Essays: Scientific, Political, & Speculative; Vol. 3 of 3 / Library Edition (1891), Containing Seven Essays not before Republished, and Various other Additions.

Believers in the intrinsic virtues of political forms, might draw an instructive lesson from the politics of our railways. If there needs a conclusive proof that the most carefully-framed constitutions are worthless, unless they be embodiments of the popular character—if there needs a conclusive proof, that governmental arrangements in advance of the time will inevitably lapse into congruity with the time; such proof may be found over and over again repeated in the current history of joint-stock enterprises. As devised by Act of Parliament, the ad­min­i­stra­tions of our public companies are almost purely democratic. The rep­re­sen­ta­tive system is carried out in them with scarcely a check. Shareholders elect their directors, directors their chairman; there is an annual retirement of a certain proportion of members of the board, giving facilities for superseding them; and, by this means, the whole ruling body may be changed in periods varying from three to five years. Yet, not only are the characteristic vices of our political state reproduced in each of these mercantile corporations—some even in an intenser degree—but the very form of government, while remaining nominally democratic, is substantially so remodelled as to become a miniature of our national constitution. The direction, ceasing to fulfil its theory as a {53} council formed of members who possess equal powers, falls under the control of some one member of superior cunning, will, or wealth, to whom the majority become so subordinate, that the decision on every question depends on the course he takes. Proprietors, instead of constantly exercising their franchise, allow it to become on all ordinary occasions a dead letter. Retiring directors are so habitually re-elected without opposition, and have so great a power of insuring their own election when opposed, that the board becomes practically a close body; and it is only when the misgovernment grows extreme enough to produce a revolutionary agitation among the shareholders, that any change can be effected. Thus, a mixture of the monarchic, the aristocratic, and the democratic elements, is repeated with such modifications only as the circumstances involve. The modes of action, too, are substantially the same; save in this, that the copy outruns the original. Threats of resignation, which ministries hold out in extreme cases, are commonly made by railway-boards to stave off disagreeable inquiries. By no means regarding themselves as servants of the shareholders, directors rebel against dictation from them; and construe any amendment to their proposals into a vote of want of confidence. At half-yearly meetings, disagreeable criticisms and objections are met by the chairman with the remark, that if the shareholders cannot trust his colleagues and himself, they had better choose others. With most, this assumption of offended dignity tells; and, under fear that the company’s interests may suffer from any disturbance, measures quite at variance with the wishes of the proprietary are allowed to be carried. The parallel holds yet further. If it be true of national ad­min­i­stra­tions, that those in power have the support of public employés; it is not less true of incorporated companies, that the directors are aided by the officials in their struggles with shareholders. If, in times past, there have been ministries who spent public money to secure party ends; there are, in {54} times present, railway-boards who use the funds of the shareholders to defeat the shareholders. Nay, even in detail, the similarity is maintained. Like their prototype, joint-stock companies have their expensive election contests, managed by election committees, employing election agents; they have their canvassing with its sundry illegitimate accompaniments; they have their occasional manufacture of fraudulent votes. And, as a general result, that class-legislation, which has been habitually charged against statesmen, is now habitually displayed in the proceedings of these trading associations: constituted though they are on purely rep­re­sen­ta­tive principles.

These last assertions will surprise not a few. The general public who never see a railway-journal, and who skip the reports of half-yearly meetings which appear in the daily papers, are under the impression that dishonesties like those gigantic ones so notorious during the mania, are no longer committed. They do not forget the doings of stags and stock-jobbers and runaway-directors. They remember how men-of-straw held shares amounting to £100,000, and even £200,000; how numerous directorates were filled by the same persons—one having a seat at twenty-three boards; how sub­scrip­tion-con­tracts were made up with signatures bought at 10s and even 4s each, and porters and errand-boys made themselves liable for £30,000 and £40,000 a-piece. They can narrate how boards kept their books in cipher, made false registries, and refrained from recording their proceedings in minute-books; how in one company, half-a-million of capital was put down to unreal names; how in another, directors bought for account more shares than they issued, and so forced up the price; and how in many others, they repurchased for the company their own shares, paying themselves with the depositors’ money. But, though more or less aware of the iniquities which have been practised, the generality think of them solely as the accompaniments {55} of bubble schemes. More recent enterprises they know to have been bonâ fide ones, mostly carried out by old-established companies; and knowing this, they do not suspect that in the getting-up of branch lines and extensions, there are chicaneries near akin to those of Capel Court; and quite as disastrous in their ultimate results. Associating the ideas of wealth and respectability, and habitually using respectability as synonymous with morality, it seems to them incredible that many of the large capitalists and men of station who administer railway affairs, should be guilty of indirectly enriching themselves at the expense of their constituents. True, they occasionally meet with a law-report disclosing some enormous fraud; or read a Times leader, characterising directorial acts in terms which are held libellous. But they regard the cases thus brought to light as entirely exceptional; and, under that feeling of loyalty which ever idealises men in authority, they constantly tend towards the conviction, if not that directors can do no wrong, yet that they are very unlikely to do wrong.

