“Regulated” Joint Stock Corporation

 

Virginia Company: Negotiated “Regulated” Joint Stock Corporation

Let’s start our by appreciating that the Virginia Company was NOT a run-of-the-mill business corporation driven by its shareholders to make profits. Family-owned partnerships dominated the late-medieval, early modern period and joint stock companies are few and far between. Corporations that functioned in turbulent and and far-removed overseas were “proprietary corporations” that restricted their membership and were closed to outsiders. The pre-Virginia Company merchant trading association restricted its members to its partners, who served on its board and had life time appointment.

English adventurers in its post-Henry VIII Tudor period operated under a heavy if not crushing cloud of the war against Spain/Portugal, a war that seemingly never ended (1604, to be precise). As allies of Holland, that imposed upon them several cross-currents. The first was that many adventurers joined the Dutch resistance against the Spanish invasion, acquiring considerable military skill and experience which they put to use in raids, privateering, semi-invasions of their colonial possessions and key cities, and even carving out settlements that served as home bases for what amounted to a war against Spain in particular. 

The second cross-current was, in the post-Henry VIII period that Holland was England’s competitor in trade, discovery, and what I would label as proto-colonization. In the course of the war against Spain, Holland granted to England by treaty several of its European trading cities, from which a series of English trading families moved to and traded from, alongside traditional Dutch family and corporate traders. Both merchant trader in the English cloth trade, the mainstay English export to the continent, if not the world, and our merchant adventurers also followed in the wakes of the more advanced Dutch trading republic whose merchant marine utilized cutting edge ships, built from their shipyards, and sailed by top-quality personnel. The smaller, more aspirational English navy, and its budding merchant marine, which joined with the navy in the Spanish war.  Never content to be an also-run the English maritime industry was waiting for the opportunity to directly compete with the Dutch and set up trading missions to the East Indies in particular, but to North America as well.

Dutch competition carried into the soft infrastructure of maritime affairs, in particular the always odious task of paying for all this. In these days, even the Crown had limited funds, and great needs to use what they had for waging the Spanish war, paying for the expenditures of the court, and obviously the needs of the kingdom. It was a sponsor for maritime ventures of many descriptions, but in all but a few occasions, English ventures needed considerable additional investment by many wealthy investors and financiers.

To facilitate this exchange of capital and investment, the joint stock corporation  In some ways one might think of the early English joint stock corporation as a maritime guild, a structure which could accommodate those who wished to practice the profession of foreign investment, trade and colonization–all of which in this time period being common to the practice of the trade. Waging war against Spain could be tossed in for good measure as well, and in a time of great religious transformation and turbulence, the spread of one’s religion in competition with others gave the profession a scent of the Almighty as justification and legitimacy.

Overseas merchants, among others, routinely organized themselves into guilds and companies to maintain and control access to the special techniques and knowledge, or ‘mysteries of their trade. Many only later sought out royal grants to allow them further immunities of self-government, relief from certain taxes, and most important unimpeded rights to travel from and reside beyond the realm… ‘Merchants Adventurers’  who risked themselves and their money to find new commercial markets in Europe had emerged in the fifteenth and sixteenth centuries in commercial cities across England. .. the best known of these was the London-based Company of Merchant Adventurers of England [which] was fully incorporated with expanded powers in 1564, governing over the textile trade to the Low Countries and Northern German states. Like London’s livery companies, a company of merchant adventurers was not only a commercial association, but a religious enterprise, a mutual assistance society, a quasi-government council, and …a ‘Guild, Fraternity, or Brotherhood’ … Unlike its more guild-like cousins, it was not a coalition of independent under the umbrella of a consortium, but rather a single ‘common stocke” … The decision to organize this company as a joint stock was one made with finance and government in mind [99] Philip J. Stern, Empire, Incorporated (the Belknap Press of Harvard University, 2004), pp. 20-1

To make our narrative more accurate we must add to it the reality that if one were to study this period historically, it is likely one would look in a chapter in which the word “discovery” would be found. In todays’ expression Asia and North America in particular could be thought of as the “dark side of the moon”. This is the time when all were seeking the “northwest passage” or the hoped-for route of best and safest travel from Europe to China and the Indies. Like a video game, much of the game is in darkness that the adventurer was tasked to reveal in order to compete and win. That darkness had to be made transparent and for traders seeking new routes to trade that were safer, shorter, and more direct in order to make trade not only more profitable, but feasible.

