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Here's what the world's most successful business looked like 300 years ago.
Government bailouts. Rogue traders. Bought-off politicians.
These are not only the headlines that have dominated since the Great Recession. They were also major developments in the history of what was for 274 years the world’s most successful multinational corporation: the East India Company.
Author Nick Robins provides an excellent and exhaustive look at the legendary company in his book: The Corporation That Changed The World.
255 years ago this month, the Company recaptured Calcutta, a decisive development in securing the company’s — and Britain’s — dominance over Eastern trade routes.
But all of its success came at a price, borne by the lives of millions of Indians caught up in the country’s profit machine, write Robins.
The company’s mark on Britain and the Asian subcontinent remains indelible.
Here are some of the fascinating lessons we learned from Robins book.
The English East India Company received its charter from Queen Elizabeth I on Dec. 31, 1600. Though not the first chartered company in England (the Muscovy Company predated it by 45 years), it pioneered the concept of joint stock ownership as a way of raising the massive amount of capital needed for successful overseas trade, as well as managing the risk inherent in the enterprise. At first joint stocks were constructed for each voyage, but by 1657 the company was formalized as a “continuous unlimited investment taking place without reference to individual voyages.”
Prior to the arrival of the English, Asian trade was controlled by the Portuguese, and to a lesser extent the Dutch. And the main trade target was Indonesia, not India. Still, the company was an instant success, generating returns of 155 percent in its first decade, mainly by eliminating the need for an overland passage.
But the company was ultimately out maneuvered in the “Spice Islands” (as Indonesia was known) by the Dutch, who in 1667 gave up some American backwater called New Amsterdam as a consolation prize.
But by then the company had already turned its gaze to India and, a different set of commodities.
In 1635, after a series of skirmishes, the company signed a treaty with Portugal giving it access to a large swatch of the coast of eastern India, including Madras (now Chennai). It added Bombay in 1668, a gift to Charles II from his Portuguese wife.
By 1684, the company had imported 1.76 million pieces of Indian textiles, representing 83 percent of its entire trade.
As ever, the company’s share price was its “heart beat,” broadcasting its current and future prospects, Robins writes. By 1693, company shares were worth nearly 150 pounds.
The company’s founders, according to Robins, had been “a band of merchants;” there does not appear to have been a central figurehead lobbying for trading rights.
Rather, the first chairman to make international headlines was Josiah Child, a career merchant who served as either a board member or governor (a name that also applied to the heads of England’s American colonies…) for 17 years.
It was Child’s idea to raise a proprietary army and navy to turn the company from a “parcel of mere trading merchants” into a “formidable martial government in India.” While the force’s initial incursions against Indian forces did not lead to significant gains, it set a precedent for how far the company would be willing to go to maintain dominance over the subcontinent.
Child was also the first to open a line of bribery with the crown. Upon his election as governor in 1681, he “awarded” Charles II 10,000 guineas to help smooth the company’s charter renewal. This sum would become an annual “gift” from the company for the next seven years. After the Glorious Revolution in 1689, Child gave the government a 1.2 million pound loan at zero interest to again secure an exclusive trading charter.
An inherent tension in the company’s operations was the relationship of its overseas executives with the home office. The salaries paid by the company were barely enough to cover living expenses. Yet nearly every executive joined the company in the hopes of adopting the conspicuous consumption habits of the British landed gentry.
So to reconcile this dilemma, an executive frequently used his privileged position overseas for what Robins calls private “adventurism.” Executives accepted “presents” from local merchants in exchange for the company’s business. The phrase “a lass