A history of railway management and railway intrigue, however, would quickly undeceive them. In such a history, the tricks of projectors and the mysteries of the share-market would occupy less space than the analysis of the multiform dishonesties which have been committed since 1845, and the genesis of that elaborate system of tactics by which companies are betrayed into ruinous undertakings which benefit the few at the cost of the many. Such a history would not only have to detail the doings of the personage famed for “making things pleasant;” nor would it have merely to add the misdeeds of his colleagues; but it would have to describe the kindred corruptness of other railway ad­min­i­stra­tions. From the published report of an investigation-committee, it would be shown how, not many years since, the directors of one of our lines allotted among themselves 15,000 new shares then at a premium in the {56} market; how to pay the deposits on these shares they used the company’s funds; and how one of their number thus accommodated himself in meeting both deposits and calls to the extent of more than £80,000. We should read in it of one railway chairman who, with the secretary’s connivance, retained shares exceeding a quarter of a million in amount, intending to claim them as his allotment if they rose to a premium; and who, as they did not do so, left them as unissued shares on the hands of the proprietors, to their vast loss. We should also read in it of directors who made loans to themselves out of the company’s floating balances at a low rate of interest, when the market rate was high; and who paid themselves larger salaries than those assigned: entering the difference in an obscure corner of the ledger under the head of “petty disbursements.” There would be a description of the manœuvres by which a delinquent board, under impending investigation, gets a favourable committee nominated—“a whitewashing committee.” There would be documents showing that the proxies enabling boards to carry contested measures, have in some cases been obtained by garbled statements; and, again, that proxies given for a specified purpose have been used for other purposes. One of our companies would be proved to have projected a line, serving as a feeder, for which it obtained shareholders by offering a guaranteed dividend, which, though understood by the public to be unconditional, was really contingent upon a condition not likely to be fulfilled. The managers of another company would be convicted of having carried party measures by the aid of preference-shares standing in the names of station-masters; and of being aided by the proxies of the secretary’s children too young to write.

That the corruptions here glanced at are not exceptional evils, but result from some deep-seated vice in our system of railway-government, is sufficiently proved by the fact, that notwithstanding the falling of railway-dividends {57} produced by the extension policy, that policy has been year after year continued. Does any tradesman, who, having enlarged his shop, finds a proportionate diminution in his rate of profits, go on, even under the stimulus of competition, making further enlargements at the risk of further diminutions? Does any merchant, however strong his desire to take away an opponent’s markets, make successive mortgages on his capital, and pay for each sum thus raised a higher interest than he gains by trading with it? Yet this course, so absurd that no one would insult a private individual by asking him to follow it, is the course which railway-boards, at meeting after meeting, persuade their clients to pursue. Since 1845, when the dividends of our leading lines ranged from 8 to 10 per cent., they have, notwithstanding an ever-growing traffic, fallen from 10 per cent. to 5, from 8 to 4, from 9 to 3 ¹⁄₄; and yet the system of extensions, leases, and guarantees, notoriously the cause of this, has been year by year persevered in. Is there not something needing explanation here—something more than the world is allowed to see? If there be any one to whom the broad fact of obstinate persistence in unprofitable expenditure does not alone carry the conviction that sinister influences are at work, let him read the seductive statements by which shareholders are led to authorize new projects, and then compare these with the proved results. Let him look at the estimated cost, anticipated traffic, and calculated dividend on some proposed branch line; let him observe how the proprietary before whom the scheme is laid, are induced to approve it as promising a fair return; and then let him contemplate, in the resulting depreciation of stock, the extent of their loss. Is there any avoiding the inference? Railway-shareholders can never have habitually voted for new undertakings which they knew would be injurious to them. Every one knows, however, that these new undertakings have almost uniformly proved injurious to them. Obviously, therefore, railway-shareholders have been {58} continually deluded by false representations. The only possible escape from this conclusion is in the belief that boards and their officers have been themselves deceived; and were the discrepancies between promises and results occasional only, there would be grounds for this lenient interpretation. But to suppose that a railway-government should repeatedly make such mistakes, and yet gain no wisdom from disastrous experiences—should after a dozen disappointments again mislead half-yearly meetings by bright anticipations into dark realities, and all in good faith—taxes credulity somewhat too far. Even, then, were there no demonstrated iniquities to rouse suspicion, we think that the continuous depreciation in the value of railway-stock, the determined perseverance of boards in the policy which has produced this depreciation, and the proved untruth of the statements by which they have induced shareholders to sanction this policy, would of themselves suffice to show the viciousness of rail­way-ad­min­i­stra­tion.

