the most important company in the world --1/20/26

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Today's selection-- from The Corporation That Changed the World by Nick Robins. Chartered in 1600, the British East India Company pioneered joint stock ownership and changed the world:

“The East India Company was one of a number of companies granted a royal charter by the British state to take advantage of the opportunities opened up by the age of European expansion and exploration. Some of these directed their attentions eastwards, such as the Muscovy (1555) and Levant (1581) Companies. A succession of companies—including the Company of Royal Adventurers (1663) and the Royal African Company (1672)—were also founded to exploit the slave trade. Others focused on settlement and commerce in the New World, notably the Virginia (1606) and Hudson Bay (1670) Companies. Most of these were wound up centuries ago, but the Hudson Bay Company lives on as one of Canada's largest department stores. 

“Unlike the pioneers of the Asia trade, the Portuguese, who adopted a wholly state-led strategy, or the Dutch, who introduced a mixed public-private model, the English pushed forward a private sector strategy for tapping the wealth of the East. What makes the English East India Company special is the way it bridged the medieval concept of the corporation as an essentially public body with the industrial model of an enterprise acting primarily in the interests of its shareholders. In the rising commercial world of sixteenth-century England, the chartered company brought together a number of institutional ingredients. The Crown had a long tradition of setting up corporations as independent bodies to manage public services, such as municipalities and universities, like Oxford and Cambridge. Indeed, the local government of London's financial district is still managed by the Corporation of London, whose electors include businesses as well as citizens. From Italy came the invention of the compagnia, a name deriving from the Latin phrase for the act. of sharing bread, cum panis. This was essentially a family firm, where fathers, brothers, sons and other relatives would pool their labour and capital.

“In England, the first generation of chartered companies brought together a band of merchants who would then buy and sell goods under a common umbrella. These regulated companies operated more akin to a guild, setting standards for a chosen field of endeavor, and collecting fees for shared services, such as docks and warehouses. Where the East India Company differed was in its fusion of the institutional structure of the public corporation with the financial mechanism of joint stock ownership. Unlike earlier regulated companies, the East India Company was established as 'one body corporate and politick'. This brought a whole series of financial and organisational benefits, which were especially valuable for the long-distance trade to the East Indies. Capital costs were high in terms of both shipping and the bullion required to buy homebound goods. In addition, risks were extreme, both natural and political, with a high likelihood of the loss of some or all of the investment. 

“The joint stock mechanism provided a solution to this challenge. First, it enabled a separation of investors and managers, thus broadening the pool of capital that could be tapped to include both City merchants as well as passive investors from elsewhere in the moneyed elite. Second, risks were shared widely: if profits were made, then dividends could be disbursed, but if losses were incurred, investors would only be liable up to the nominal value of their paid—in capital. This limited liability endowed the Company with a special dynamism, substantially reducing the risks for investors compared with the usual partnership model of ownership. Third, trading was conducted by the joint stock company on its own account, rather than by the members themselves. This gave the Company a separate identity and its own legal personality—one that could conduct business strategies that went beyond the interests of individual merchants. It also gave it a unique institutional structure when confronting the merchant partnerships and states of Asia. 

Red Dragon fought the Portuguese at the Battle of Swally in 1612, and made several voyages to the East Indies

“The Company's basic joint stock model evolved in significant ways over successive decades. Initially, the Company constructed separate joint stocks for each voyage, whereby investors would decide to allocate capital on a case-by-case basis. Only in 1657 did the Company become a permanent joint stock corporation, a 'continuous unlimited investment taking place without reference to individual voyages'.  This provided the basis for shares in the Company to be valued and exchanged at its headquarters in Leadenhall Street. Later, trading in India stock moved to the courtyard of London's Royal Exchange. When this proved too cramped, dealing shifted across Cornhill to the coffee houses of the Exchange or 'Change Alley until the formal establishment of the London Stock Exchange in 1773. 

“Like the modern corporation, the Company's share price was its heart-beat, communicating to the world the market's estimates of its future prospects. For the jobbers clustered around Exchange Alley, the Company's stock—along with its bonds and annuities—became the bellwether for the market as a whole. From the 1690s, its share price graph for the next 180 years would be dominated by a series of peaks and troughs, reflecting both the state of its commerce and the health of its relations with governments at home and abroad. Looking at the graph today, what is striking is how it starts out with a significant drop in value. Following the Glorious Revolution of 1688, the 1690s was a period of ferocious speculation. For the Company, its share price peaked in 1693, and then fell for the next five years as successive parliamentary inquiries exposed corruption and proposed potentially disastrous remedies. The low point was in 1698 when a rival company was established, sending the Company's shares with a nominal value of £100 down to a mere £39. By the turn of the century, the threat had been seen off, and prices had returned to well over £100 once more, rising to over £200 in 1717. 

“Along with the rest of the market, the Company's shares then became caught up in the market mania that followed the end of war in 1713 and subsequently came to be known as the South Sea Bubble. The price of Company stock doubled from £200 at the end of 1719 to £420 in June 1720, before collapsing to £150 in the following summer. Yet while this spike was extreme, the underlying vitality of the East India Company can be seen in the way that its share price continued a slow, but steady climb once the South Sea crisis had abated. But the next surge was all its own making. From 1757 to 1769, its shares more than doubled to reach £276. But in a crisis that almost cost it its independence, the Company's share price continued on a downward path for the next 15 years, ultimately halving in value. 

“The big fear that drove markets was that parliament would take a savage revenge on the Company, even removing the board of directors and replacing it with its own appointees. As we shall see in Chapter 7, when this threat was removed in 1784, the Company's financial fortunes recovered, and its shares began to rise once more. Deepening state intervention into the Company's affairs also brought some surprising benefits for the Company's shareholders, with the government increasingly guaranteeing a high level of dividends, making the stock a truly attractive investment after the mayhem of the 1760s. Buoyed by the surge in share prices that followed the end of the Napoleonic War in 1815, the Company's shares reached a third peak of £298 in April 1824. From this point on, the value of the Company's stock rarely slipped below £200, the generous level at which the government had agreed to buy out Company stock. Finally, on 30 April 1874, the stock was liquidated and Company's financial heart stopped beating.”

author:	Nick Robins
title:	The Corporation That Changed the World: How the East India Company Shaped the Modern Multinational
publisher:	Pluto Press
pages:	22-26