORY COMMITTEE REJECTED.
Not only, however, did. the directors act wisely it appointing the investigators last March, in allowing a special small Committee of shareholders privately to inspect the Report when it was issued, and finally, in accepting all its proposals, but they took a further step which is to be commended. The Board was prepared to accept as an Advisory Committee Lord Ashfield, Lord Buckland, Sir Hugo Hirst and Mr. F. A. Szarvasy, and these gentlemen were prepared to act on the condition that any proposals they might make should be reeom. mended to the shareholders by the Board and by the Irish and English Shareholders' Committees. This condition was accepted by the Board, by the Irish Committee and by the Sub-Committee of the Shareholders' Com. mittee. Unfortunately, the main English Committee refused and the Advisory Committee, therefore, declined to act. It seems particularly regrettable that the English Committee should have taken this attitude, because, valuable and impartial as no doubt are the reconunenda, tions of the investigating auditors, such examinations usually have reference to the correctness and soundness of the accounts rather than to the competence or otherwise of the management, and the Advisory Committee cotdd have performed an excellent service to the shareholden by pronouncing on that matter.
Under the circumstances, and in the absence of a more constructive lead from the Shareholders' Committee, shareholders would probably be well advised in supportiug the directors' proposals. But I feel that I cannot in an organ like the Spectator let the occasion pass without observing that while one-half the Ordinary capital of the Marconi Company may be blotted out by resolutions at the forthcoming meeting, there ought not to 'be a blotting out of remembrance- of the colossal losses suffered by body of British shareholders.
ARTHUR W. KIDDY.
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