That the existing evils, and the causes conspiring to produce them, may be better understood, it will be needful to glance at the mode in which the system of extensions grew up. Earliest among the incentives to it was a feeling of rivalry. Even while yet their main lines were unfinished, a contest for supremacy arose between our two greatest companies. This presently generated a confirmed antagonism; and the same impulse which in election contests has sometimes entailed the squandering of a fortune to gain a victory, has largely aided to make each of these great rivals submit to repeated sacrifices rather than be beaten. Feuds of like nature are in other cases perpetually prompting boards to make aggressions on each other’s territories—every attack on the one side leading to a reprisal on the other; and so violent is the hostility occasionally produced, that directors might be pointed out whose votes are wholly determined by the desire to be revenged on their opponents. {59} Among the first methods used by leading companies to strengthen themselves and weaken their competitors, was the leasing or purchase of subordinate neighbouring lines. Of course those to whom overtures were made, obtained bids from both sides; and it naturally resulted that the first sales thus effected, being at prices far above the real values, brought great profits to the sellers. What resulted? A few recurrences of this proceeding, made it clear to quick-witted speculators, that constructing lines so circumstanced as to be bid for by competing companies, would be a lucrative policy. Shareholders who had once pocketed these large and easily-made gains, were eager to repeat the process; and cast about for districts in which it might be done. Even the directors of the companies by whom these high prices were given, were under the temptation to aid in this; for it was manifest to them that by obtaining a larger interest in any such new undertaking than they possessed in the purchasing company, and by using their influence in the purchasing company to obtain a good price or guarantee for the new undertaking, a great advantage would be gained. That this motive has been largely operative, railway history abundantly proves. Once commenced, sundry other influences conspired to stimulate this making of feeders and extensions. The non-closure of capital-accounts rendered possible the “cooking” of dividends, which was at one period carried to a great extent. Expenditure that should have been charged against revenue was charged against capital; works and rolling stock were allowed to go unrepaired, or insufficient additions made to them, by which means the current expenses were rendered delusively small; long-credit agreements with contractors permitted sundry disbursements that had virtually been made, to be kept out of the accounts; and thus the net returns were made to appear greater than they really were. Naturally new undertakings put before the moneyed world by companies whose stock and dividends had been thus artificially raised, {60} were received with proportionate favour. Under the prestige of their parentage their shares came out at high premiums, bringing large profits to the projectors. The hint was soon taken; and it presently became an established policy, under the auspices of a prosperity either real or mock, to get up these subsidiary lines—“calves,” as they were called in the slang of the initiated—and to traffic in the premiums their shares commanded. Meanwhile had been developing, a secondary set of influences which also contributed to foster unwise enterprises; namely, the business interests of the lawyers, engineers, contractors, and others directly or indirectly employed in railway construction. The ways of getting up and carrying new schemes, could not fail, in the course of years, to become familiar to all concerned; and there could not fail to grow up among them a system of concerted tactics for achieving their common end. Thus, partly from the jealousy of rival boards, partly from the greediness of shareholders in purchased lines, partly from the dishonest schemings of directors, partly from the manœuvres of those whose occupation it is to carry out the projects legally authorized, partly, and perhaps mainly, from the delusive appearance of prosperity maintained by many established companies, there came the wild speculations of 1844 and 1845. The consequent disasters, while they pretty well destroyed the last of these incentives, left the rest much as they were. Though the painfully-undeceived public have ceased to aid as they once did, the various private interests that had grown up have since been working together as before—have developed their methods of co-operation into still more complex and subtle forms; and are even now daily thrusting unfortunate shareholders into losing undertakings.

Before proceeding to analyze the existing state of things, however, we would have it clearly understood that we do not suppose those implicated to be on the average morally lower than the community at large. Men taken at random {61} from any class, would, in all probability, behave much in the same way when placed in like positions. There are unquestionably directors grossly dishonest. Unquestionably also there are others whose standard of honour is far higher than that of most persons. And for the remainder, they are, doubtless, as good as the mass. Of the engineers, parliamentary agents, lawyers, contractors, and others concerned, it may be admitted that though custom has induced laxity of principle, yet they would be harshly judged were the transactions which may be recorded against them, used as tests. Those who do not see how in these involved affairs, bad deeds may be wrought out by men not correspondingly bad, will readily do so on considering all the conditions. In the first place, there is the familiar fact that the corporate conscience is inferior to the individual conscience—that a body of men will commit as a joint act, that which each one of them would shrink from, did he feel personally responsible. And it may be remarked that not only is the conduct of a corporate body thus comparatively lax, but also the conduct towards one. There is ever a more or less distinct perception, that a broad-backed company scarcely feels what would be ruinous to a private person; and this perception is in constant operation on all railway-boards and their employés, as well as on all contractors, landowners, and others concerned: leading them to show a want of principle foreign to their general behaviour. Again, the indirectness and remoteness of the evils produced, greatly weaken the restraints on wrongdoing. Men’s actions are proximately caused by mental representations of the results to be anticipated; and the decisions come to, largely depend on the vividness with which these results can be imagined. A consequence, good or bad, that is immediate and clearly apprehended, influences conduct far more potently than a consequence that has to be traced through a long chain of actions or influences, and, as eventually reached, is not a particular and {62} readily conceivable one, but a general and vaguely conceivable one. Hence, in railway affairs, a questionable share-transaction, an exorbitant charge, a proceeding which brings great individual advantage without apparently injuring any one, and which, even if traced to its ultimate results, can but very circuitously affect unknown persons living no one knows where, may be brought home to men who, could the results be embodied before them, would be shocked at the cruel injustices they had committed—men who in their private business, where the results can be thus embodied, are sufficiently equitable. Further, it requires to be noted that most of these great delinquencies are ascribable not to the extreme dishonesty of any one man or group of men, but to the combined self-interest of many men and groups of men, whose minor delinquencies are cumulative. Much as a story which, passing from mouth to mouth, and receiving a slight exaggeration at each repetition, comes round to the original narrator in a form scarcely to be recognised; so, by a little improper influence on the part of landowners, a little favouritism on the part of members of Parliament, a little intriguing of lawyers, a little manœuvring by contractors and engineers, a little self-seeking on the part of directors, a little under-statement of estimates and over-statement of traffic, a little magnifying of the evils to be avoided and the benefits to be gained—it happens that shareholders are betrayed into ruinous undertakings by grossly untrue representations, without any one being guilty of more than a small portion of the fraud. Bearing in mind then, the comparative laxity of the corporate conscience; the diffusion and remoteness of the evils which malpractices produce; and the composite origin of these malpractices; it becomes possible to understand how, in railway affairs, gigantic dishonesties can be perpetrated by men who, on the average, are little if at all below the generality in moral character.

