SECOND READING. (Hansard, 18 April 1866)

§ MR. DARBY GRIFFITH

, in moving the second reading of this Bill, explained that it was identical with the Bill upon the same subject introduced in the year 1864. That Bill passed the first and second readings, and was sifted in Committee to a single clause, but the third reading was not proceeded with through the Session being so near its close and other causes. There was a clerical error in the title of the present Bill, but that could be rectified in Committee if necessary. The object of the Bill was to correct a certain malversation in the mode of voting in public companies, by extending the powers of the shareholders, and enabling them to vote after they knew what they were voting about instead of before, and its operation was restricted to those companies formed under the Companies Consolidation Act of 1845. Under that Act, shareholders were enabled to vote in one of two ways—either by proxies sent in forty-eight hours previous to the time for the holding of the meeting, or by personally giving their votes. But the shareholders of some of the railway companies numbered many thousands, and there was no room in the country that would contain them if they were disposed to attend. It was obvious, however, that gentlemen conducting large mercantile operations in Manchester or Liverpool would rarely be able to be present at meetings held in the south of England, and it would also be impossible to expect that ladies, who formed a large proportion of railway shareholders, would attend and take part in the proceedings. The other mode of voting—namely, by proxy—was exceedingly reprehensible, seeing that it left the way open to the directors to resort to various artifices in order to secure the 1581 votes of the shareholders upon questions that might arise for consideration; and then when the time for holding the meeting arrived, the directors, by the number of the proxies received, knew precisely how the voting would terminate. Of course, the shareholder could cancel his vote afterwards by personally attending and giving it in accordance with his maturer consideration; but it was in vain to expect that such a course would be extensively adopted. The alteration proposed by this Bill was of the simplest character possible. The only fresh provision was that in case any person wished to know, through the press or in any other way, what the questions were which arose, that they should have the opportunity of voting then with a knowledge of the facts of the case instead of beforehand. As a railway director, he at once admitted that he desired to be more under the control of the shareholders than the existing law permitted him to be. Railway directors, like Members of that House, were but too likely to be carried off their legs, and to be coerced to vote upon questions from a party view. It frequently happened that they were obliged to sit by, although regarding the course pursued by their brother directors with the greatest mistrust through having no alternative before them but to resign their seats. In a remarkable speech lately made in the other House by a great authority (Lord Redesdale), the necessity for re form in railway matters was sufficiently demonstrated. Lord Redesdale gave some instances of the extraordinary mode in which the borrowing powers of railway companies were sometimes exercised under the existing state of the law. One of those cases was that of the Cork and Youghal Railway Company, which had power to raise about £500,000, but had actually raised £920,000. That was done under the management of a Mr. Leopold Lewis, who acted as the financier of the board of directors. He first issued £206,000 in Lloyd's bonds; he then proposed to call in £165,000 of these bonds, and to issue new ones in their place; but while he issued the latter he did not withdraw those that he had before put in circulation, so that the actual issue he had made of these bonds amount ed to £371,000, and he had besides is-sued £30,000 of new mortgage, bonds, making a total amount which he had raised beyond the borrowing powers of 1582 the company of not less than £400,000. The result of these operations was that the line was at present about to be sold to the Great Southern and Western Railway Company of Ireland for £315,000, or about one-third of the capital that had been expended upon it. Another remarkable case was that of the Carmarthen and Cardigan Railway Company, whom Parliament had authorized to raise £248,000, and who had actually raised £981,000. He thought it was manifest that a state of the law which permitted transactions of that description ought, if possible, to be amended. He was certain that many of the directors themselves disapproved of the proceedings of their colleagues on railway boards, but finding that they had no alternative except to sanction them or to resign their seats, adopted the course which best suited their own sense of interest or their convenience, and allowed the shareholders to be deluded, It should be remembered that lists of proxies were by rule to be sent in to the secretary forty-eight hours before the holding of the meeting at which they were to be used, and the directors were thus aware what would be the result of a division before the proceedings commenced. In the year 1864 there was an amalgamation proposed between the Great Western Company and the South Wales Company. Seven directors were then to be changed; the board wished that certain gentlemen should be appointed to the offices, while a committee of shareholders were desirous of making a different selection, but the directors received proxies in their own favour representing £8,000,000 of stock before the shareholders knew anything of the report that was to be issued. Last autumn another striking exemplification of the existing state of the law took place in the case of the Great Eastern Railway Company. Captain Jervis, one of the directors, and who was also a Member of that House, addressed a letter to the secretary, in which he stated that he understood the borrowing power of the company was then exceeded by £150,000, and had a short time previously been exceeded by £250,000, and that he would cause an inquiry to be instituted into the matter, as he would be no party to the continuance of such a state of things. A resolution was proposed at the next meeting of the board to the effect that Captain Jervis' name should be erased from the board, and all the officers of the company should be instructed not to give 1583 him any information. But as it was considered that the passing of such a resolution would be too strong a measure, there was issued instead of it a circular stating that the directors had resolved that no copies of any documents should be furnished to any director without the authority of the board. The subject then came before the next meeting of the company—at which the directors, relying on their proxies, refused all information. But the proxies, together with that meeting, proved to be informal. Therefore the directors, if they had confidence in their case, might have tested the opinion of the shareholders afresh. Instead of that, however, they did not venture to give the opinion of the shareholders, now that the latter could vote after they were duly informed of the merits of the case—and thus the directors thought it prudent to concede the committee they had before resisted. This is an ample illustration of the evils of the present system of voting. He believed, however, that the proposal embodied in the Bill would make directors much more independent, and would save the shareholders from the risk of their proxies being abused.