make a railroad company an oligarchy or an autocracy, in which the autocrat does pretty much what he pleases without thinking of asking the leave of the people who own the property with which he disposes so freely, it being assumed that he knows best what is for their interest and that he will do it, and that somehow the company would be in danger of dire disaster if the executive should have to state his plans frankly, or could not effect some great stroke of policy secretly. But time shows that, whether or no, much may be gained by a secret policy, very much may be lost by it, and the shareholders who insist on knowing what their directors are doing and intend to do, are those who lose least and gain most. Moreover, the rage for making secret combinations seems to have abated, and the public complaints against the railroads are making it necessary to publish instead of concealing the details of railroad business, and the results of the operations from year to year. There is no such friend of prejudice as ignorance, and the policy which will make it easy for shareholders and the public to understand just what the companies are doing will do most to avert the violent, unreasonable and harmful prejudice which is now widespread."

The facts which are stated and the policy which is illustrated in the foregoing article, may serve to indicate a phase in the relations railroads may sustain to the community, and which would perhaps have a large influence in solving the problem of general regulation.

It is evident that the power which the stockholder exerts over the management of a corporation when exercising his full rights, is of such a nature as to popularize as it were the business of the company. Its entire condition becomes known, alterations of its status are discussed in advance, there being no concealment, the public awards it the right to adequate returns, and economical management is the enforced rule. Under such conditions necessity for state control may be said to be reduced to its minimum, and the road to have reached its normal condition in reference to the community.

This state of things may be said to be unknown, or at most, exceptional in this country. The policy of secrecy is maintained. The few reports which are made are considered unreliable,"cooked," for a purpose, and at most appear but annually. The real condition of the road, if known at all, is known only to the managers, and instead of courting the confidence of the public, the entire management is calculated to create distrust and excite suspicion.

A move in the right direction and akin to the English practice which has now obtained, was made by the stockholders of the Pen

sylvania Railroad Company at a meeting held March 10, 1874. They appointed a committee from their own rumber to investigate the affairs of the company, make an appraisment of the roads, shops, machinery, real estate, depots, bonds, stock and all other assets of the company, etc., etc. A report of 240 pages was the result, and besides the valuable statistics in regard to the property of the company it presents views in regard to the management of railways, which have a direct bearing upon the main problem which is sought to be solved; and although the views presented by the committee are from the stand point of the stockholder, yet they are suggestive of very many requirements necessary to meet those conditions which the relations of railways with the public render imperative in order to a proper accord with the principle of non-interference to the greatest extent practicable; and in conformity with the spirit of our system of government. We have therefore made copious extracts from the report.

"There exists in the public mind a want of confidence in railway stocks as a means of permanent investment. It is feared by some that all moneys invested in railway stocks will ultimately be sunk and lost from the operation of the causes we will notice. This state of hesitation and doubt should not exist. There is no reason for it in the character of the investment. Welllocated and well-managed railways will pay good dividends on the amount in cash invested in them. The causes of this want of confidence must then exist outside the nature of the case. Let us examine and find out, if possible, what they are; and we suggest as the

"First. The meagre and incomplete reports of the directors of railroads made to the stockholders. Railway directors, in their reports, seem guided by the old adage, 'that the least said is the soonest mended.' There is a tendency to limit their reports to the general results of a year's work, giving financial results and the economic workings, while the stockholders are left in great ignorance of the value of their own property. There should be, in every report, the fullest detail of these items, enabling each stockholder, at the end of the year, to make his own estimate of the value of his stock. But these reports should go further and give the most ample information as to the position of the road in its relation with other roads, and state fully all the facts that might influence its policy, its plans for the future, or its finances.

Second.-The tendency in the leading officials and managers of railroad companies to act as if the property they manage was their own. This is natural. Strong men, with their natural self-reliance, and from their more intimate knowledge of the particular interests of a company, are apt to assume the infallibility of their own judgment, and therefore grow impatient, and come at last to look upon a stockholder who may ask a question, or presume to criticse their conduct or plans, as an impertinent intermeddler, and

the annual problem is, how to get through with the stockholders' meeting without debate; showing, at least, a lack of confidence in the shareholders. These persons must learn to submit to the unwillingness of the shareholders to abandon their right of judgment, though that judgment should be wrong, They also overlook the weightier and more important fact that, apart from the right which shareholders have to discuss all matters affecting their interest, the directors and officials, by this means, lose the profit and moral support which shareholders, educated by a full discussion of the reports of the directors would give them.

"Fifth. The tendency among railway stockholders to transfer the decision of all important questions to the board of directors.