With this preliminary mitigation we proceed to detail the {63} various illegitimate influences by which these seemingly insane extensions and this continual squandering of shareholders’ property are brought about.

Conspicuous among these is the self-interest of landowners. Once the greatest obstacles to railway enterprise, owners of estates have of late years been among its chief promoters. Since the Liverpool and Manchester line was first defeated by landed opposition, and succeeded with its second bill only by keeping out of sight of all mansions, and avoiding game preserves—since the time when the London and Birmingham Company, after seeing their project thrown out by a committee of peers who ignored the evidence, had to “conciliate” opponents by raising the estimate for land from £250,000 to £750,000—since the time when Parliamentary counsel justified resistance by the flimsiest excuses, even to reproaching engineers with having “trodden down the corn of widows” and “destroyed the strawberry-beds of gardeners”—since then, a marked change of policy has taken place. Nor was it in human nature that it should be otherwise. When it became known that railway-companies commonly paid for “land and compensation,” sums varying from £4000 to £8000 per mile; that men were indemnified for supposed injury to their property, by sums so inordinate that the greater part has been known to be returned by the heir as conscience-money; that in one case £120,000 was given for land said to be worth but £5000—when it was noised abroad that large bonuses in the shape of preference shares and the like, were granted to buy off opposition—when it came to be an established fact that estates are greatly enhanced in value by the proximity of railways; it is not surprising that country gentlemen should have become active friends of schemes to which they were once the bitterest enemies. On considering the many temptations, we shall see nothing wonderful in the fact that in 1845 they were zealous {64} provisional committee-men; nor in the fact that their influence as promoters enabled them to get large sums for their own acres. If we are told of squires soliciting interviews with the engineer of a projected railway; prompting him to take their side of the country; promising support if he did, and threatening opposition if he did not; dictating the course to be followed through their domains; and hinting that a good price would be expected; we are simply told of the special modes in which certain private interests show themselves. If we hear of an extensive landowner using his influence as chairman of a board of directors, to project a branch running for many miles through his own estate, and putting his company to the cost of a parliamentary contest to carry this line; we hear only of that which was likely to occur under such circumstances. If we find now before the public, a line proposed by a large capitalist, serving among other ends to effect desirable communications with his property, and the estimates for which line, though considered by the engineering world insufficient, are alleged by him to be ample; we have but a marked case of the distorted representations which under such conditions self-interest is sure to engender. If we discover of this or that scheme, that it was got up by the local nobility and gentry—that they employed to make the survey a third-rate engineer, who was ready in anticipation of future benefit to do this for his bare expenses—that principals and agent wearied the directors of an adjacent trunk-line to take up their project; threatened that if they did not their great rival would; alarmed them into concession; asked for a contribution to their expenses; and would have gained all these points but for shareholders’ resistance—we do but discover the organized tactics which, in course of time, naturally grow up under such stimuli. It is not that these facts are particularly remarkable. From the gross instance of the landowner who asked £8000 for that which he eventually accepted £80 for, down to the {65} every-day instances of influence used to get railway accommodation for the neighbourhood, the acts of the landed class are simply manifestations of the average character acting under special conditions. All that it now behoves us to notice, is, that we have here a large and powerful body whose interests are ever pressing on railway extension, irrespective of its intrinsic propriety.

