Tuesday, July 3, 2012

III. Corporations—An Example of Extreme but Conditional Power

Corporations come in all sizes. Some consist of a handful of people with little or no capital. Others are huge and powerful. Some are non-profits that have socially valuable objectives. Some, such as private educational and health-care institutions, are woven into the fabric of society. But many exist only to provide profits to the shareholders without regard to their broader social impact. It is incorrect to lump them all into one bucket.

This posting, the third in this series, will briefly describe the power and fate of what was perhaps the most powerful corporation of all, the British East India Company (which had various other official titles, and below will just be called “the Company”). It survived for 274 years from 1600 until 1874—though its power was practically all taken away from it in 1858. (Today, another company by the same name, selling food in London, claims some kind of unclear connection to the defunct one.) Subsequent postings in this series will also discuss other kinds of corporations, from the minute to the powerful, from the charitable to the soulless.

“What was so special about this Company? Well, at the end of its powers it was responsible, directly or indirectly, for nearly one-fifth of the world’s population.” (Gardner, p. 11—see references below.)

What started it? The exotic health foods of the day—spices, notably cloves, nutmeg, mace, pepper and cinnamon, and later tea and coffee, combined with the irresistible lure of profits. The attraction of these spices led to the European “discovery” of America, resulting from an attempt to reach these spices by sailing west instead of east. The Europeans who sailed east found many of these spices in an area appropriately called ‘The Spice Islands,” an area mostly of now Indonesian islands between the Philippines to the north and Australia the south. These spices could be obtained at very low cost from their sources and sold at high prices in Europe and England. (For example, in one instance, in 1608, a cargo of cloves that was purchased for the equivalent of £3000 sold in England for £36,000.) The ships of Europe began to replace the slower transport of these spices through Persian and Arab lands. The Portuguese ships got to this area first, followed more successfully by the Dutch and later the Company which engaged in frequent skirmishes with the Dutch. Due to the success of the Dutch, the Company pulled back from the Spice Islands and retreated northwest towards India and for certain periods, Burma and Thailand.

The Company was established as a corporation by Elizabeth I, Queen of England, in 1600, by her signing a “charter” that gave the Company authority to operate as a corporation. The corporate form enabled the Company to collect large investments simply by selling shares, often to others who had no interest in engaging directly in the Company’s business. Years before, British merchants began to set up various endeavors, complete with ships, to engage in trading with Asian areas, just as Portuguese and Dutch merchants did. The Company evolved out of these earlier endeavors, but to become a corporation, an artificial legal entity, a charter from the Queen was necessary. The Company’s charter was initially valid for only fifteen years, but it was continually renewed (with modifications) until the final charter that expired in 1874. The Company’s first ships sailed in 1601, going south and around the African Cape of Good Hope and then northeastward to reach their destinations many months after leaving England.

With the huge profits from the sales in England of these Asian items, the Company not only funded itself and built more ships, but also paid the shareholders who provided the Company’s funding. Much later, beginning in the late eighteenth century, the Company earned further income by engaging in the Asian tea and opium trades that included trade with China.

The Company’s earliest efforts were focused on trade in the East Indies, not conquest of Asian lands. Nonetheless, the Company’s ships were well armed and, when the opportunity presented itself, would often attack and plunder other European ships, take over their outposts on land or seek to divert trade to itself. Other major battles were fought with pirates—and, less successfully, with cholera and other diseases. By the end of the seventeenth century, the Company was well established along various costal areas of what was later known as India. Occasionally there were battles with local Indian authorities, which the local authorities sometimes won, and some ill-advised plundering of Indian vessels that jeopardized the very trade on which the Company depended. Often, but not always, the Company’s presence was accepted by the local authorities through various arrangements, including bribes and intrigue.

Beginning in the early eighteenth century, the Company’s armies grew, consisting of both British and Indian soldiers (“sepoys”). Without the sepoys, the British would have had no hope of success. Beginning in the middle of that century and well into the next, the Company increasingly engaged in military takeovers of Indian lands with the essential assistance of sepoys. These ventures involved fighting other European powers, most notably Portugal and France, as much as Indian powers. Communications and directives from London, including occasional directives to avoid intervention into Indian affairs and to respect native culture, were often ignored or arrived too late to change what had already happened. Desires to westernize and Christianize India increased, both within the Company and in England. Nonetheless, there were some marriages between Company men and Indian women and some notable Anglo-Indian families resulted. In addition to the marriages, from the beginning of the Company’s numerous landings from India to Japan, sex between the Company’s male personnel and the local women were documented and sometimes seemed to play a role in decisions affecting commerce. Thus, the Company’s complex and varied life might be said to have been governed by commerce, carnality, adventure, alcohol, disease, warfare and intrigue.

As these incursions into India increased, by the end of the eighteenth century the Company controlled, directly or indirectly, much of the Indian sub-continent. It expanded further. However, its attempt to take over Afghanistan resulted, in 1842, in the total slaughter of an entire Company camp, more than 16,000 people, with only one known survivor. (A poignant trilogy of novels set in those times was written by Thalassa Ali, noted below.)

While the Company came increasingly under the control of London beginning towards the end of the eighteenth century, the Company’s final demise was brought about in 1857 by a mutiny of sepoys in a large area that included Delhi. The mutiny developed into war. During these battles, both the British and opposing Indian forces engaged as commanded in some of the most depraved and bloody atrocities of which humans are capable. The Company eventually prevailed at great cost to human life—and the loss of any credibility of whatever dubious claim it might have made to be a force of decency.

The war was not well received in London, and it triggered successful efforts in Parliament to transfer the Company’s possessions to the crown. By act of Parliament in 1858, the Company was reduced to a minimal existence that was later completely eliminated by the expiration of its final charter in 1874. Its huge, stately headquarters in London were demolished in 1861. However, the Company set the stage for England to take direct control over the places that the Company had colonized. By then, the age of imperialism was well underway.

While the Company has been called the world’s most powerful corporation, we must not lose sight of the fact that the Company’s existence depended entirely on charters from the government. When the Company’s final charter expired and was not renewed, the Company ceased to exist. This is important, because a corporation today, as has always been the case, exists only to the extent that a government authorizes its existence.

But we must also not lose sight of the fact that the Company often operated on its own, sometimes in direct defiance of directions from London. The Company became a nation of its own, authorized by another nation that could not control it while it existed. Still, the Company’s foundation was nothing more than a series of legal writings approved by the British government. Thus, in spite of its independent stature, the Company was, as a legal matter, an extension of the British government, but an extension that took on a life of its own and that the government could not fully control without entirely removing the Company’s legal foundation.


Brian Gardner, The East India Company: A History, McCall Publishing Co, New York, 1972.
John Keay, The Honourable Company: A History of the English East India Company, Macmillan Pub. Co., New York, 1991.

A short overview:
John Micklethwait and Adrian Wooldridge, The Company: A Short History of a Revolutionary Idea, Modern Library, New York, 2005, pp. 21-28.

A trilogy of novels in an historical setting in nineteenth century India
Thalassa Ali, A Singular Hostage (London, 2002), A Beggar at the Gate (New York, 2004), Companions of Paradise (New York, 2007).

Links to previous postings in this series:

  1. Corporations (Part I of series): Introduction—Why We Need To Know About Them (2/3/12)
  2. II. Corporations: Their Early Beginnings (2/18/12)