“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 4s. 6d., the price of the Lisbon, instead of 8s. 01/4d., 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 4s. 6d. 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.”