The English East India Company was the mother of the modern multinational. Its trading empire encircled the globe, importing Asian luxuries such as spices, textiles and teas. But it also conquered much of India with its private army and broke open China's markets with opium. The Company’s practices shocked its contemporaries and still reverberate today.
The Corporation That Changed the World is the first book to reveal the Company’s enduring legacy as a corporation. This expanded edition explores how the four forces of scale, technology, finance and regulation drove its spectacular rise and fall. For decades, the Company was simply too big to fail, and stock market bubbles, famines, drug-running and even duels between rival executives are to be found in this new account.
For Robins, the Company’s story provides vital lessons on both the role of corporations in world history and the steps required to make global business accountable today.
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About the Author
Nick Robins has more than 20 years experience in the policy and practical realities of corporate accountability. A historian by training, he currently works on sustainable and responsible investment in London, and has written on the East India Company for the Financial Times, New Statesman and Resurgence.
Read an Excerpt
The Hidden Wound
In 1778, the directors of the Honourable East India Company installed an extravagant new painting in their London headquarters, East India House. Like much corporate art before and since, the quality of the painting was generally regarded as poor, with one commentator describing it as 'a work too feeble to confer any credit either on the artist or his employers'. But the directors were not seeking applause for the artistic merit of their commission. Ten feet across and over eight feet high, Spiridione Roma's giant allegory of The East Offering Her Riches to Britannia was designed to impress (see Illustration 1.1). Fixed to the ceiling of the Company's revenue committee room, where the directors monitored the flow of profit and loss, the purpose of The Offering was simple: to convey the commercial domination that the Company had now achieved in Asia.
At the heart of the painting is the relationship of three women, each representing their country. The scene is an Asian shoreline. Sitting high on a rock to the left, a fair Britannia looks down on a kneeling India who offers her crown surrounded by rubies and pearls. Beside her, China presents her own tribute of porcelain and tea. From a grove of palm trees to the right comes a convoy of labourers carrying bales of cloth, along with an elephant and a camel, all directed westward by a stern Mercury, the classical god of commerce. The British lion sits at Britannia's feet, as does Old Father Thames, a sign that it was to London that much of this wealth would flow. Far off, beyond the figures, one of the Company's famous merchant ships sails into the distance, laden with the treasure of the East, its striped ensign fluttering in the wind.
For The Offering, Spiridione drew on a long line of similar depictions of European trading supremacy. The early success of the Honourable Company's main rival, the Dutch United East India Company (Verenigde Oostindische Compagnie – VOC), had provided Pieter Isaacsz with the inspiration he needed for his 1606 painting symbolising Amsterdam as the centre of world trade.
In Isaacsz's allegory, Amsterdam holds a horn of plenty in her right hand, and with her left controls the globe. Servants offer her pearls, while three VOC ships command the centre of the painting. A century later, in 1729, the English Company had enlisted the fashionable Dutch sculptor Michael Rysbrack to create a grand marble chimney piece for its new headquarters. On the left of the carving sits Britannia, receiving a treasure chest from a woman representing Asia, escorted by two other women, one leading a camel, the other a lion; two Company ships frame the piece on the right. Importantly, Britannia and Asia look each other in the eye, as if to symbolise that this was still an age when the Company based its wealth on exchange. The English Company had certainly gained ground, but still lagged its Dutch rival, and was also starting to face tough competition from new French Compagnie des Indes.
By 1778, however, there was little doubt that 'John Company', as it has become known, had replaced 'Jan Compagnie' as master of Europe's trade with Asia. Years of argument over trading rights with local rulers in India had culminated two decades earlier in the takeover of Bengal in 1757. Combining economic muscle with its small but effective private army, the Company's forces under Robert Clive had defeated the Nawab of Bengal at Plassey (Palashi), 90 miles north of its trading base of Calcutta (Kolkata). The Company quickly installed Mir Jafar – a general who had betrayed the defeated Nawab – as the first of a series of puppet rulers of Bengal. More of a commercial transaction than a real battle, Plassey was followed by the systematic looting of Bengal's treasury. In a powerful symbol of the transfer of wealth that had begun, the Company loaded the treasury's gold and silver onto a fleet of over a hundred boats and sent them downriver to Calcutta. In one stroke, Clive had netted £2.5 million for the Company and £234,000 for himself. Today this would be equivalent to a £262 million corporate windfall and a cool £24.5 million success fee for Clive. Historical convention views Plassey as the first step in the creation of the British Empire in India. It is perhaps better understood as the East India Company's most successful business deal.