A good map and ship captain’s  journal was almost equivalent to an modern financial plan. Accordingly, during this period, almost all merchant adventurer voyages had a serious element of discovery and route making attached. Indeed, such initiatives put Drake and later Cook in our history books. Consider also poor Raleigh who, after founding an expensive colony, lost it in the darkness of the Carolinas. A key task in the job description of our Virginia Company John Smith was to seek it out. Indeed, a telling anecdote drawn from the Virginia Company charter, reveals that in the first decade of the 1600’s  the Virginia Company was entitled to all lands from the Atlantic Coast to the Pacific across demarcated latitudes belonged to the Company. Virginia still held on to those claims throughout its colonial years, resulting in a Colonel Washington being sent by Virginia’s governor to evict the French from intruding on its claims in 1754. The almost humorous battle then waged by our Founding Father brought on what we call the French and Indian War, a war that Churchill labeled as the real “First World War”–or if you prefer, the war of Jenkin’s ear.

Thus it may be little surprise that the closer one’s ambitions were to England, the more attractive, and less expensive were the colonial expeditions undertaken in this period. Ireland, the first geography which suffered from intensive England’s overseas ambitions. In search of “plantations” and permanent settlement was organized around the versions of joint stock corporation available in the 1570’s.

 

 

 

The Virginia Company was first of its kind, a unique form of proprietary company that opened up its investment to the general public: a joint stock company. The Virginia Company required election of its officers and administrators on an annual basis. To participate all one had to do was purchase as little as one share. The share price was expensive, but not prohibitive and was affordable to even the more affluent middle class, the gentry class. That issue was not a small one, and it had triggered a major confrontation in the parliaments of 1603, 1604. Parliament, loaded up with gentry and aristocrats wanted in on these overseas profits and they were not able to invest because the trading associations, like the East Indies Company were proprietary with restricted memberships. They alone were beneficiaries of any profits (and losses I might add). Parliamentarians called them “monopolies”—as indeed they were. As we shall see shortly, the Virginia Company, as a joint stock company, was opened up for investment—and lo and behold, again as we shall see, parliamentarians loaded up on investing in the Virginia Company.

That sounds good, and indeed it was—after all lots of people could now lose money in overseas investments, not just wealthy traders. But there was a catch. As explained above, I called the Virginia Company a conglomerate; it had a sovereign board of directors, initially appointed by the king exclusively and thereafter from candidates nominated by each of the two subsidiary corporations that were also created. Each of those corporations were expected to found their own colony (colonies)—one in the northern geography designated by latitudes, and the other in the southern.

While I stress the Virginia Company was a joint stock company—it was—I am afraid I confuse matters by calling the subsidiary “London” Company, (First Company) by name of the Virginia Company because it was the patent-holder for Virginia—not because that was its real name at the time. In 1606 the Virginia Company more properly was the name accorded to the conglomerate sovereign company governed by the Royal Council. To the modern reader, it would seem more logical the names be reversed—so I reversed them in this history.

In that the conglomerate corporation lost much of its function and even purpose very early on—certainly by the third charter in 1612, little harm little foul. But there is one topic we need to address: why did we need the conglomerate company at all? Both London and Plymouth advocates for an American colony could easily have pursued their own separate charter and corporation and gone their own individual ways. This was rejected, probably by Cecil and Popham (Gorges) who wanted to forestall rivalry between the two—and Plymouth needed the London merchant adventurers to invest in it. But there was more to this story.

nd because the joint company up to this point, completely private as it was-had very real limitations. In an era of early mercantilist ambitions and rivalries/war between foreign countries a permanent needed to be perceived as “part of the realm” and deserving of English protection. A link with the Crown also was extraordinarily useful in attracting English migrants, and promoting investing in the New World; it could be more easily portray as a patriotic endeavor. But, again, there is still more to this story.

