“27th June, 1848.
“I think with Captain Ellice and Mr. Bond, that we should desire to
conclude an arrangement with the Oriental in preference to any other
company, for the present contract has been loyally kept, and the
capital and means of that company give better promise of efficiency
and exactness than could be looked for in any other quarter. The
Indian and Australian Company is indeed supported by good names, but
it has yet no paid-up capital, or body of shareholders, or organised
establishment on which we could depend; and though it may be desirable
to establish a rivalry and competition on the line of communication,
It would not be wise to do so at the hazard of uncertainty and
interruption. We have, however, advertised for tenders; and though we
are not bound to take the lowest offer, we should scarcely be justified
in rejecting it without a fair examination of its value. The first
question, however, must be, which is the lowest offer? The Oriental
Company propose to perform the service in the first instance, for
£27,500; the other company for £25,650. But the Oriental are ready
to lower their charge by sums of £500 in the second, £1,000 in the
third, £1,500 in the fourth, and £2,000 in the fifth year, or £5,000
in the five years. This would reduce the difference between the two
companies to only £850 annually, in the event of the contract winning
for five years, or to £1,350 if it should be taken for three years.
But the Oriental further offer to the Government a share in their
profits on this line, whatever they may be beyond 10 per cent. paid
to the shareholders. It is difficult to calculate to what this might
amount, or to determine upon what principle it should be calculated.
The dividend to the shareholders has not yet amounted to more than
eight per cent., but large sums have been applied to new capital,
to reserve funds, for insurance, and to other purposes. There may
be profit on the Mediterranean line, and there may be loss on other
lines, and an annual inquiry into all these matters might lead to
endless discussions and disputes, and would be a source of frequent
vexation to both parties. It is clear, however, that the company makes
considerable profits, and I would prefer, to a share in them under the
exercise of an inquisitorial power, a liberal compromise by a reduction
of the terms which have been proposed; and I think that this reduction
should be to a sum considerably lower than the £25,650 which has been
tendered by the Indian and Australian Company. Mr. Cowper would reduce
the sum demanded to about £15,000, taking the mileage at 4_s._ 6_d._,
the price of the Lisbon, instead of 8_s._ 0-1/4_d._, the mileage of the
Mediterranean packets. I doubt whether these terms would not be too
hard. The Lisbon packets are less efficient and less expensive than
those of the Mediterranean, and though the profits of the latter are
large at some seasons of the year, there are months when passengers to
India are rare, and the receipt small.
“I am inclined to propose a middle term between the £16,000 and the
£27,500, and to offer £22,000 for five years, as a fixed sum, without
condition for periodical reductions, or for a share in the company’s
profits; but before this is determined on, I should like to have
further opinions upon the result which may be drawn from the company’s
accounts.
“I have carefully looked into them, and I find it difficult to decide
upon what portion of the receipts is to be regarded as net profit,
and what portion of disbursement is to be referred to necessary
expenditure. Looking to the accumulation of capital which has taken
place in twelve years, the profit must have been large.
(Signed) “AUCKLAND.
“NOTE.--I find that from May, 1845, up to this month, the Oriental
Company has been running their Mediterranean packets at 4_s._ 6_d._ the
mile; and I am reconciled, therefore, to the offer which it is proposed
by Mr. Cowper should be made to them.”[9]
_Extract from the Deed of Settlement of the Peninsular and Oriental
Steam Navigation Company, dated 25 January, 1841._
“That the managing directors shall provide and furnish, free of all
costs to the company, suitable offices for the business of the said
company at the house No. 51, St. Mary Axe, in the city of London, or
elsewhere[10] in the said city, including a suitable board-room for
the meetings of the Board of Directors, and the general meetings of
the company; and shall provide all necessary superintendents, clerks,
agents, and servants, for conducting and performing the business and
matters to be done by the said managing directors; and also will
provide and pay such printing and stationery, and office expenses,
as shall be connected with, or necessary for the performance of such
business; but all superintendents, clerks, or other persons employed in
any repairing or building establishment of the said company, and the
salaries of the secretary, and of any clerks employed at outports, at
foreign places, and all other expenses relating to the conduct of the
affairs of the company, except such as are agreed to be transacted by
the managing directors, are to be paid by the said company.
“That in consideration of the duties to be performed by the said
managing directors, and the expense to be incurred by them, and of the
services rendered by them[11] in the formation of the said company,
and of the negotiating and procuring the contracts with her Majesty’s
Government for the mail service, and of applying for and procuring
the aforesaid charter of incorporation for the said company,--the
said managing directors shall be allowed and paid by the said company
a commission of two and a half per cent. on the gross receipts or
earnings of the said company; and also a further commission of £5 per
cent. upon the net profits of the business of the said company, after
deducting from such net profits the amount which shall be considered
necessary to set apart as a reserve fund, as after mentioned, for the
purpose of repairing machinery and vessels and other of the stock
of the said company; the aforesaid commission of £5 per cent. to be
paid on the making up the half-yearly accounts of the company for the
ascertaining and declaring the dividends to be paid to the proprietors;
and that such compensation shall be paid to the managing directors in
equal shares so long as there shall be more than one.[12]
“B. M. W.”
“11 August, 1848.”