In the decade that followed, the Company used its dominant position to monopolise the foreign and internal trade of Bengal, driving out Asian, Dutch and French merchants in the process. In August 1765, the Company's supremacy was formally recognised by the impoverished Mughal Emperor Shah Alam II with the grant of Bengal's diwani. This office of state gave the Company control over tax collection for more than 10 million people. For a stock market-listed company with profit as its primary motive, this acquisition of a country's public finances was truly revolutionary. Not surprisingly, the Company's share price boomed when news of the acquisition reached London's financial markets in April 1766.
Just as Spiridione portrayed, the wealth of the East began to pour into England. This represented an extraordinary turnaround. Before Plassey, the 'balance of trade was against all nations in favour of Bengal', wrote Alexander Dow in his 1773 History of Hindostan. Bengal had been 'the sink where gold and silver disappeared without the least prospect of return'. Now that flow was reversed. Monopoly power and windfall revenues combined to create unrivalled purchasing power that bought ever-increasing quantities of Eastern goods to European markets. In spite of tough trade barriers against cheap Indian calicoes, Bengal's textiles, notably the soft Dhaka muslins, were still an essential fashion item for Britain's female elite. Indeed, Spiridione's Britannia seems swathed in muslin. But tea was now the Company's prize commodity, and the riches of Bengal helped to boost shipments from the Company's Chinese subsidiary in Canton (Guangzhou) three-fold in the five years following 1768. The annual consumption of tea rose to some one pound for each man, woman and child in England. On the streets of London, the Company also made its presence felt, not least at its imposing headquarters on Leadenhall Street, the huge dock complex in Blackwall and the fine merchant houses around Stepney Green. For a Parliamentary Select Committee investigating the Company's affairs five years later, 1778 – the year of Spiridione's triumphal portrayal of commercial success – would be seen as 'the high flood tide' of its exports from Asia.
The East Offering Her Riches to Britannia provides us with a fascinating window onto the ways in which the Company wished to see itself – and be seen – at the peak of its commercial powers. Its mix of classical imagery and oriental exoticism – Mercury in a palm grove – captures well the sense of unlimited opulence that the Company's success in the East had made possible.
Yet much is missing from this vast tableau. Like so many high-profile corporate ventures since, the takeover of Bengal proved to be an acquisition too far for the East India Company. Initial stock market euphoria quickly gave way to excess, mismanagement and collapse. As the Company transformed itself from a modest trading venture into a powerful corporate machine, its systems of governance completely failed to cope with the new responsibilities it faced. Oppression of local weavers and peasants became the norm. Military spending spiralled out of control as adventurers took over from traders. Corruption assumed epidemic proportions and speculation overtook its shares, stoked up by Clive and others. Then, in 1769, conflict in south India rattled nervy investors, sending its share price into free fall. Financial crisis stalked Europe and the Company faced bankruptcy. Across the world in Bengal, drought turned to famine as Company executives profiteered from rising grain prices. Plays, pamphlets and poems poured from the presses back in Britain to pillory the Company and its executives. Company executives became caricatured as grasping Nabobs (or Nobs), the Yuppies of Georgian England. Like many of his contemporaries, the Glasgow Professor of Moral Philosophy, Adam Smith, was horrified at the way that the Company 'oppresses and domineers' in the East Indies. Parliament was forced to intervene, while over the Atlantic in Britain's American colonies, patriots focused on the Company's tea as a symbol of oppression. For one 'Mechanic' appealing to the tradesmen of Pennsylvania, America was faced with 'the most powerful Trading Company in the Universe', an institution 'well-versed in tyranny, plunder, oppression and bloodshed'. On the night of 16 December 1773, patriots dressed as 'Indians' dumped East India Company tea into Boston harbour, the symbolic start to the American War of Independence.
War still raged in the Americas when The Offering was first unveiled in the Company's headquarters. In London, the Company's share price continued to languish at half the level it had reached during the 1760s. To the east in India, the Company's most senior executive, Governor-General Warren Hastings, had taken a succession of desperate measures to restore the Company's financial health. Looking back on this era as Parliament once more sought to bring the Company to account in the early 1780s, the philosopher/ politician Edmund Burke was savage in his criticism. For him, India had been 'radically and irretrievably ruined' through the Company's 'continual Drain' of wealth – a phrase that would haunt the next 150 years of British presence in India.
Yet, none of this – the speculation, wars and corruption – could be allowed to disturb the expression of supreme corporate confidence that the Company's 24 directors had commissioned Spiridione Roma to portray. Then, as now, some things are always hidden.
