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Direct Management from Abroad: The Formative Years of the British Columbia Electric Railway
Published online by Cambridge University Press: 11 June 2012
Abstract
This is a case study of a London-directed firm that supplied transportation, gas, and electric power in British Columbia. Its history suggests that, in a young and rapidly developing economy, control of a company's activities by outsiders who are chiefly concerned with long-term investment prospects may be of greater benefit to all concerned than critics of absentee management are willing to admit.
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- Research Article
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- Copyright © The President and Fellows of Harvard College 1973
References
1 Times (London), January 31, 1929, 14Google Scholar. See also Field, F. W., Capital Investments in Canada (Montreal, 1911), 22Google Scholar; Spence, Clark C., British Investments and the American Mining Frontier (Ithaca, N.Y., 1958), 92–93Google Scholar.
A leading example of an unsuccessful Canadian company controlled from London would be the Grand Trunk Railway, which had a London-based board but during the pre-war years allowed its manager, C. M. Hays, who resided in Canada, to dominate its policy. Currie, A. W., The Grand Trunk Railway of Canada (Toronto, 1957), 374Google Scholar. On the Canadian Northern Railway, see Stevens, G. R., Canadian National Railways (Toronto, 1962), II, 37–42Google Scholar. The author of Horne-Payne's obituary may have been thinking particularly of the British Empire Steel Company, which in 1920 amalgamated a number of coal, iron, steel, and shipping interests. By 1929 its British bondholders seemed likely to lose heavily on their investment. A major subsidiary of BESCO, Dominion Steel Corporation Limited, was in receivership.
2 G. P. Norton to J. Buntzen, March 16, 1904, British Columbia Electric Railway Papers, Box 73. (All manuscript sources cited are from these papers, which are located in the Library of the University of British Columbia, Vancouver.)
While the British Columbia public occasionally complained about absentee ownership and management, the question of “foreign” ownership did not arise. Although British Columbia had been a province of Canada since 1871, remnants of the colonial mentalitypersisted. Many British Columbians, even those born in Canada, regarded Britain as the “mother country.”
3 In 1913 the company earned a net profit of £381,424 and had a total reserve of £924,346. B.C.E.R., Annual Report, 1913.
4 Board of Directors, Minutes, April 12, 1898, Box 687. Barnard remained a nominal member of the board of directors until 1904.
5 Buntzen to H. Williams, January 27, 1898, General Letter Book, #1. (Hereafter GLB.)
6 R. M. Horne-Payne to R. H. Sperling, May 5, 1914, Box 68. The managers of the B.C.E.R. played an active role in civic life. Although Buntzen and Sperling left British Columbia after retiring as managers, they did not act merely as sojourners while in the province. Compare Lucas, Rex A., Minetown, Milltown, Railtown (Toronto, 1971), 153–54Google Scholar.
7 Horne-Payne to Buntzen, November 21, 1902, Box 73. Horne-Payne was clearly the dominant member of the board, although his directors did participate in policy making and undertook visits to British Columbia.
8 Horne-Payne to Buntzen, October 23, 1900; Buntzen to Horne-Payne, December 11, 1900, Letters from the General Manager. (Hereafter LFGM.)
9 Buntzen to Francis Hope, September 14, 1898, General Manager's Letter Book (hereafter GMLB); Buntzen to Hope, November 13, 1899, LFGM; Buntzen to Norton, February 5, 1904, Box 73; Buntzen to F. S. Barnard, May 31, 1905, LFGM; Buntzen to Barnard, June 5, 1905, LFGM; Local Advisory Committee, Minute Book.
10 Between 1897 and 1913 the B.C.E.R. raised over £9,000,000. About 60 per cent of this was obtained by the sale of debentures of which 80 per cent were issued at 4¼ per cent. Most Canadian industrial bond issues had to pay between 4.94 and 5.33 per cent. [Viner, Jacob, Canada's Balance of International Indebtedness, 1900–1913 (Cambridge, Mass., 1924), 98Google Scholar.] The remainder of the B.C.E.R.'s capital was raised by the issue of shares. These paid a maximum dividend of 8 per cent — and that on Deferred Ordinary Stock, which had the least preference in the time of adversity — whereas other Canadian tramway and lighting companies were paying from 6 to 12 per cent in dividends
One reason for the company's ability to raise money cheaply was its reputation for safety. The directors had deliberately sought to make B.C.E.R. preference shares eligible as trust investments under English law. An examination of the records of shareholdings in the Company Registry Office in London suggests that most investors in the B.C.E.R. looked upon it as a long-term investment. Of the approximately 5,000 individual shareholders in 1912, about half were women and most of the males were “gentlemen” or professional men. Most held no more than a few hundred shares and only about 15 per cent bought or sold any shares during the year.
11 Buntzen to Hope, February 24, 1900, GLB, #5.
12 Hope to Buntzen, March 20, 1900, Box 688; Horne-Payne to Buntzen, March 21, 1900, Box 73.
13 Hope to Buntzen, January 13, 1904, Box 691; Hope to Buntzen, February 12, 1904, Box 691; Norton to Buntzen, March 16, 1904, Box 73; B.C.E.R., Annual Reports, 1904 and 1905.
14 Buntzen to Hope, February 3, 1904, LFGM; Buntzen to Norton, February 6, 1904, Box 73; Norton to Buntzen, March 16, 1904, Box 73.
15 Hope to Buntzen, March 5, 1904, Box 691; Hope to Buntzen, April 23, 1904, Box 691; Report of Norton and Slade, auditors, July 9, 1917, Box 89.
