At the very best, a railroad president is subject to temptations to misuse his financial powers, all the more dangerous because it is impossible to draw the line between right and wrong. He knows the probable value of his railroad and of the property affected by its action a great deal better than any outsider possibly can. The published figures of earnings of the road are the result of estimates by himself and his subordinates. Out of the current earnings he pays current expenses, and probably charges permanent expenditures to capital account. But what expenditures are current and what are permanent? This division is itself the result of an estimate, and a very doubtful one at that. There are some well-established general principles, but none which will apply themselves automatically. With the best will in the world he cannot make his annual reports give a thoroughly clear idea of what has been done. Is he to be forbidden to buy stock when it seems too low, or sell it when it is high? Shall we refuse him the right to invest in other property which he sees will advance in value? Apparently not; and yet, if we allow this, we open the door for some of the worst abuses of power which have occurred in railroad history. The line between good faith and bad faith in these matters is a narrow one, and the average conscience cannot be trusted to locate it with accuracy.
But the relations to the investors cover but a small part either of the work or of the responsibility of the railroad authorities. They are managing not merely a piece of property, but a vast and complicated organization of men, and an instrument of public service. In all these capacities their cares are equally great. The operating and the traffic departments are not less important than the financial department. The relations of the railroad to its employees, and to the business community at large, are even more perplexing than its relations to the investors.
Of the questions arising between the railroad and its employees we are just beginning to realize the full importance. They are not matters to be settled by private agreement or private war. If they involve a serious interruption of the business of the community they concern public interests most vitally. The community cannot afford to have its business interrupted by railroad strikes. On the other hand, it cannot allow the men to make this public duty of the railroads a means of enforcing their own will on every occasion, to the detriment of all discipline and responsibility, or in disregard of investors' rights. How to compromise between these two conflicting requirements is one of the most serious problems of the immediate future.[29] Little progress in this direction has as yet been made, or even systematically attempted.