A STRANGE INVISIBILITY
Established on a cold New Year's Eve, 1600, England's East India Company is the mother of the modern corporation. In its more than two and a half centuries of existence, it 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 was 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. 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 the country'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, eventually ruling most of the subcontinent. Yet, the Company's footprint did not stop there, but stretched 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, Congou, Souchon and Pekoe teas flowed west to Britain and beyond. In the other direction came first silver and later a flood of Patna opium, smuggled in chests proudly bearing the Company chop (or logo).
Throughout its existence the Company was in a state of almost constant metamorphosis. Its end would come following the uprising against Company rule in 1857–58, a contest generally known as the Indian Mutiny in Britain and the First War of Independence in India. By then, the Company had lost almost all connection with the band of merchants who set out in four tiny ships to break into the Indonesian pepper market at the beginning of the seventeenth century. It no longer traded, and it administered its conquests in India as a licensed agent on behalf of the British Crown. But one abiding link remained: its ultimate purpose as a profit-making agency, always with an eye to its shareholders and the annual dividend. Following the suppression of the great rebellion, there was a fierce public backlash against the Company's anachronistic status. In the India Act of 1858, the Company was effectively nationalised, with all its rights and responsibilities taken over by the British state; the British Raj had begun. Yet, the Company lingered on, 'a shadow of a shade', according to one observer. It may have lost its purpose, but its directors were insistent that its capital should be protected for the remaining years of its last charter. Eventually, time ran out, its shares were exchanged for government bonds, and on 1 June 1874, the Company ceased to exist.
Colonial rule was certainly the final outcome of the Company's adventurism in Asia. But it was the hunt for personal and corporate profit that had drawn the Company inexorably on. The results of this enduring dynamic were world-shattering. By the time of its demise, the Company had changed the course of economic history, reversing the centuries' old flow of wealth from west to east. From Roman times, Europe had always been Asia's commercial supplicant, shipping out gold and silver in return for spices, textiles and other luxury goods. European traders were attracted to the East for its wealth and sophistication at a time when the western economy was a fraction the size of Asia's. And for its first 150 years, the Company had to repeat this practice, as there was almost nothing that England could export that the East wanted to buy. Then first in Bengal in the decades that followed Plassey, and then in China through the opium trade, the Company broke this longstanding pattern of trade and wealth. By the time of its demise, Europe's economy was double the size of those of China and India, a complete reversal of the situation in 1600 (see Table 1.1). There are many elements in this turnaround, but the East India Company was certainly one of the chief agents that engineered the great switch in global development that marked the birth of the modern age.
Yet, if you walk to the site of East India House as I did, you will see that nothing marks the tumultuous impact of this once mighty corporation. Today Richard Rogers's glass and steel Lloyds Building stands in its place. It was here that the Company's board of directors guided its global operations, and where its famous quarterly auctions were held. Sometimes lasting for days, such was the ferment generated by these auctions that the noise of 'howling and yelling' from the Sale Room could be heard through the thick stone walls on the street outside. Lawrence Norfolk's wonderful 1991 novel Lemprière's Dictionary captures some of these passions, with his tale of how a secret society manipulates the Company from caverns deep beneath the streets of London. As the hero approaches East India House, he finds 'a stone hulk stretched down Leadenhall Street like a petrified carcass'.
Leadenhall Street was not the Company's first headquarters. When it was newly established by Elizabeth I as 'The Governor and Company of Merchants of London Trading to the East Indies', its business was done at the City mansion of its first Governor (or Chairman), Sir Thomas Smythe. His house was situated on the narrow Philpot Lane, where an echo remains in the appropriately named 'Spice Trader' curry restaurant. The Company then shifted a few hundred yards to the north and occupied Crosby Hall. Long after the Company had moved on, this magnificent Jacobean structure remained in the financial heart of London. When property developers threatened it with demolition at the turn of the twentieth century, a public campaign paid for it to be dismantled and re-erected brick by brick on the riverfront at Chelsea. The hall remained in public use as a college until it was sold off by the Conservative Prime Minister, Margaret Thatcher, after her abolition of the Greater London Council in 1986. It was then purchased by a financier who had recently left the insurance giant, Lloyds – itself the site for the next phase of the Honourable Company's rise.
Excerpted from "The Corporation That Changed the World"
Copyright © 2012 Nick Robins.
Excerpted by permission of Pluto Press.
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Table of Contents
Lists of Tables, Figures, Maps and Illustrations
1 The Hidden Wound
2 This Imperious Company
3 Out of the Shadows
4 The Bengal Revolution
5 The Great East Indian Crash
6 Regulating the Company
7 Justice Will be Done
8 The Toxic Exchange
9 A Skulking Power
10 Unfinished Business
Most Helpful Customer Reviews
Brilliantly written, a carefully drawn history that helps us to understand how modern corporations developed.