Past adventurer voyages and Raleigh’s attempt at colonization were private individuals out on their own limb, as independent of the Crown. That was the fiction which made privateering possible for those like Drake and even Raleigh. But this attempt at permanent settlement required more: as usual “the more” meant money, either cash equity, or more likely the Crown bringing resources to the venture, tax abatement, favored terms of import, land grants from the king’s huge land mass, gold coin as currency. Money could come in the form of defense: soldiers, ships, sailors, forts, weapons. Accordingly, there was a dimension of discussion that underlie the need to explain the “conglomerate” nature of the Virginia Company

As a suitable vehicle for the western plantation “Men of the Popham-Smythe type, with the example of the great trading companies before them, saw the value of employing a similar form of organization-the legal chartered company. for the purpose of advancing settlement as well as trade“. What they wanted in this instance was NOT a colony established by a private corporation, or a business joint stock company. Rather they wanted the Crown lead the colonization effort, as a public initiative, a path that promised more success and commitment than any led by the private sector. Indeed the missive that started the drive for a corporation that was to become the Virginia Company was a hard fisted effort to convince others that the next step in successful colonization was the inclusion of the Crown. The author of this missive is generally credited to an Edward Haics, who was an adventurer associated with Gilbert [99] Osgood, Vol.1, p. 25, footnote 1. He said in this 1605 missive that:

‘Where colonies are [founded] by a public consent [man] continewe in better obedience, and become more industrious then where private men are absolute [in charge] of a [voyage] for-as-much-better men of [be]haviour and qualitie, will engage themselves at a publique service than which carrieth more [reputation] with it than a private, which is for the most part ignominious in the end” [quote from Andrews, p. 74 from Alexander Brown, Genesis of the United States, Vol I, p. 37-8

This closely followed Raleigh and the founders of Roanoke, who after their failure, insisted a private effort was inevitably doomed, and clearly urged that a private joint stock corporation would “enlist private capital” and empower the organized private company to carry out the colonization UNDER the CONTROL of the state (capitals mine) [99] Andrews, Vol. 1, p.74. While it is clear the merchant adventurers wanted to conduct and manage the operations of colonization, the profound involvement of the Crown, converting the initiative into a larger endeavor than simple private profit, and King’s support in sustenance of the colony were preconditions for their success.

Raleigh’s Roanoke (1684-5) failed so badly, no one then could find what happened to it or its population. Raleigh learned his lesson: the settlement had to be a Crown led settlement and it had to chip in with actual funds if the venture was to work. We have seen that while this might have been a hope, the big kingly financial lightweight was in the midst of promoting a large colonization initiative in Ireland–not Virginia. James assumed a nominal control over the Virginia Company, but provided no funds–leaving that to the responsibility of the old merchant investor plan–good luck with that!

The merchants knew what they could bring to the colonization table: money to pay for it. But they needed the legitimacy and primacy of the the royal government to lend the character the endeavor so badly needed. Still, one cannot sidestep the reality of the day that without private sector investment of funds, colonization at that time would not get started. But was James ready to jump on board? Not really.

 

The Stuarts, James I Enter the Stage

By the time of Elizabeth’s death in 1603, numerous voyages of discovery, settlement/ exploration, and simple exploration had created a limited body of knowledge as what the outside world looked like. Much was still unknown, or very poorly understood. One, therefore should realize the age of discovery was not yet over, and traders were still looking for ways to get to Asia—including the proverbial Northwest Passage in the northern climes of North America.

The rogue privateers-discoverers had been the glamour boys of the earliest period, the Age of Discovery. The merchant adventures had the benefit of London’s investor wealth. Populated by several aristocrats, a group of adventure seeking second son types from aristocrats, to gentry, and up and coming on the make nautical entrepreneurs usually drawn from the West Country elites and well-to do. An then there were the “sailors”.

The line between trading, colonization, a private merchant marine that served as a national defense force, and pirating with a uniform and flag was both thin and blurred. Viciously anti-Spanish, and Portuguese, a major focus was seizing advantage from their colonial holdings. That these men were almost soldiers of fortune, and their investors who funded these activities created strong bonds with military adventurers from other wars, and extended their influence into the commercial investment community. Intersecting interests, drew in trading masters such as Thomas Smythe, as well as the trading activists/privateers of London, Bristol, and Plymouth among others. The traditional English cloth merchants still dominated English exports and governance of the City of London; their markets were almost exclusively continental. Our merchant adventurers were an offshoot, but each maintained contacts and relationships for trade, investment and political advantage. Both relied greatly on the merchant guild system which was an equally powerful member of England’s commercial trade community.

