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main line, though less directly interested, are still frequently interested in some degree: for every extension opens up new markets either for produce or raw materials; and if it is one effecting a junction with some other system of railways, the greater mercantile conveniences afforded to directors thus circumstanced, become import.

ant.

Obviously, therefore, the indirect profits accruing to such from one of these new undertakings, may more than counterbalance the direct loss upon their railway investments; and though there are, doubtless, men far to honourable to let such considerations sway them, yet the generality can scarcely fail to be affected by temptations so strong. Then we have further to remember the influences brought to bear upon directors having seats in Parliament. Already these have been noticed; and we recur to them only for the purpose of pointing out that the immediate evil of an increased discount on his £1,000 worth of stock, may be to a director of much less consequence than the favours, patronage, connections, position, which his aid in carrying a new scheme will bring him-a consideration which, without saying how far it applies, suffices to show that in this respect, also, the supposed identity of interests between directors and shareholders does not hold.

Moreover, the disunion of interests produced by these influences is increased by the system of preference-stock. Were there no other cause in action, this practice of raising capital for supplementary undertakings, by issuing shares bearing a guaranteed interest of 5, 6, and 7 per cent., would alone destroy that community of motives supposed to exist between a railway proprietary and its executive. Little as the fact is at present recognized, it is yet readily demonstrable that by raising one of these mortgages, a Company is forthwith divided into two classes: the one consisting of the richer shareholders, in

clusive of the directors, and the other of the poorer share holders; of which classes the richer one can protect itself from the losses which the poorer one has to bear-nay, can even profit by the losses of the poorer one. This assertion, startling as it will be to many, we will proceed to prove.

When the capital required for a branch or extension is raised by means of guaranteed shares, it is the custom to give each proprietor the option of taking up a number of such shares proportionate to the number of his original shares. By availing himself of this offer, he more or less effectually protects himself against any possible loss which the new undertaking may entail. Should this, not fulfilling the promises of its advocates, diminish in some degree the general dividend; yet, a high dividend on the due proportion of preference-stock, may nearly or quite compensate for this. Hence, it becomes the policy of all who can do so, to take up as many guaranteed shares as they can get. But what happens when the circular announcing this apportionment of guaranteed shares is sent round to the proprietary? Those who possess much stock, being generally capitalists, forthwith apply for as many as they are entitled to. On the other hand, the smaller holders, constituting as they do the bulk of the Company, having no available funds with which to pay the calls on new shares, are obliged to decline them. What results? When this additional line has been opened, and it turns out, as usual, that its revenue is insufficient to meet the guaranteed dividend on its shares-when the general income of the Company is laid under contribution to make up this guaranteed dividend-when as a consequence, the dividend on the original stock is diminished; then the poorer shareholders who possess original stock only, find themselves losers; while the richer ones, possessing guaranteed shares in addition, find that their gain on prefer

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ence-dividends nearly or quite counterbalances their loss on general dividends.

Indeed, as above hinted, the case is even worse.

For

as the large share-proprietor who has obtained his proportion of guaranteed stock, is not obliged to retain his original stock—as, if he doubts the paying character of the new undertaking, he can always sell such part of his shares as will suffer from it; it is obvious that he may, if he pleases, become the possessor of preference-shares only; and may so obtain a handsome return for his money at the expense of the Company at large and the small shareholders in particular. How far this policy is pursued we do not pretend to say. All which it here concerns us to no tice, is, that directors being mostly men of large means and being therefore able to avail themselves of this guaranteed stock, by which at least much loss may be warded off if not profit made, are liable to be swayed by motives different from those of the general proprietary. And that they often are so swayed there cannot be a doubt. Without assuming any of them to be guilty of so flagitious an intention as that of benefiting at the cost of their co-proprietors; and believing, as we do, that few of them duly realize the fact that the protection they will have, is a protection not available to the mass of the shareholders; we think it is a rational deduction from common experience, that this prospect of compensation will often turn the scale in the minds of those who are hesitating, and diminish the opposition on the part of those who disapprove.

Thus, the belief which leads the majority of railway shareholders to place implicit faith in their directors, is an erroneous one. It is not true that there is an identity of interest between the proprietary and its executive. It is not true that the board forms an efficient guard against the intrigues of lawyers, engineers, contractors, and others

who profit by railway-making. On the contrary, it is true that its members are not only liable to be drawn from their line of duty by various indirect motives, but that by the system of guaranteed shares they are placed under a positive temptation to betray their constituents.

And now what is the proximate origin of all these corruptions? and what is the remedy for them? What general error in railway legislation is it that has made possible such complicated chicaneries? Whence arises this facility with which interested persons continually thrust companies into unwise enterprises? We believe there is a very simple answer to these questions. It is an answer, however, which will at first sight be thought quite irrelevant and we doubt not that the corollary we propose drawing from it, will be forthwith condemned by practical men as incapable of being acted on. Nevertheless, if such will give us a little time to explain, we are not without hope of showing, both that the evils laboured under would be excluded were this principle recognized, and that the recognition of it is not only feasible, but would even open the way out of sundry perplexities in which railway legislation is at present involved.

We conceive, then, that the fundamental vice of our system, as hitherto carried out, lies in the misinterpretation of the proprietary contract-the contract tacitly entered into between each shareholder and the body of shareholders with whom he unites; and that the remedy desired lies simply in the enforcement of an equitable in terpretation of this contract. In reality it is a strictly limited one in practice it is treated as altogether unlimited and the thing needed is, that it should be clearly defined and abided by.

Our popular form of government has so habituated us to secing public questions decided by the voice of the ma

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jority, and the system is so manifestly equitable in the cases daily before us, that there has been produced in the general mind, an unhesitating belief that the majority's power is unbounded. Under whatever circumstances, or for whatever ends, a number of men coöperate, it is held that if difference of opinion arises among them, justice requires that the will of the greater number shall be executed rather than that of the smaller number; and this rule is supposed to be uniformly applicable, be the ques tion at issue what it may. So confirmed is this conviction, and so little have the ethics of the matter been considered, that to most this mere suggestion of a doubt will cause some astonishment. Yet it needs but a brief analysis to show that the opinion is little better than a political superstition. Instances may readily be selected, which prove, by reductio ad absurdum, that the right of a majority is a purely conditional right, valid only within specific limits. Let us take a few.

Suppose that at the general meeting of some philanthropic association, it was resolved that in addition to relieving distress the association should employ home-missionaries to preach down popery. Might the subscriptions of Catholics, who had joined the body with charitable views, be rightfully used for this end? Suppose that of the members of a book-club, the greater number, thinking that under existing circumstances rifle-practice was more important than reading, should decide to change the purpose of their union, and to apply the funds in hand for the purchase of powder, ball, and targets. Would the rest be bound by this decision? Suppose that under the excitement of news from Australia, the majority of a Freehold Land Society should determine, not simply to start in a body for the gold diggings, but to use their accumulated capital to provide outfits. Would this appropriation of property be just to the minority? and must these