1911 Encyclopædia Britannica/Chartered Companies
CHARTERED COMPANIES. A chartered company is a trading corporation enjoying certain rights and privileges, and bound by certain obligations under a special charter granted to it by the sovereign authority of the state, such charter defining and limiting those rights, privileges and obligations, and the localities in which they are to be exercised. Such companies existed in early times, but have undergone changes and modifications in accordance with the developments which have taken place in the economic history of the states where they have existed. In Great Britain the first trading charters were granted, not to English companies, which were then non-existent, but to branches of the Hanseatic League (q.v.), and it was not till 1597 that England was finally relieved from the presence of a foreign chartered company. In that year Queen Elizabeth closed the steel-yard where Teutons had been established for 700 years.
The origin of all English trading companies is to be sought in the Merchants of the Staple. They lingered on into the 18th century, but only as a name, for their business was solely to export English products which, as English manufactures grew, were wanted at home. Of all early English chartered companies, the “Merchant Adventurers” conducted its operations the most widely. Itself a development of very early trading gilds, at the height of its prosperity it employed as many as 50,000 persons in the Netherlands, and the enormous influence it was able to exercise undoubtedly saved Antwerp from the institution of the Inquisition within its walls in the time of Charles V. In the reign of Elizabeth British trade with the Netherlands reached in one year 12,000,000 ducats, and in that of James I. the company’s yearly commerce with Germany and the Netherlands was as much as £1,000,000. Hamburg afterwards was its principal depot, and it became known as the “Hamburg Company.” In the “Merchant Adventurers’” enterprises is to be seen the germ of the trading companies which had so remarkable a development in the 16th and 17th centuries. These old regulated trade gilds passed gradually into joint-stock associations, which were capable of far greater extension, both as to the number of members and amount of stock, each member being only accountable for the amount of his own stock, and being able to transfer it at will to any other person.
It was in the age of Elizabeth and the early Stuarts that the chartered company, in the modern sense of the term, had its rise. The discovery of the New World, and the opening out of fresh trading routes to the Indies, gave an extraordinary impulse to shipping, commerce and industrial enterprise throughout western Europe. The English, French and Dutch governments were ready to assist trade by the granting of charters to trading associations. It is to the “Russia Company,” which received its first charter in 1554, that Great Britain owed its first intercourse with an empire then almost unknown. The first recorded instance of a purely chartered company annexing territory is to be found in the action of this company in setting up a cross at Spitzbergen in 1613 with King James’s arms upon it. Among other associations trading to the continent of Europe, receiving charters at this time, were the Turkey Company (Levant Co.) and the Eastland Company. Both the Russia and Turkey Companies had an important effect upon British relations with those empires. They maintained British influence in those countries, and even paid the expenses of the embassies which were sent out by the English government to their courts. The Russia Company carried on a large trade with Persia through Russian territory; but from various causes their business gradually declined, though the Turkey Company existed in name until 1825.
The chartered companies which were formed during this period for trade with the Indies and the New World have had a more wide-reaching influence in history. The extraordinary career of the East India Company (q.v.) is dealt with elsewhere.
Charters were given to companies trading to Guinea, Morocco, Guiana and the Canaries, but none of these enjoyed a very long or prosperous existence, principally owing to the difficulties caused by foreign competition. It is when we turn to North America that the importance of the chartered company, as a colonizing rather than a trading agency, is seen in its full development. The “Hudson’s Bay Company,” which still exists as a commercial concern, is dealt with under its own heading, but most of the thirteen British North American colonies were in their inception chartered companies very much in the modern acceptation of the term. The history of these companies will be found under the heading of the different colonies of which they were the origin. It is necessary, however, to bear in mind that two classes of charters are to be found in force among the early American colonies: (1) Those granted to trading associations, which were often useful when the colony was first founded, but which formed a serious obstacle to its progress when the country had become settled and was looking forward to commercial expansion; the existence of these charters then often led to serious conflicts between the grantees of the charter and the colonies; ultimately elective assemblies everywhere superseded control of trading companies. (2) The second class of charters were those granted to the settlers themselves, to protect them against the oppressions of the crown and the provincial governors. These were highly prized by the colonists.
In France and Holland, no less than in England, the institution of chartered companies became a settled principle of the governments of those countries during the whole of the period in question. In France from 1599 to 1789, more than 70 of such companies came into existence, but after 1770, when the great Compagnie des Indes orientales went into liquidation, they were almost abandoned, and finally perished in the general sweeping away of privileges which followed on the outbreak of the Revolution.
