|
...the English East India Company (1600-1874), probably the most powerful multinational corporation in world history. Starting out as marginal importer of Asian spices, the Company became the agent that changed the course of economic history, combining financial strength with military muscle to conquer India and break open China's closed economy. Its rise and eventual fall highlighted to contemporaries--notably Adam Smith and Edmund Burke--three fundamental flaws in the corporate metabolism: first, the corporate drive to market domination and monopoly; second, the inherent speculative dynamic of shareholder-owned businesses; and, third, the absence of effective mechanisms for bringing companies to account for malpractice overseas. The article concludes by arguing that a better understanding of the Company--and other similar corporations--helps not only to give greater depth to today's efforts to improve corporate behaviour, but also highlights the reasons for continuing anxiety about foreign multinationals in Asia and elsewhere.
* East India Company
* Corporate accountability
* Adam Smith
* Edmund Burke
* Market power
* Shareholder speculation
* Duty of care
* Global justice
'The greatest corporation in the world' (1)
ESTABLISHED ON A COLD NEW YEAR'S EVE IN 1600, ENGLAND'S EAST INDIA Company is the mother of the modern corporation. In a career spanning almost three centuries, the Company bridged the mercantilist world of chartered monopolies and the industrial age of corporations accountable solely to shareholders. The Company's establishment by royal charter, its monopoly of all trade between Britain and Asia and its semi-sovereign privileges to rule territories and raise armies certainly mark it out as a corporate institution from another time. Yet, in its financing, structures of governance and business dynamics, the Company is undeniably modern. It may have referred to its staff as servants rather than executives, and communicated by quill pen rather than email, but the key features of the shareholder-owned corporation are there for all to see.
Beyond its status as a corporate pioneer, the sheer size of its operations makes the Company historically significant on a global scale. At its height, the Company's empire of commerce stretched from Britain across the Atlantic and around the Cape to the Gulf and on to India. From its headquarters at East India House on London's Leadenhall Street, the Company managed an extensive import-export business. Trading posts were established at St Helena in the mid-Atlantic, where Napoleon drank Company coffee in exile. 'Factories' were also established at Basra and Gombroon (Bandar Abbas) in the Middle East. But it was in India that the Company's impacts were most profound. Some of India's major cities grew on the back of the Company's trade, not least Bombay (Mumbai), Calcutta (Kolkata) and Madras (Chennai). Beyond these coastal ports, the Company established a huge land empire, first as an opportunistic quest for extra revenues and later as an end in itself. Always with an eye to the share price and their own executive perks, the Company's executives in India combined economic muscle with its small, but effective, private army to establish a corporate state across large parts of the subcontinent. The Battle of Plassey in June 1757 was the turning point when the Company's forces defeated the Nawab of Bengal, and placed its puppet on the throne. This is often regarded as the contest that founded the British Empire in India. But it is perhaps better viewed as the Company's most successful business deal, generating a windfall profit of 2.5 million [pounds sterling] for the Company and 234,000 [pounds sterling] for Robert Clive, the chief architect of the acquisition. Today, this would be equivalent to a 232 million [pounds sterling] corporate windfall and a cool 22 million [pounds sterling] success fee for Clive. (2) However, the Company's footprint did not stop there, but stretched on to South-East Asia and beyond to China and Japan. Penang and Singapore were both ports purchased by the Company in an age when territories could be bought and sold like commodities. And, if India was the site of the Company's first commercial triumphs, it was in China that it made its second fortune. The Company's 'factory' at Canton was the funnel through which millions of pounds of Bohea, Congo, Souchon and Pekoe teas flowed west to Britain, Europe and the Americas. In the other direction came first silver and later a flood of Indian-grown opium, smuggled in chests proudly bearing the Company chop (or logo).
Like the modern corporation, the Company's share price was its heartbeat, communicating to the world the market's estimates of its future prospects. For the jobbers clustered around Exchange Alley in London, 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 (Fig. I), what is striking is how it starts out with a significant drop. 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 [pounds sterling] down to a mere 39 [pounds sterling]. By the turn of the century, the threat had been seen off, and prices had returned to well over 100 [pounds sterling] once more, rising to over 200 [pounds sterling] in 1717.
[FIGURE 1 OMITTED]
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 [pounds sterling] at the end of 1719 to 420 [pounds sterling] in June 1720, before collapsing to 150 [pounds sterling] in the...
NOTE: All illustrations and photos
have been removed from this article.
More articles from The Journal of Corporate Citizenship
European academy of business in society (EABIS): Knowledge Development..., March 22, 2007
Seeking stakeholder-centric sustainability assurance: an examination o..., March 22, 2007
Looking for additional articles?
Search our database of over 3 million articles.
Looking for more in-depth information on this industry?
Search our complete database of Industry & Market reports by text, subject, publication
name or publication date.
About Goliath
Whether you're looking for sales prospects, competitive information, company
analysis or best practices in managing your organization,
Goliath can help you meet your business needs.
Our extensive business information databases empower business
professionals with both the breadth and depth of credible,
authoritative information they need to support their business
goals. Whether it be strategic planning, sales prospecting,
company research or defining management best practices -
Goliath is your leading source for accurate information.
|
%20%20&position=1)