The Sun.
London, England, 1867-04-24 00:00:00

THE SUN, LONDON, WEDNESDAY EVENING, APRIL 24, 1867.

and approval of the board, and a certificate duly
signed by them. Parliament ought to have
known, we repeat, that the sole object sought by
these plunderers of the public was the indemnity

attendant on this semblance of security ; they

knew they could gull the public ; make them
believe what did not exist, like that English writer
who has said somewhere—" Never believe what
does not suit, for it must not be, cannot be ; there:
fore why believe it." Such being, we regret to
say, the every-day logic of the public press of
England the public had nobody to open their
eyes. The WESTMINSTER GAZETTE was not in exist-
ence; so four long years elapsed before anybody
understood the meaning of " Limited Liability"—
Overend and Gurney have explained the real
meaning of those two words better than any
dictionary, and more effectually than any public
writer. Parliament, with that manly spirit which
directs the destinies of this country, no doubt
considered that any kind of restriction would
be contrary to those principles of free trade
which constitute the glory of our epoch. If
liberty is abused, it carries always with it its
own remedy in its punishment ; but when liberty
is made use of by the entire public press of
a country to gull the public, the remedy is
as awful, since the power to use it has been
longer without any control ; it produces fruit
that germinates before that fruit itself has
been destroyed. The seed in this case has pro-
duced a want of confidence and a distrust which
causes every Stock Exchange security to be looked
upon with suspicion, and in a Parliamentary sense
it has produced Fenianism, combinations, strikes,
insurbordination, and, the worst of all evils, a thirst
for power expressed by the word " Reform." The
word " Reform " is abused in the same manner as
the word limited, and both have served to make
many dupes. Let us hope that the eyes of the
country are now open to the danger of the fal-
lacy, and fortunately before the evil has grown up
and gained such strength that no remedy is left.
Railway shares continue to be greatly agitated,
prices are still falling, and capitalists cannot re-
commend them yet as an eligible speculation. The
public have at last begun to feel that it is time to
close capital accounts, to allow no further in-
crease of capital, and to pay every expense,
whatsoever, from revenue. This was illustrated
last week at the Wharncliffe meeting of the Great
Northern Railway Company called for the purpose
of considering and approving five bills now pend-
ing in Parliament. Little did the directors imagine
that any opposition would be made in the room ;
the old trick, of telling shareholders that the pur-
pose of the meeting was only a matter of order to
confirm resolutions already passed and agreed at
the annual meeting, was here practised upon them.
Directors forget that at the annual meetings, when
shareholders are tired out by some long discussion,
they tell them :—" Well, gentlemen, you will have
full time to discuss the merits of these bills when
we call you together for the Wharncliffe meeting."
This time, however, the shareholders were not in
a humour to accept such flimsy replies. They
boldly expressed their opinion, and the five bills
were lost by a show of hands. A poll was de-
manded, and, of course, the new schemes were
carried ; proxies had been sent in by unsuspecting
shareholders, unaware in what way they would
be used. With all respect to these amiable
proxy-signers, do they know the damage they in-
flict? Do they know that every pound added to
capital account requires a gross traffic receipt of
two shillings to pay 5 per cent. upon that pound
before they can receive one farthing dividend ?
Do any of them know the merits of the branch
line they are so anxious to secure, the nature of the
arrangements proposed, the interests at stake,
when they sign these innocent-looking proxy-
papers, sent out with such care by the directors,
and with every kind.of instruction how to fill them
up ? A shareholder was simple enough to propose
that a full account of the meeting should be sent to
every shareholder before the proxies were used, so
that everybody might know what he was going to
vote about. This was considered by one of the
directors as most unreasonable, and, as an im-
putation on the intellect of the easy-going proxy-
' signers, unworthy of a man of business. So the
case was decided in the dark, since in the
broad day-light of the room shareholders were
on that day so very unreasonable. It is, however,
a move in the right direction—a lesson which will
be very useful to many directors who have lost
their
by promises—by getting their friends
osubscribe
to their branch lines, extensions, and
t liberty
leases, fascinated at the time by some skilful en-
gineer, or deceived by some plausible lawyer.
Entangled in promises and recommendations, they
have no other resource left open to them than to
try to make of others as thorough dupes as them-
selves. However, the Great Northern Railway
can, perhaps, afford this last mistake, which may
not lessen the dividend more than a trifling per
centage. They are, so far, better off than the
Great Western or the Great Eastern, which can-
not raise money at 6 or even at si per cent. on
debentures, when as much as:£s,ooo is given for a
plan, which, for the sake of the Great Eastern
shareholders, it is hoped will not be paid for until
that plan has proved successful. But let not the
Great Northern shareholders be too much dazzled
by their present success. Let them not forget
that the last dividend was only earned by carrying
£11,456 Bs. 9d. (profit of the sale of non-issued
stock) to net revenue account, which ought, by
rights, to have been carried to capital account ;
that this half year the net profits will have to be
divided over an increased capital ; and after the
Ist day of July the capital stock of the company
will have to be increased by £979,936. So let
every railway shareholder be more and more care-
ful not to allow directors to increase the capital
stock, the preference shares, fixed charges, and
guarantees, for fear they should find themselves in
the same predicament as their unfortunate neigh-

bours.
The Rio Improvements Company is an example
that, although railway shareholders have at last
opened their eyes, there still exists a class of
shareholders yet labouring under a fond delusion
fatal to their dearest interests. The intellect of
that company has been overpowered by the re-
gularity with which the 7 per cent. dividend
warrants have been paid during the construction
of the works. They have never examined from
what source those interest-warrants have been
taken. They have never inquired whether the
sum put down in the original prospectus has
been sufficient to pay for the 15,000 houses to be
drained, and to pay the interest-warrants like-
wise. They have been misled by a report so
confused that the only item in it they can read
is--‘4 That the directors cannot promise a higher
dividend than 71 per cent. per annum." This
shuts their eyes, so that they are unable to look into
the accounts, or study the ground upon which the
directors make out this 7i- per cent. If they will
read the accounts they will find that £44,653 is 5d
have been paid out of capital over and above the
sum put down in the original prospectus. If
they would only reflect upon what the chairman
told them at the meeting : That the rental from
14,612 houses will be £87,000 from which, after
deducting for keeping up the works £1,400, for
office expenses £6,000, for the interest upon the
debenture stock £4,500, for a sinking fund in
ninety years £3OO, making together £24,800,
there will remain, with £2,500 to be paid by the
municipality of Rio, £65,300.f0r dividend, or over
71 per cent. upon the original capital of £850,000.
Have the shareholders examined into the correct-
ness of these items of expenditure ? Will they
not probably all have to be increased in the same
proportion that office expenses, put down in the
original prospectus at £5,000, have been increased
to £6,000 ? Are they aware that after the meet-
ing a gentleman in the room who had accepted
some of the 6 per cent. debentures in payment of
his claim, said that they were given to him with
the understanding that they were to be paid off
in five years ? If that be true, it will be neces-
sary to deduct from the sum of net profit £65,300,
the sum of £15,000 during five years to pay off
the debentures, which will leave only £50,300 for
dividend. This will not pay 6 per cent. The
shareholders cannot be aware of this, otherwise
they would have supported the proposition made,