16 Report of Norton and Slade.
17 B. Binder to Sperling, December 1, 1906, Box 694; B.C.E.R. (London) to Sperling, November 15, 1907, LFGM; George Kidd to Sperling, November 18, 1908, Box 698; Kidd to Sperling, January 7, 1909, Box 29A–393; Kidd to Sperling, June 26, 1909, Box 700.
18 Kidd to Sperling, March 29, 1910, Box 549; Kidd to Sperling, July 7, 1910, Box 549. I have described the relationship between the Saanich line and the city of Victoria in “The Fine Arts of Lobbying and Persuading: The Case of the B.C. Electric Railway, 1897–1917,” in Macmillan, David S., ed., Canadian Business History (Toronto, 1972), 252–53Google Scholar.
19 Kidd to Sperling, January 4, 1911, Box 549; Sperling to Kidd, January 25, 1911, Box 549; Sperling to Secretary (London), April 8, 1911, LFGM; Richard McBride to Horne-Payne, January 27, 1911, Box 40–629.
20 Kidd to Sperling, February 25, 1911, Box 47B–844.
21 Sperling to Buntzen, November 24, 1905, Box 2–18; Buntzen to Sperling, December 13, 1905, Box 2–18.
22 Sperling to Kidd, April 12, 1910, LFGM; Kidd to Sperling, May 4, 1910, Box 41A–647.
23 Chilliwack Progress, July 19, 1905.
24 Buntzen to Binder, June 17, 1906, Box 665.
25 Binder to Sperling, January SO, 1907, Box 694; B.C.E.R., Annual Report, 1907.
26 A. P. Ingrame to Sperling, September 20, 1907, Box 673.
27 Kidd to Sperling, November 30, 1910, Box 44–751; Sperling to H. Kirby, [September, 1912”, LFGM; M. Urwin to F. Glover, October 5, 1912, Box 47B–845.
Horne-Payne's relationship with Mackenzie and Mann probably played no role in this. On the Saanich peninsula, the Canadian Northern and the B.C.E.R. competed as they did of course between New Westminster and Chilliwack. In another case, that of the Canadian Western Lumber Company, of which Horne-Payne as well as Mackenzie and Mann were directors, the B.C.E.R. would not extend its New Westminster city lines two miles to the mill site until the lumber company provided a free right of way and other concessions and until the B.C.E.R. was convinced that there was sufficient traffic to warrant the construction of the line.
28 Urwin to Sperling, March 9, 1912, Box 657; Sperling to Urwin, June 3, 1912, Box 51A–948–F1; Alan Purvis to Sperling, May 25, 1912, Box 51A–948–F1.
29 Buntzen to Hope, August 3, 1899, Box 73; Board of Directors, Minutes, August 22, 1899 and September 12, 1899, Box 688.
30 Buntzen to T. F. McGuigan, February 11, 1901, CMLB; Buntzen to Hope, February 27, 1901, GMLB; Horne-Payne to Buntzen, April 3, 1901, Box 73; Buntzen to Horne-Payne, April 23, 1901, GMLB; Buntzen to Hope, May 18, 1901, Box 647; McGuigan to Buntzen, October 15, 1901, Box 637.
31 Kidd to Sperling, October 17, 1908, Box 698; Sperling to Kidd, October 30, 1908, Box 23–331. For the B.C.E.R.'s dealings with the municipalities see Roy, “The Fine Arts,” 250–51.
32 This line was owned by the Canadian Pacific Railway but had been operated by the B.C.E.R. under a lease agreement since 1905.
33 Kidd to Sperling, January 21, 1909, Box 26–368.
34 Kidd to Sperling, February 4, 1909, Box 699; Kidd to Sperling, April 1, 1909, Box 23–331; Sperling to Kidd, December 21, 1909, LFGM; Sperling to Kidd, January 20, 1910, London Letter Book, #7.
35 B.C.E.R. (Vancouver) to B.C.E.R. (London), November 4, 1910, LFGM; B.C.E.R. (London) to B.C.E.R. Vancouver), November 7, 1910, LFGM; H. Williams to Sperling, February 25, 1911, Box 192.
36 Williams to Glover, April 13, 1911, Box 192; Williams to Sperling, September 16, 1911, Box 192; Sperling to Williams, October 3, 1911, LFGM; Urwin to Sperling, November 22, 1911, Box 713.
37 Vancouver Daily Province, May 9, 1912, 24.
38 June 18, 1912, 6.
39 B.C.E.R. (London) to B.C.E.R. (Vancouver), February 21, 1912, Box 192; B.C.E.R. (London) to B.C.E.R. (Vancouver), February 22, 1912, Box 713; Urwin to general manager, March 1, 1912, Box 713.
40 B.C.E.R. (Vancouver) to B.C.E.R. (London), July 1, 1912; B.C.E.R. (London) to B.C.E.R. (Vancouver), July 9, 1912; B.C.E.R. (Vancouver) to B.C.E.R. London), July 27, 1912; B.C.E.R. (Vancouver) to B.C.E.R. (London), August 30, 1912; B.C.E.R. (London) to G. R. G. Conway, September 10, 1912, Box 713.
41 B.C.E.R. (Vancouver) to B.C.E.R. (London), September 11, 1912; B.C.E.R. (London) to Conway, September 16, 1912, Box 713.
42 B.C.E.R. (London) to B.C.E.R. (Vancouver), March 8, 1912, Box 192.
43 See T. D. Regehr, “The Canadian Northern Railway: The West's Own Product,” Canadian Historical Review, LI (June, 1970), 177–187.