K. RAILWAYS - FOREIGN AND CONTINENTAL (cont.)

Railways - United States - Corporation Management

The laws governing the formation of railway corporations and authorizing railway construction differ in different States, but in most it is open to any association of man with the necessary capital to form a company and construct a railway anywhere. Generally the laws relating to raising and extending capital and the disposition of income are very lax, and under them great abuses have occurred. All but a very small number of the railways have been projected and constructed by private enterprise; but many companies have received aid from towns, cities, counties, or States, and the Federal Government and the State of Texas (which owns the public land within its borders) have subsidized many railways, mostly west of the Mississippi, by immense grants of public lands, in the aggregate amounting to 200,000,000 acres. The Federal Government also lent its bonds to the amount of £13,000,000 to aid in the construction of a few lines between the Missouri and the Pacific coast. Between 1830 and 1840 several States undertook to construct railways on their own account; but most of these attempts ended in disaster, and the railways were completed by companies, if completed at all. There remain, however, two State railways, one 138 miles long owned by Georgia, which it leases to a corporation for working, and the other by Massachusetts, mostly in the long Hoosac tunnel. Owing to the pernicious system of raising capital for railway construction from the sale of bonds, secured only by the property bought by the proceeds, before the end of 1874 108 railway companies were insolvent, and interest was unpaid on more than £100,000,000 ($497,807,660) of mortgage bonds which they had issued. Indeed, of the total nominal railway capital of the United States very nearly one-half is represented by bonds. One great company which has paid dividends for many years has £9,500,000 of stock to £20,000,000 of debt. The management of railway companies in the United States is often autocratic to the last degree. When once directors have been elected by the vote of the majority of the shareholders, they take the most important steps without ever consulting the shareholders, and in their annual reports they give only such information as they please, subject to no examination by independent auditor. This state of things naturally leads to grave abuses, to directoral mismanagement and dishonest speculation in bonds and shares. In some cases, however, the authority of the directors is limited by the charter or constitution of the company.





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Railway, Railways - Table of Contents