MANAGEMENT OF PUBLIC COMPANIES.
ANOTHER. railway company must now be added to the number of those in which the directors stand openly at issue with the great body of the shareholders. As to the merits of the particular pro- position laid before the meeting at the London Tavern on Tuesday last, we have neither information nor opinion. The proposed exten- sion would seem to be a very desirable increase to the territory of the company in question, to the convenience of the public, and we should presume to the revenue of the adventurers ; but we are without any information which would enable us to trust that prima facie estimate ; and, to say the truth, we should be hopeless of ac- acquiring any information, except at an enormous expense. We know well enough, that if we were to seek it from either side, we should have the case of that side, and on the other side we should, of course, have the opposite ease ; each backed by data so well built up and compacted, that an investigation to penetrate the two, and thus obtain a tertium quid having some relation to the real truth, would, we say, be an enterprise of immense cost. A Select Committee of Parliament might attempt it, because then the public would pay the bill. We do not say that the Select Committee would succeed ; experience is against any such supposition. On the question at issue, therefore, we are wholly unbiassed ; but it strikes us as remarkable, that a great incorporation of com- mercial men, having of course a common interest in the proceed- ings of the whole, and governed by fair commercial motives, could exhibit this singular disruption before the public. It is the more remarkable, precisely because the case is not singular; indeed, this species of anarchy is showing, itself here and there with an in- creasing ratio of development. The division of views at the meet- ing in question was doubly complicated. The directors were lay- ing a proposition before the assembled body of shareholders ; they had in their possession a majority of proxies favourable to the proposition, nearly in the ratio of eleven to ten; but when the proposition was put to the vote, it was negatived by at least four- fifths of the meeting present. This is a very strange state of af- fairs. The directors of a public company appear before it with a special proposition ; the outlying shareholders are nearly divided upon the proposition, but upon the whole rather in favour of it ; the shareholders present show an immense majority against it!
We do not know whether the substance of the question at issue in this ease was the same as that which agitates other commercial companies, but we do know that an innocent class of society called "the public," which purchases shares "for investment," en- tertains a rising grudge against the directorial class in regard to the disposal of funds. A man having some small property considers with himself how he shall dispose of it so that it shall be at the
same time most secure and most profitable in yearly revenue. He is told that if he invests it in the Funds it will be as certain as the succession to the crown, but that it will only yield him some three per cent—a very small pittance indeed if the amount itself be not large. He is told that in some branches of trade he may turn over his capital four or five times in the year and get 25 per cent out of it every time, but that it is almost as likely as not that one summer's day he may find neither profit nor capita], the whole having strayed by mistake into the pockets of somebody else. As a kind of middle course, he is told by his intelligent lawyer and adviser, that he may invest it in some shareholding company, where he will get a return for his money between common trading and Government trading. He obtains the prospectus of the company, and invests his money, say for a particular line of railway ; he sees that it will cost so much to make the line, so much to work it; and he calculates a certain dividend upon his capitaL His money is paid in; his dividend is paid to him on quarter-day, and he feels that he is safe for the re- mainder of his life. But some time after this, a special meeting of the shareholders is called, and the directors propose that, instead of paying so much dividend due to the shareholders, they shall keep back a certain proportion to make up a fund for a new line in addi- tion to the old, which will ultimately be very profitable and return the incorporation a proportionately larger revenue. The member of "the public" who has bought shares for present income is some- what dismayed at the proposition. It is all very well for the great capitalist, who has large fortunes invested here and there, and whose dividends would only be added to the large balance already at his banker's, to waive his receipts for the particular quarter, or for so many quarters, and so to increase his ulti- mate balance by the proposed enterprise • but what is be- come of the yearly income for that unfortunate member of the public ? he has not found it very easy to get on with his 951., and how is he to manage if he only gets his 421. las.? If he is in business, and has some other resources, probably he has set his dividends against his rent; and now he must find his rent by other means for the next year or so. • He attends the meeting of share- holders to object ; but he finds that a vast number of persons like himself, scattered about the country, have been talked over or written over ; that they have sent their proxies to this or that in- fluential person; that the directors have claimed " the confidence" of their constituents ; and that the meeting is most likely inclined to confirm tlgnproposition as a matter of course. When he looks blank, and t • ks of his tailor's bill, or his rent, the thick-waisted gentleman with warm pockets laughs at him, and tells him that he does not know his own interest. If he perseveres, and raises his voice, he is stigmatized as an obstructive—an eccentric fellow of no account, who has " only " so many shares, by no means the stake in the company that other shareholders possess ; the chair- man " throws himself upon the meeting;" and the contumacious shareholder is hooted down.
So matters proceed for some time, till at last dividends come to be popularly regarded almost as an abstraction, and nothing more than a continually accruing capital available for the directorial elite. The humble shareholders grow discontented, and ultimately a feeling spreads itself amongst that somewhat slighted class the public, that it will be necessary henceforward for every share- holder to look a little more after his own interests, and be present when those interests are put to the vote.
We have entered into no special .questions ; we protest against being supposed to insinuate any judgment against any project whatever ; but we do say that the conclusion to which the pensive shareholder has arrived is a wholesome moral. Irresponsibility from any practical control by shareholders has been all very well for honourable gentlemen with large shares and large ideas; it has been still better for the paid staff, whose position and interests de- pend so very much upon the magnitude and amount of every such incorporation • but the smaller interests of the shareholder have their importance too, and he is beginning to perceive that they are too small for any eyes but his own.
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