The East India Company: The World's Most Powerful Corporation (The Story of Indian Business) Read Online Free PDF Page B

see rival companies form, but a formal end to the charter did not happen until 1813. For one thing, the ideological opposition was divided. Some among those who opposed monopoly in domestic trade still favoured monopoly in overseas trade. For another, the opposition was more or less confined to merchants. A truly universal critique of monopoly had to await Adam Smith’s
Wealth of Nations
(1776).
    Until then, the criticism of the Company was slow to develop, and was bred by its very success. The critics were well aware that the monopoly charter had been instrumental in the making of its fortune. The commercial-maritime enterprise entailed great financial and physical risks. In the early 1600s, possibly half of those who set out to go overseas died from scurvy, storms, pirate attacks and shipwrecks. Goods broughtfrom India or the Indonesian islands to England or Holland were expensive luxuries that sold in markets susceptible to economic shocks or epidemic attacks. Capital was needed to maintain an elaborate infrastructure of factory, fort, sailors, ships and soldiers. The business of overseas trade could weather these risks only if it was unusually profitable and run on a very large scale. The monopoly charter helped it earn large profits and the joint stock provided the scale.
    In turn, the early Company brought to India an organizational principle that had been rare in the region’s economic and political tradition. It sought a royal charter from an Indian king. And it sent the most able diplomats to discuss the terms. In order to maintain the level of sophistication in negotiation, the chiefs of the Company’s distant outposts tended to be senior merchants. Negotiation skill became a benchmark with which individual ability in the Company’s hierarchy would be assessed, and young men could move up quickly based on this ability. Learning an Indian language helped as it could facilitate direct communication with the Indians.
    In this fashion, there emerged the characteristic form of the Western European chartered companies trading in Asia.
Conflict of interest
    It is sometimes suggested that the chartered companies were the precursors of the modern joint-stock company. This is true only in a narrow sense. The differences were fundamental. There were two main differences.
    Firstly, the Company was formed during a time when shareholding by the public, and professional management, were still unknown. The identity of the Company was hardly distinct from the identity of the owners. Even when the shares were traded widely, the Company never acquired an identity independent of the oligarchy of the largest shareholders who controlled all policy matters. Secondly, whereas the term ‘company’ would evoke today the picture of an organization where the employees work for the interests of the shareholders and under a central command centre, the East India Company was an enterprise in which the head did not have perfect control over the limbs. This lack of control was deliberate. The very design of personnel management made the overseas branches somewhat autonomous from the head office.
    The formation and functioning of the Company can be read as a partnership between the sedentary bankers and merchants of the City of London and the peripatetic sailors and soldiers. The merchants supplied the money, the sailors navigated the waters, and the soldiers ensuredsecurity. Merchants and soldiers, the smooth and the rough sides of society, hailed from different classes, had different world views, and did not share an innate propensity to become friends. If the partnership were to work, profits of the enterprise had to be shared, or the sailors and soldiers allowed to trade on their own account. The Company paid them small salaries, but allowed them limited scope for private trade.
    The scope to pursue private interest while working for a firm imparted an element of instability on the whole enterprise. The tendency to develop a split