The drive to found the Virginia Company attracted a number of these folk. The followers of Drake, Gilbert and Raleigh dominated the initial 1605 proposal, and the Rich family were early powerhouse members after the Company was incorporated. Compounding the future misery and polarization of the Virginia Company was also the inclusion of a goodly number of “adventurers” who often sailed using an Elizabethan “marque” who would continue to raid Spanish shipping after the 1604 peace treaty, a treaty which allowed the plans for Virginia to restart. In any event, several key Virginia Company investors (Robert Rich, later Earl of Warwick, John Delbridge of Barnstaple, and Marmaduke Rawdon, from London, who got wrapped up in the settlement of Barbados) [99] Andrews, Vol. 1, pp. 46-7. Known to us as the First and Second Earls of Warwick—Warwick for short—they are a name the reader should keep in mind because they will be dominant previous to and during the English civil war—until they deviated from Cromwell in the 1650’s.

Naturally, the coast of North America had attracted English interest, and from the 1590’s through 1610, a variety of exploratory voyages were organized, several by individuals such as Popham, Sir Ferdinando Georges, and Richard Hakluyt, all of whose activities were loosely tied to the still surviving Raleigh (who died in 1618) and his charter. These explorations traced the coastline and suggested the vast forests (timber-related, and fur), and offshore fishing banks were valuable sources for import–which fit nicely into the import paradigm of our second group of merchant traders. Chief Justice Popham and Sir Ferdinando, Hakluyt, George Somers, a a son of Sir Humphrey Gilbert were destined to be Osgood’s “moving spirits” of the Virginia enterprise and the joint stock corporation. [99] Osgood, Vol. 1., pp. 24-5

Hakluyt (the Younger) was an active proponent of what would become the Virginia Company. A cousin of the Elder Hakluyt, Richard the Elder [99] was a merchant and lawyer, gentry family of the region, whose business affairs injected him deeply into trade and plantation issues. He studied geography which at that time was the study of the “discovery of the globe”, and his living was tied to foreign commerce from the out ports of England. His conceptual tomes, written during his last years (he died in 1600). From these works, we can see what I perceive as the major underlying paradigm justifying plantations, colonization and commercial trade, particularly with North America.

Alan William’s introduction to the pre-Jamestown English-American adventure and discovery is the best: comprehensive but succinct, a faithfulness to chronology, and personality-sensitive treatment. The reader will benefit more from his words than my bruising and tossed asunder chronology and narrative:

Hakluyt’s greatest contribution was his rationale for overseas colonies. He fastened the possibility for commercial profits to an English colony in the New World and surrounded the whole project with a sense of national purpose, America, with its vital raw materials and markets could make England self-sufficient and free from the insecurities of Dutch middlemen, and the threats of European wars,  could provide every commodity England bought from European traders—wine, salt, tar, pitch, resin, timber, silk, spices, and dyestuffs—and could augment the mother country’s fishing, fur and skin trades. Of course there was always the possibility of discovering gold, silver, copper and precious stones (although these remained secondary to a diversified economy that would complement England’s products. From American colonies Englishmen could easily raid the Spanish in the Caribbean, or drive French fishermen from the Newfoundland banks.

Once settlements were made, major missionary efforts could be undertaken. Hakluyt’s goal was a commercially viable colony of Englishmen set down among a native population that would be anglicized. It was not to be an outpost, but an entrepot for a continuous influx of England’s honest poor, who desired employment they could not find, and the lazy, poor criminals whose presence threatened the social stability of a supposedly overpopulated Elizabethan England  … his emphasis was on a wilderness Canaan overflowing with natural resources, land awaiting industrious gentry and yeoman farmers, a healthful climate, seas teeming with fish, and an easier, more certain life for all … all who went to Virginia … remained wildly optimistic about Virginia. It was an Eden, needing only righteous, industrious men to cultivate its gardens. [99]  D. Alan Williams,“ Introduction” in Frank E. Grizzard and D. Boyd Smith, Jamestown Colony: a Political, Social, and Cultural History (ABC Clio, 2007)   p. xx

He never mentioned slavery or indenture, tobacco, Indian wars, and a capital city located on a mosquito and typhoid-ridden swamp. Sometimes the best laid plans of mice and men do go astray. In any case, this is the best and most succinct description of the business plan and the main goals to which the proponents of the Virginia Company shared. While other factors and drivers may have crystalized their involvement in the Virginia Company formation effort, these are the “better angels” of what they hoped would result.