If we inquire into the economic ideas which induced the granting of charters to these earlier companies and animated their promoters, we shall find that they were entirely consistent with the general principles of government at the time and what were then held to be sound commercial views. Under the old régime everything was a matter of monopoly and privilege, and to this state of things the constitution of the old companies corresponded, the sovereign rights accorded to them being also quite in accordance with the views of the time. It would have been thought impossible then that private individuals could have found the funds or maintained the magnitude of such enterprises. It was only this necessity which induced statesmen like Colbert to countenance them, and Montesquieu took the same view (Esprit des lois, t. xx. c. 10). John de Witt’s view was that such companies were not useful for colonization properly so called, because they want quick returns to pay their dividends. So, even in France and Holland, opinion was by no means settled as to their utility. In England historic protests were made against such monopolies, but the chartered companies were less exclusive in England than in either France or Holland, the governors of provinces almost always allowing strangers to trade on receiving some pecuniary inducement. French commercial companies were more privileged, exclusive and artificial than those in Holland and England. Those of Holland may be said to have been national enterprises. French companies rested more than did their rivals on false principles; they were more fettered by the royal power, and had less initiative of their own, and therefore had less chance of surviving. As an example of the kind of rules which prevented the growth of the French companies, it may be pointed out that no Protestants were allowed to take part in them. State subventions, rather than commerce or colonization, were often their object; but that has been a characteristic of French colonial enterprise at all times.
Such companies, however, under the old commercial system could hardly have come into existence without exclusive privileges. Their existence might have been prolonged had the whole people in time been allowed the chance of participating in them.
To sum up the causes of failure of the old chartered companies, they are to be attributed to (1) bad administration; (2) want of capital and credit; (3) bad economic organization; (4) distribution of dividends made prematurely or fictitiously. But those survived the longest which extended the most widely their privileges to outsiders. According to contemporary protests, they had a most injurious effect on the commerce of the countries where they had their rise. They were monopolies, and therefore, of course, obnoxious; and it is undoubted that the colonies they founded only became prosperous when they had escaped from their yoke.
On the other hand, it must not be forgotten that they contributed in no small degree to the commercial progress of their own states. They gave colonies to the mother country, and an impulse to the development of its fleet. In the case of England and Holland, the enterprise of the companies saved them from suffering from the monopolies of Spain and Portugal, and the wars of the English, and those of the Dutch in the Indies with Spain and Portugal, were paid for by the companies. They furnished the mother country with luxuries which, by the 18th century, had become necessaries. They offered a career for the younger sons of good families, and sometimes greatly assisted large and useful enterprises.
During the last twenty years of the 19th century there was a great revival of the system of chartered companies in Great Britain. It is a feature of the general growth of interest in colonial expansion and commercial development which has made itself felt almost universally among European nations. Great Britain, however, alone has succeeded in establishing such companies as have materially contributed to the growth of her empire. These companies succeed or fail for reasons different from those which affected the chartered companies of former days, though there are points in common. Apart from causes inherent in the particular case of each company, which necessitates their being examined separately, recent experience leads us to lay down certain general principles regarding them. The modern companies are not like those of the 16th and 17th centuries. They are not privileged in the sense that those companies were. They are not monopolists; they have only a limited sovereignty, always being subject to the control of the home government. It is true that they have certain advantages given them, for without these advantages no capital would risk itself in the lands where they carry on their operations. They often have very heavy corresponding obligations, as will be seen in the case of one (the East Africa) where the obligations were too onerous for the company to discharge, though they were inseparable from its position. The charters of modern companies differ in two points strongly from those of the old: they contain clauses prohibiting any monopoly of trade, and they generally confer some special political rights directly under the control of the secretary of state. The political freedom of the old companies was much greater. In these charters state control has been made a distinguishing feature. It is to be exercised in almost all directions in which the companies may come into contact with matters political. Of course, it is inevitable in all disputes of the companies with foreign powers, and is extended over all decrees of the company regarding the administration of its territories, the taxation of natives, and mining regulations. In all cases of dispute between the companies and the natives the secretary of state is ex officio the judge, and to the secretary of state (in the case of the South Africa Company) the accounts of administration have to be submitted for his approbation. It is deserving of notice that the British character of the company is insisted upon in each case in the charter which calls it into life. The crown always retains complete control over the company by reserving to itself the power of revoking the charter in case of the neglect of its stipulations. Special clauses were inserted in the charters of the British East Africa and South Africa Companies enabling the government to forfeit their charters if they did not promote the objects alleged as reasons for demanding a charter. This bound them still more strongly; and in the case of the South Africa Company the duration of the charter was fixed at twenty-five years.