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The existing relation in almost every large railway organization, will show that the shareholders are almost a nullity as to their influence in the policy or management of their own property-their main utility being in furnishing an audience to hear a report and voting for directors, a ticket being care fully prepared for them. The evils of this are apparent, and it is time for the shareholders to resume, or more properly, assume the direction and control of their property."

While the report of the committee plainly sets forth some of the evils which have grown up in railroad management, and propose remedies to meet the case of their own company, having a working body of stockholders; the proposed remedies, (even from the statements made in the report), evidently could not be made operative in their application to a large part of the railroads of the United States, and particularly of those of the western states under their present status and management. The existence of the element designated stockholders, being either a myth entirely, or else the rights inherent in them as the proper proprietors of the property are practically ignored or abandoned.

It will be observed from the extracts given, that after a full examination of the situation in which they find their company placed, and which necessarily included a comprehensive consideration of the general situation of railroad affairs in the United States, that the conclusions reached are entirely in harmony with those which have obtained ascendancy in England. The practicability of the improved relations between stockholder, manager and community, as set forth, has an important bearing upon the whole question, not only with reference to Wisconsin but to the whole United States.

It will be observed that these relations are only possible under certain governing conditions, and such conditions are those which pertain to the legitimate financial basis of the company, and to the

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degree of harmony between the several functional parts of the company itself.

If upon these we are to depend for the subsequent minimum of governmental interference, it becomes a proper subject of inquiry: (1) What are the essential requirements? (2) What means are at our disposal to secure them?

Evidently, to start with, the requirements are a total revolution in the railroad management of the country. So long as the irregularities which notoriously exist through the entire management of these corporations are suffered to continue, so long may we expect that the public will insist upon legislation, the character of which has thus far marked the progress of the railroad agitation, and so long may we expect the theory of state or national ownership to receive serious consideration. The evils which have crept into the management of railroads cannot consistently be expected to be eradicated by enactments which leave the original cause of the trouble intact. The powers which have been granted these corporations, and which have been concentrated in the hands of the officers, and in many cases that of the president alone, have encouraged wide departures from legitimate business transactions, always at the ultimate expense of the company, and thus, indirectly, that of the public, and in many cases for the mere private emolument of individuals.

Foremost in the train of evils which now exist in railroad matters, is that of an entirely deranged and distorted basis. The stockholder, who is the proper owner of the road, is practically impotent, no interest in the road being attached to his ownership. The funded debt is perhaps largely in excess of the stock itself, and the assumed "cost" represents values which never had a place in the property.

STATUTORY LIMITATIONS UPON THE POWER OF DIRECTORS.

If the restraints so imposed are to be effectual, they should go no further than will be recognized as reasonable and necessary; a provision of law, for example, prohibiting—

(1.) The making a bonded debt until the company shall have first received for stock at least a certain per cent. of the estimated cost, or a certain proportion in the form of securities approved by the state authorities. This would prevent many enterprises from falling into the hands of mere speculative adventurers, and, by fur

nishing some sort of substantial basis, render it possible to negotiate the bonds of the company, when really issued, at a much less sacrifice than would be otherwise practicable.

(2.) Prohibiting the borrowing of money on mortgage or bond, the lease or purchase of lines of railway, or the guaranteeing of the bonds of other companies, or of the interest therein, without authority, by a vote of stockholders at a general meeting, and the filing a notice of the intent so to do, and the reasons therefor, with the railroad commissioners.

3. One of the greatest mistakes which has been made, is that permissive legislation which fixes no limit to the increase of either stock or bonds, the "non-interference" principle being here carried out to the bounds of absurdity, and in the wrong direction. If the original mechanism is wrong, if the component parts of the legislative machinery are out of order, no amount of subsequent "tinkering" at details will suffice to enable it to produce satisfactory results. An inconsistency is apparent in undertaking to legislate charges down, when the assumed cost upon which these charges are based, and upon which it is conceded an adequate interest shall be paid, has by legislative permission been augmented to a point which renders it impossible to meet the imposed duty and at the same time pay the expected interest when a legislative carte blanche has been granted to increase the amount which shall be assumed as interest-paying capital, to any optional extent, and at the same time a legislative limit to the capacity to produce interest is established.

There is no one phase of railway management in this country which presents so many obstacles in the way of establishing proper relations between railroad corporations and the public, as this one of assumed cost. It is the pivot upon which has turned most of the special legislation to control charges, and to which also, in a great measure, their failure may be attributed. There is reason to believe, however, that the abuse of privileges in this respect have been carried so far as to react under certain conditions against some of those companies who have indulged in them. In illustration we quote as follows from a late address of the President of the Baltimore and Ohio Railroad Company:

"It is very fortunate, at a period when the evil results are shown of finan cial error, when many other railways, under the efforts of speculators and manipulators of stocks, committed the huge mistake of making not the