VALUATIONS AND BONUSES 153
Here we see ‘freedom and publicity > fully at work. So
long as the method adopted for valuing securities is stated,
and a belief expressed that it is adequate, no more is insisted
upon. The rest is left to the publication of the document ;
and the resultant examination of it by expert critics, in the
business and out of it, which may be taken as sure to follow.
Upon this basis certain traditions have sprung up which
have had such general repute that by many they are believed
to be legal requirements. One of them is that the values
inserted for Stock Exchange securities must in no case exceed
their market value on the closing day of the valuation period
(in the great majority of cases the 31st December). This is
nowhere stipulated. It has been urged that an average value
extending over a reasonably limited period would be a fairer
standard, so as to avoid any temporary depression on one
particular day. There is reasonableness in this suggestion,
but it would have to be acted upon with great care and judge-
ment. Put in its extreme form, the argument for it would be
that supposing the 31st December of any year found the markets
affected by a temporary panic of short duration, which had
little or no ground in actual conditions and quickly passed
away, but which meanwhile heavily affected values, a rigid
adherence to the traditional practice might penalize policy-
holders by reduced distribution, the effect of which would in
most cases endure, so far as they were concerned, for some vears
to come.
There is one object lesson on this point of considerable
interest. As is well known, the wave of depression which
affected all securities during the later war years embraced in
its operation the very loans which the British Government had
contracted to meet war exigencies, and to which, on its earnest
appeal, the Companies had largely subscribed. This was
recognized ; and in 1917 the Board of Trade issued a statement
that no objection would be raised if Government securities,
redeemable at fixed dates, were entered on balance sheets at
their redemption value or cost, whichever should be the less.
Some Companies availed themselves of the offer and some did