The chartered company of these days is therefore very strongly fixed within limits imposed by law on its political action. As a whole, however, very remarkable results have been achieved. This may be attributed in no small degree to the personality of the men who have had the supreme direction at home and abroad, and who have, by their social position and personal qualities, acquired the confidence of the public. With the exception of the Royal Niger Company, it would be incorrect to say that they have been financially successful, but in the domain of government generally it may be said that they have added vast territories to the British empire (in Africa about 1,700,000 sq. m.), and in these territories they have acted as a civilizing force. They have made roads, opened facilities for trade, enforced peace, and laid at all events the foundation of settled administration. It is not too much to say that they have often acted unselfishly for the benefit of the mother country and even humanity. We may instance the anti-slavery and anti-alcohol campaigns which have been carried on, the latter certainly being against the immediate pecuniary interests of the companies themselves. It must, of course, be recognized that to a certain extent this has been done under the influence of the home government. The occupation of Uganda certainly, and of the Nigerian territory and Rhodesia probably, will prove to have been rather for the benefit of posterity than of the companies which effected it. In the two cases where the companies have been bought out by the state, they have had no compensation for much that they have expended. In fact, it would have been impossible to take into account actual expenditure day by day, and the cost of wars. To use the expression of Sir William Mackinnon, the shareholders have been compelled in some cases to “take out their dividends in philanthropy.”
The existence of such companies to-day is justified in certain political and economic conditions only. It may be highly desirable for the government to occupy certain territories, but political exigencies at home will not permit it to incur the expenditure, or international relations may make such an undertaking inexpedient at the time. In such a case the formation of a chartered company may be the best way out of the difficulty. But it has been demonstrated again and again that, directly, the company’s interests begin to clash with those of foreign powers, the home government must assume a protectorate over its territories in order to simplify the situation and save perhaps disastrous collisions. So long as the political relations of such a company are with savages or semi-savages, it may be left free to act, but directly it becomes involved with a civilized power the state has (if it wishes to retain the territory) to acquire by purchase the political rights of the company, and it is obviously much easier to induce a popular assembly to grant money for the purpose of maintaining rights already existing than to acquire new ones. With the strict system of government supervision enforced by modern charters it is not easy for the state to be involved against its will in foreign complications. Economically such companies are also justifiable up to a certain point. When there is no other means of entering into commercial relations with remote and savage races save by enterprise of such magnitude that private individuals could not incur the risk involved, then a company may be well entrusted with special privileges for the purpose, as an inventor is accorded a certain protection by law by means of a patent which enables him to bring out his invention at a profit if there is anything in it. But such privileges should not be continued longer than is necessary for the purpose of reasonably recompensing the adventurers. A successful company, even when it has lost monopoly or privileges, has, by its command of capital and general resources, established so strong a position that private individuals or new companies can rarely compete with it successfully. That this is so is clearly shown in the case of the Hudson’s Bay Company as at present constituted. In colonizing new lands these companies often act successfully. They have proved more potent than the direct action of governments. This may be seen in Africa, where France and England have of late acquired vast areas, but have developed them with very different results, acting from the opposite principles of private and state promotion of colonization. Apart from national characteristics, the individual has far more to gain under the British system of private enterprise. A strong point in favour of some of the British companies has been that their undertakings have been practically extensions of existing British colonies rather than entirely isolated ventures. But a chartered company can never be anything but a transition stage of colonization; sooner or later the state must take the lead. A company may act beneficially so long as a country is undeveloped, but as soon as it becomes even semi-civilized its conflicts with private interests become so frequent and serious that its authority has to make way for that of the central government.
The companies which have been formed in France during recent years do not yet afford material for profitable study, for they have been subject to so much vexatious interference from home owing to lack of a fixed system of control sanctioned by government, that they have not been able, like the British, to develop along their own lines.
See also Borneo; Nigeria; Brit. East Africa; Rhodesia; &c. The following works deal with the subject of chartered companies generally: Bonnassieux, Les Grandes Compagnies de commerce (Paris, 1892); Chailly-Bert, Les Compagnies de colonisation sous l’ancien régime (Paris, 1898); Cawston and Keane, The Early Chartered Companies (London, 1896); W. Cunningham, A History of British Industry and Commerce (Cambridge, 1890, 1892); Egerton, A Short History of British Colonial Policy (London, 1897); J. Scott Keltie, The Partition of Africa (London, 1895); Leroy-Beaulieu, De la colonisation chez les peuples modernes (Paris, 1898); Les Nouvelles Sociétés anglo-saxonnes (Paris, 1897); MacDonald, Select Charters illustrative of American History, 1606–1775 (New York, 1899); B. P. Poore, Federal and State Constitutions, &c. (Washington, 1877; a more complete collection of American colonial charters); H. L. Osgood, American Colonies in the 17th Cent. (1904–7); Carton de Wiart, Les Grandes Compagnies coloniales anglaises au 19 me siècle (Paris, 1899). Also see articles “Compagnies de Charte,” “Colonies,” “Privilege,” in Nouveau Dictionnaire d’économie politique (Paris, 1892); and article “Companies, Chartered,” in Encyclopaedia of the Laws of England, edited by A. Wood Renton (London, 1907–1909). (W. B. Du.)