The great change in the attitude of the Legislature towards railways, from “the extreme of determined rejection or dilatory acquiescence, to the opposite extreme of unlimited concession,” was simultaneous with the change above described. It could not well fail to be so. Supplying, as the landowning community does, so large a portion of both Houses of Parliament, it necessarily follows that the play of private interests seen in the first, repeats itself in the last under modified forms, and complicated by other influences. Remembering the extent to which legislators were themselves implicated in the speculations of the mania, it is unlikely that they should since have been free from personal bias. A return proved, that in 1845 there were 157 members of Parliament whose names were on the registers of new companies for sums varying from £291,000 downwards. The supporters of new projects boasted of the numbers of votes they could command in the House. Members were personally canvassed, and peers were solicited. It was publicly complained in the upper chamber, that “it was nearly impossible to bring together a jury, some members of which were not interested in the railway they were about to assess.” Doubtless this state of things was in a great degree exceptional; and there has since been not only a diminution of the temptations, but a marked increase of equitable feeling. Still, it is not to be expected that private interests should cease to act. It is not to be expected that a landowner who, out of Parliament, exerts himself to get a railway for his district, should, when in Parliament, not employ the power his new position gives him to the same {66} end. It is not to be expected that the accumulation of such individual actions should leave the legislative policy unchanged. Hence the fact, that the influence once used to throw out railway bills is now used to carry them. Hence the fact, that railway committees no longer require a good traffic case to be made out in justification for the powers asked. Hence the fact, that railway directors having seats in the House of Commons, are induced to pledge their companies to carry out extensions. We could name a member of Parliament who, having bought an estate fitly situated, offered to an engineer, also in Parliament, the making of a railway running through it; and having obtained the Act (in doing which the influence of himself and his friend was of course useful), pitted three railway companies against each other for the purchase of it. We could name another member of Parliament who, having projected and obtained powers for an extension through his property, induced the directors of the main line, with whom he had great influence, to subscribe half the capital for his extension, to work it for fifty per cent. of the gross receipts, and to give up all traffic brought by it on to the main line until he received four per cent. on his capital; which was tantamount to a four per cent. guarantee. But it is not only, nor indeed mainly, from directly personal motives that legislators have of late years unduly fostered railway enterprises. Indirectly personal motives of various kinds have been largely operative. The wish to satisfy constituents has been one. Inhabitants of an unaccommodated district, are naturally urgent with their rep­re­sen­ta­tives to help them to a line. Not unfrequently such rep­re­sen­ta­tives are conscious that their next elections may perhaps turn upon their successful response to this appeal. Even when there is no popular pressure there is the pressure of their leading political supporters—of large landholders whom it will not do to neglect; of local lawyers, important as electioneering friends, to whom a railway always brings {67} business. Thus, without having immediately private ends, members of Parliament are often almost coerced into urging forward schemes which, from a national point of view, or from a shareholder’s point of view, are very unwise ones. Then there come the still less direct stimuli. Where neither personal nor political ends are to be gained, there are still the interests of a relative to be subserved; or, if not those of a relative, still those of a friend. And where there is no decided impulse to the contrary, these motives, of course, have their weight. Moreover, it requires in fairness to be said, that possessed as most members of Parliament are, with the belief that all railway-making is nationally beneficial, there exist in their minds few or no reasons for resisting the influences brought to bear on them. True, shareholders may be injured; but that is their own affair. The public will be better served; constituents will be satisfied; friends will be pleased; perhaps private ends gained: and under some or all of these incentives, affirmative votes are readily given. Thus, from the Legislature also, there has of late years proceeded a factitious stimulus to railway extensions.

From Parliament to Parliamentary agents, and the general body of lawyers concerned in railway enterprise, is a ready transition. With these, the getting up and carrying of new lines and branches is a matter of business. Whoever traces the process of obtaining a railway Act, or considers the number of legal transactions involved in the execution of railway works, or notes the large sums that figure in half-yearly reports under the head of “law charges;” will at once see how strong are the temptations which a new project holds out to solicitors, conveyancers, and counsel. It has been shown that in past years, parliamentary expenses have varied from £650 to £3000 per mile; of which a large proportion has gone into the pockets of the profession. In one contest, £57,000 was spent among six counsel and twenty solicitors. At a late {68} meeting of one of our companies it was pointed out, that the sum expended in legal and parliamentary expenses during nine years, had reached £480,000; or had averaged £53,500 a-year. With these and scores of like facts before them, it would be strange did not so acute a body of men as lawyers use vigorous efforts and sagacious devices to promote fresh enterprises. Indeed, if we look back at the proceedings of 1845, we shall suspect, not only that lawyers are still the active promoters of fresh enterprises, but often the originators of them. Many have heard how in those excited times the projects daily announced were not uncommonly set afloat by local solicitors—how these looked over maps to see where plausible lines could be sketched out—how they canvassed the local gentry to obtain provisional committeemen—how they agreed with engineers to make trial surveys—how, under the wild hopes of the day, they found little difficulty in forming companies—and how most of them managed to get as far as the Committee on Standing Orders, if no farther. Remembering all this, and remembering that those who were successful are not likely to have forgotten their cunning, but rather to have yearly exercised and increased it, we may expect to find railway lawyers among the most influential of the many parties conspiring to urge railway proprietaries into disastrous undertakings; and we shall not be deceived. To a great extent they are in league with engineers. From the proposal to the completion of a new line, the lawyer and the engineer work together; and their interests are throughout identical. While the one makes the survey, the other prepares the book of reference. The parish plans which the one gets ready, the other deposits. The notices to owners and occupiers which the one fills in, the other serves upon those concerned. And there are frequent consultations between them as to the dealing with local opposition and the obtainment of local support. In the getting up of {69} their case for Parliament, they necessarily act in concert. While, before committee, the one gets his ten guineas per day for attending to give evidence, the other makes profits on all the complicated transactions which carrying a bill involves. During the execution of the works they are in constant correspondence; and alike profit by any expansion of the undertaking. Thus there naturally arises in each, the perception that in aiding the other he is aiding himself; and gradually as, in course of years, the proceedings come to be often repeated, and a perfect familiarity with railway politics gained, there grows up a well-organized system of co-operation between them—a system rendered the more efficient by the wealth and influence which each has year by year accumulated.