The East India Company achieved some success in its first few years and the idea of replicating that success in the west, as we mentioned earlier, attracted activist interest from Popham (then lord, chief justice of the king’s bench), Smythe (head of the East India Company), and Gorges (governor of the fort at Plymouth (England) came together and attempted to influence the king and his Privy Council especially, that along with an Irish plantation, a plantation in the west  was both possible and desirable from a number of needs and perspectives.

The arrival of James I on the throne in London generated many emotions, schemes, ambitions and fears, but freed from the long reign of Elizabeth, many turned to the new king for his consent in their plans. Still James was not to be a replay of Elizabeth and the Tudor script. First and very important, James I of England, was already James VI of Scotland. The English and Scottish kingdoms, while preserving their separate sovereignty and churches, were ruled by James, whatever his number. As we shall see in future modules, colonization was affected by this union, as James had two distinct constituencies to accommodate.

More important in 1603-4, was that England and Scotland had two different foreign policies, and allies. Scotland had not taken a hard line against Spain in England’s longstanding war against Spain. With considerable controversy, James signed a 1604 treaty with the Spanish, and brought an end to a period of multi-decade war, trading disruption, privateering, and broken relations with a Catholic kingdom. Certainly a dramatic political change, the treaty resulted in English recession and hard times hit the general population, as did plague and bad harvests–all of which intensified, the anti-Crown activities of the Parliament. If there were frustrations and anxieties in England, one can be sure they were found somewhere in Parliament—and James relationship with parliament enjoyed little if any honeymood of consequence.

During James’s first parliament sessions he was at odds with parliament. While several issues caused dissention and conflict, among the most troublesome was the issue of our trading monopolies, the joint stock corporation of our merchant adventurers—and to a considerable extent, the Rogue Privateers as well. Yet there was hope for trading, and some sympathy for colonization, as avenues for generating prosperity permeated into the deliberations that commenced on the structure of a counterpart to the East India Company, the soon to be Virginia Company. As the initial proposal was formulated in early 1605, the position of the king was uncertain, but, unlike Elizabeth, the early Stuarts, if they were to think about colonization, would place Ireland, where Scots and English could immigrate and England (the King) could more easily profit. As Andrews observes this was an impediment to the Virginia proposal:

[99] Andrews Vol. 1, p. 44 footnote 1: Little would have been accomplished in the first half of the seventeenth century either in commerce or the settlement of colonies had the state been left to take the initiative, for not only were the early Stuart kings too deeply immersed in affairs at home to interest themselves directly in such undertakings, but their treasury was far too empty to warrant any expenditure in overseas enterprise. As a pathbreaking instrument at this time the private company or promoter was indispensable. That the privately settled colonies had to give way eventually before an expanding state control was inevitable, as the state grew in wealth and power and gradually formulated a program of its own, and as the needs of the whole overrode those of any of its parts. Hence arose in the history of the colonies, the friction, ill-will, and endless complications that accompanied English expansion …

Though James I had no commercial sense and consequently no commercial policy, and in fact, exhibited little interest in economic questions of any kind, his Privy Council, which was almost the sole government agency in matters relating to trade and the plantations, gave support to the merchants, both in London and the outports, and the nobility and many lesser folk could usually be counted on to take shares in any undertaking that promised a financial return. Long experience in privateering and exploration enable shipbuilders to improve the sailing qualities of the merchant vessels …  many ship captains had already seen service … before they employed or chartered for the peaceful and harmless pursuit of carrying colonists to America …

Though the King brought up as he was in Scotland, had no knowledge of the impulses that were at work … and his relations with the merchants was neither practical nor tactful, nevertheless the years from 1604 to 1619 were characterized by peace, prosperity and confidence in England’s future. During this period were taken the first steps toward the permanent colonization of the West. [99] Andrews, Vol 1, p. 52