Among the manœuvres employed by railway solicitors thus established and thus helped, not the least remarkable is that of getting their own nominees elected as directors. It is a fact, which we state on good authority, that there are puppet-directors who vote for this or that at the instigation of the company’s lawyer. The obtainment of such tools is not difficult. Vacancies are about to occur in the directorate. Almost always there are men over whom a solicitor, conducting the extensive law-business of a railway, has considerable power: not only connexions and friends, but persons to whom in his legal capacity he can do great benefit or great injury. He selects the most suitable of these; giving the preference, if other things are equal, to one living in the country near the line. On opening the matter to him, he points out the sundry advantages attendant on a director’s position—the free pass and the many facilities it gives; the annual £100 or so which the office brings; the honour and influence accruing; the opportunities for profitable investment that are likely to occur; and so forth. Should ignorance of railway affairs be raised as an objection, the tempter, in whose eyes this ignorance is a chief recommendation, {70} replies that he shall always be at hand to guide his votes. Should non-possession of a due amount of the company’s stock be pleaded, the tempter meets the difficulty by offering himself to furnish the needful qualification. Thus incited and flattered, and perhaps conscious that it would be dangerous to refuse, the intended puppet allows himself to be put in nomination; and as it is the habit of half-yearly meetings, unless under great indignation, to elect any one proposed to them by those in authority, the nomination is successful. On subsequent occasions this proceeding can, of course, be repeated; and thus the company’s legal agent and those leagued with him, may command sufficient votes to turn the scale in their own favour.

Then, to the personal interest and power of the head solicitor, have to be added those of the local solicitors, with whom he is in daily intercourse. They, too, profit by new undertakings; they, therefore, are urgent in pressing them forwards. Acting in co-operation with their chief, they form a dispersed staff of great influence. They are active canvassers; they stimulate and concentrate the feeling of their districts; they encourage rivalry with other lines; they alarm local shareholders with rumours of threatened competition. When the question of extension or non-extension comes to a division, they collect proxies for the extension party. They bring pressure to bear on their shareholding clients and relatives. Nay, so deep an interest do they feel in the decision, as sometimes to create votes with the view of influencing it. We have before us the case of a local solicitor, who, before the special meeting called to adopt or reject a contemplated branch, transferred portions of his own shares into the names of sundry members of his family, and so multiplied his seventeen votes into forty-one; all of which he recorded in favour of the new scheme.

The morality of railway engineers is not much above {71} that of railway lawyers. The gossip of Great George Street is fertile in discreditable revelations. It tells how So-and-so, like others before him, testified to estimates which he well knew were insufficient. It makes jocose allusion to this man as being employed to do his senior’s “dirty work”—his hard-swearing; and narrates of the other that, when giving evidence before committee, he was told by counsel that he was not to be believed even on his knees. It explains how cheaply the projector of a certain line executed the parliamentary survey, by employing on it part of the staff in the pay of another company to which he was engineer. Now it alludes to the suspicion attaching to a certain member of the fraternity from his having let a permanent-way contract, for a term of years, at an extravagant sum per mile. Again it rumours the great profits which some of the leaders of the profession made in 1845, by charging for the use of their names at so much the prospectus: even up to a thousand guineas. And then, it enlarges on the important advantages possessed by engineers who have seats in the House of Commons.

Thus lax as is the ethical code of engineers, and greatly as they are interested in railway enterprise, it is to be expected that they should be active and not very scrupulous promoters of it. To illustrate the vigour and skill with which they further new undertakings, a few facts may be cited. Not far from London, and lying between two lines of railway, is an estate lately purchased by one of our engineers. He has since obtained Acts for branches to both of the adjacent lines. One of these branches he has leased to the company whose line it joins; and he has tried to do the like with the other, but as yet without success. Even as it is, however, he is considered to have doubled the value of his property. Again, an engineer of celebrity once nearly succeeded in smuggling through Parliament, in the bill for a proposed railway, a clause extending the limits of deviation, to several miles on each side of the line, {72} throughout a certain district—the usual limits being but five chains on each side; and the attempt is accounted for by the fact, that this engineer possessed mines in this district. To press forward extensions by the companies with which they are connected, they occasionally go to great lengths. Not long since, at a half-yearly meeting, certain projects which the proprietary had already once rejected, were again brought forward by two engineers who attended in their capacity of shareholders. Though known to be personally interested, one of them moved and the other seconded, that some new proposals from the promoters of these schemes be considered without delay by the directors. The motion was carried; the directors approved the proposals; and again, the proprietors negatived them. A third time a like effort was made; a third time a conflict arose; and within a few days of the special meeting at which the division was to take place, one of these engineers circulated among the shareholders a pamphlet denying the allegations of the dissentient party and making counter-statements which it was then too late to meet. Nay, he did more: he employed agents to canvass the shareholders for proxies in support of the new undertaking; and was obliged to confess as much when charged with it at the meeting.

Turn we now to contractors. Railway-enterprise has given to this class of men a gigantic development; not only in respect of numbers, but in respect of the vast wealth to which some of them have acquired. Originally, half a dozen miles of earthwork, fencing, and bridges, was as much as any single contractor undertook. Of late years, however it has become common for one man to engage to construct an entire railway; and deliver it to the company in a fit condition for opening. Great capital is required for this. Great profits are made by it. And the fortunes accumulated in course of time have been such, that sundry contractors are named as being each able to make a railway at his own {73} cost. But they are as insatiable as millionaires in general; and so long as they continue in business at all, are, in some sort, forced to provide new undertakings to keep their plant employed. As may be imagined, enormous stocks of working appliances are needed: many hundreds of earth-waggons and of horses; many miles of temporary rails and sleepers; some dozen locomotive engines, and several fixed ones; innumerable tools; besides vast stores of timber, bricks, stone, rails, and other constituents of permanent works, that have been bought on speculation. To keep the capital thus invested, and also a large staff of employés, standing idle, entails loss, partly negative, partly positive. The great contractor, therefore, is both under a strong stimulus to get fresh work, and enabled by his wealth to do this. Hence the not unfrequent inversion of the old arrangement under which companies and engineers employed contractors, into an arrangement under which contractors employ engineers and form companies. Many recent undertakings have been thus set on foot. The most gigantic project which private enterprise has yet dared, originated with a distinguished contracting firm. In some cases this mode of procedure may, perhaps, be advantageous; but in far more numerous cases its results are disastrous. Interested in promoting railway extensions, even in a greater degree than engineers and lawyers, contractors habitually co-operate with these, either as agents or as coadjutors. Lines are fostered into being, which it is known from the beginning, will not pay. Of late, it has become common for landowners, merchants, and others personally interested, who, under the belief that their indirect gains will compensate for their meagre dividends, have themselves raised part of the capital for a local railway, but cannot raise the rest—it has become common for such to make an agreement with a wealthy contractor to construct the line, taking in part payment a portion of the shares, amounting to perhaps a third of the whole, and to charge for his work according to {74} a schedule of prices to be thereafter settled between himself and the engineer. By this last clause the contractor renders himself secure. It would never answer his purpose to take part payment in shares likely to return some £2 per cent., unless he compensated himself by unusually high profits; and this subsequent settlement of prices with one whose interests, like his own, are wrapped up in the prosecution of the undertaking, ensures him high profits. Meanwhile, it is noised abroad that all the capital has been subscribed and the line contracted for; these facts unduly raise the public estimate of the scheme; the shares are quoted at much above their true worth; unwary persons buy; the contractor from time to time parts with his moiety at fair prices; and the new shareholders ultimately find themselves part owners of a railway which, unprofitable as it originally promised to be, had been made yet more unprofitable by expensiveness of construction. Nor are these the only cases in which contractors gain after this fashion. They do the like with lines of their own projecting. To obtain Acts for these, they sign the sub­scrip­tion-con­tracts for large amounts; knowing that in the way above described, they can always make it answer to do this. So general had the practice latterly become, as to attract the attention of committees. As was remarked by a personage noted for his complicity in these transactions—“Committees are getting too knowing; they won’t stand that dodge now.” Nevertheless, the thing is still done under a disguised form. Though contractors no longer enter their own names on subscription lists for thousands of shares; yet they effect the same end by making nominal holders of their foremen and others: themselves being the real ones.

Of directorial misdoings some samples have already been given; and more might be added. Besides those arising from directly personal aims, there are sundry others. One of these is the increasing community between railway {75} boards and the House of Commons. There are eighty-one directors sitting in Parliament; and though some of these take little part in the affairs of their respective railways, many of them are the most active members of the boards to which they belong. We have but to look back a few years, and mark the unanimity with which companies adopted the policy of getting themselves represented in the Legislature, to see that the furtherance of their respective interests—especially in cases of competition—was the incentive. How well this policy is understood by the initiated, may be judged from the fact, that gentlemen are now in some cases elected on boards, simply because they are members of Parliament. Of course this implies that railway legislation is affected by a complicated play of private influences; and that these influences generally work towards the facilitation of new enterprises, is obvious. It naturally happens that directors having seats in the House of Commons can more or less smooth the way of their annual batch of new bills through committees. It naturally happens that those whose companies are not opposed, exchange good offices. Not only do they aid the passing of schemes in which they are interested, but they are solicited to undertake further schemes by those around them. It is a common-sense conclusion that rep­re­sen­ta­tives of small towns and country districts needing railway accommodation, who are daily thrown in contact with the chairman of a company capable of giving this accommodation, do not neglect the opportunity of furthering their ends. It is a common-sense conclusion that by hospitalities, by favours, by flattery, by the many means used to bias men, they seek to obtain his assistance. And it is an equally common-sense conclusion that in many cases they succeed—that by some complication of persuasions and temptations they swerve him from his calmer judgment; and so introduce into the company he represents, influences at variance with its welfare.

Under some motives however—whether those of direct {76} self-interest, of private favour, or of antagonistic feeling, matters not here—it is certain that directors are constantly committing their constituents to unwise enterprises; and that they frequently employ unjustifiable means for either eluding or overcoming their opposition. Shareholders occasionally find that their directors have given to Parliament, pledges of extension much exceeding any they were authorised to give; and they are then persuaded that they are bound to endorse the promises made for them by their agents. In some cases, among the misleading statements laid before shareholders to obtain their consent to a new project, will be found an abstract of the earnings of a previously-executed branch to which the proposed one bears some analogy. These earnings are shown (not always without “cooking”) to be tolerably good and improving; and it is argued that the new project, having like prospects, offers a fair investment. Meanwhile, it is not stated that the capital for this previously-executed branch was raised on debentures or by guaranteed shares at a higher rate of interest than the dividend pays; it is not stated that as the capital for this further undertaking will be raised on like terms, the annual interest on debt will swallow up more than the annual revenue; and thus unsuspecting shareholders—some unacquainted with the company’s antecedents, some unable to understand its complicated accounts—give their proxies, or raise their hands, for new works which will tell with disastrous effect on their future dividends. In pursuit of their ends, directors will from time to time go directly in the teeth of established regulations. Where it has been made a rule that proxies shall be issued only by order of a meeting of the proprietors, they will yet issue them without any such order, when by so doing they can steal a march on dissentients. If it suits their purpose, they will occasionally bring forward most important measures without due notice. In stating the amount of the company’s stock which has {77} voted with them on a division, they have been known to include thousands of shares on which a small sum only was paid up, counting them as though fully paid up.

To complete the sketch, something must be said on the management of board meetings and meetings of shareholders. For the first—their decisions are affected by various manœuvres. Of course, on fit occasions, there is a whipping-up of those favourable to any project which it is desired to carry. Were this all, there would be little to complain of; but something more than this is done. There are boards in which it is the practice to defeat opposition by stratagem. The extension party having summoned their forces for the occasion, and having entered on the minutes of business a notice worded with the requisite vagueness, shape their proceedings according to the character of the meeting. Should their antagonists muster more strongly than was expected, this vaguely-worded notice serves simply to introduce some general statement or further information concerning the project named in it; and the matter is passed over as though nothing more had been meant. On the contrary, should the proportion of the two sides be more favourable, the notice becomes the basis of a definite motion committing the board to some important act. If due precautions have been taken, the motion is passed; and once passed, those who, if present, would have resisted it, have no remedy; for in railway government there is no “second reading,” much less a third. So determined and so unscrupulous are the efforts sometimes made by the stronger party to overcome and silence their antagonists, that when a contested measure, carried by them at the board, has to go before a general meeting for confirmation, they have been known to pass a resolution that their dissentient colleagues shall not address the proprietary!

That, at half-yearly and special meetings, shareholders should be so readily misled by boards, even after repeated {78} experience of their un­trust­worth­i­ness, seems at first sight difficult to understand. The mystery disappears, however, on inquiry. Very frequently, contested measures are carried against the sense of the meetings before which they are laid, by means of the proxies previously collected by the directors. These proxies are obtained from proprietors scattered everywhere throughout the kingdom, who are mostly weak enough to sign the first document sent to them. Then, of those present when the question is brought to an issue, not many dare attempt a speech. Of those who dare, but few are clear-headed enough to see the full bearings of the measure they are about to vote upon; and such as can see them are often prevented by nervousness from doing justice to the views they hold. Moreover, it must be borne in mind that proprietors displaying antagonism to the board are usually regarded by their brother proprietors with more or less reprobation. Unless the misconduct of the governing body has been very glaring and very recent, there ever arises in the mass a prejudice against all playing the part of an opposition. They are condemned as noisy, and factious, and obstructive; and often only by determined courage avoid being put down. Besides these negative reasons for the general inefficiency of shareholders’ resistance, there are sundry positive ones. As writes to us a Member of Parliament who has been an extensive holder of stock in many companies from the first days of railway enterprise:—“My large and long acquaintance with Railway Companies’ affairs, enables me to say, that a large majority of shareholders trust wholly to their directors, having little or no information, nor caring to have any opinion of their own. . . . . Some others, better informed but timid, are afraid, by opposing the directors, of causing a depreciation of the value of their stock in the market, and are more alarmed at the prospect of this temporary depreciation than at the permanent loss entailed on the company by the useless, and therefore {79} unprofitable, outlay of additional capital. . . . . Others again, believing that the impending permanent evil is inevitable, resolve on the spot to sell out immediately, and to keep up the prices of their shares, also give their support to the directors.” Thus, from lack of organization and efficiency among those who express their opposition, and from the timidity and double-facedness of those who do not, it happens that extremely unwise projects are carried by large majorities. Nor is this all. The tactics of the aggressive party are commonly as skilful as those of their antagonists are bungling. The chairman, who is generally the chief promoter of the contested scheme, has it in his power to favour those who take his own side, and to throw difficulties in the way of opponents; and this he not unfrequently does to a great extent—refusing to hear, putting down on some plea of breach of order, browbeating, even using threats.5 It generally turns out too, that, whether intentionally or not, some of the most important motions are postponed until nearly the close of the meeting, when the greater part of the shareholders are gone. Large money-votes, extensive powers, unlimited permits to directors to take, in certain matters, “such steps as in their judgment they may deem most expedient,”—these, and the like, are hurried over during the last half-hour, when the tired and impatient remnant will no longer listen to objectors; and when those who have personal ends to serve by outstaying the rest, carry everything their own way. Indeed, in some cases, the arrangements are such as almost ensure the meeting becoming a pro-extension one towards the end. {80} This result is brought about thus:—A certain portion of the general body of proprietors are also proprietors of some subordinate work—some branch line, or canal, or steamboats, which the Company has purchased or leased; and as holders of guaranteed stock, ready to take up further such stock if they can get it, these lean towards projects that are to be executed on the preference-share system. They hold their meeting for the declaration of dividend, &c., as soon as the meeting of the Company at large has been dissolved; and in the same room. Hence it happens that being kept together by the prospect of subsequent business, they gradually, towards the close of the general meeting, come to form the majority of those present; and the few ordinary shareholders who have been patient enough to stay, are outvoted by those having interests distinct from their own and quite at variance with the welfare of the Company.