At the opening the peace with Spain (1604) not a single colony of Englishmen had found place in either Asia, Africa, or America. Before the end of the century, there were twenty colonies along the Atlantic seaboard, and in the West Indies, peopled by nearly two hundred and twenty-five thousand human beings of all sorts and conditions, chiefly of English stock, engaged in building up communities of active, vigorous frontier life–towns, villages, farms and plantations–and concerned with agriculture, industry and commerce. (pp. 53-5)

Parliament and Free Trade

Pauline Scott, Free Trade and the house of Commons, 1605-6, the Economic History Review, Feb, 1975, Vol 28, No. 1

How did the Virginia Company become a first-time example of a joint stock company the Parliament could accept—indeed embrace? The joint stock corporation, deeply involved in “court politics”  was also in the center of James’s early conflict with Parliament. John Cramsie suggests the process of court policy-making shifted greatly—and abruptly- from that of Elizabeth to that of James and indeed the early Stuarts especially:

The ultimate failure of Jacobean finance transcends structural problems. It failed politically because of the manner in which policy was made, and policymakers conceptualized finance. Finance was conceived of entrepreneurial-lie projects that attempted to marry private gain and public profit, a development which had its origins in the 1580’s and the treasurership of William Cecil [Richard’s dad]), Lord Burghley.

The failure of policy-making lay in James’s practice of kingship and the political process that grew around him. In particular, his personal style of kingship—in contrast to government by privy council under Elizabeth—left policy-making especially susceptible to struggles between patronage and the everyday duties of government. Projects embodied the competing forces of patronage and government, private gain and public good. Commercial projects, traditionally the preserve of economic historians, illuminate these intersections in politics and finance in the making of fiscal policy. [99] John Cramsie, Commercial Projects and the Making of Fiscal Policy of James VI and I, the Historical Journal, Vol. 43,No. 2 (June 2000), p. 346

When the Parliament met, for what would be a sixteen week session in 1604, its royalist leadership was seriously weakened, principally by a new generation of M.P.s . which the older Elizabethan core were unable to control. Lacking his own forceful spokesman, the King would in the course of the session turn mostly to his protégé and councilor, Sir Francis Bacon.

From the opening day it was obvious the King’s agenda was in trouble–borne out by significant reversals in his signature Union with Scotland initiative, and the rise of long-simmering reforms to modernizing-liberalizing feudal intuitions and “processes” such as “wardism”. The debate became insulting with insinuations about the Scots, and the divine right aspirations of the King. New agenda issues dominated committee sessions, reports, and finally erupted in legislation.

It is one new agenda-legislation with which we are concerned in this module: the advancement of “free trade”, which in the Blessed Parliament was defined as the end of “regulated” trading companies, like the Muscovy, Levant, and Company of Merchant Adventurers. In the end, while the Commons passed a bill, the Senate did not–and the legislation seemingly failed. But there is much to be gained, and learned, from this legislation because as we shall see, approved or not, the fate of regulated trading companies was sealed after this.

We are see from our study of free trade in the Blessed Parliament is the injection of Parliament into the vehicle of trading and colonization, the regulated and joint stock corporation”. More importantly we witness the joint stock corporation reform and the opening up of English investment to non noble and merchant individuals: the admission of a new investor class who had demanded their right to invest in trading companies thru Parliamentary legislation. The goal of this new investor group was to earn a return through investment in trading companies–and their horizon also saw opportunities from colonization. What they attempted in this legislation was to break up the trading company “monopolies” which in their mind constituted an inner closed, interlocking core of membership that deprived the great body of company membership of opportunities to secure profit and limited their access to company decision-making.

In a larger sense, the 1604 Commons was injecting itself into a policy area formerly a near exclusive preserve of the Crown and her/his key institutions such as the Privy Council. The structure and policy-making associated with English trading and foreign policy was about to be challenged and change dramatically over the next seven years. Its effect on the Virginia Company–and by implication, Virginia–was huge.

What is this “free trade thing? Unfortunately, the answer requires an expedition into the “weeds” of late sixteenth and early seventeen trading finance and organization. [99] I rely on Theodore K. Rabb, “Investment in English Overseas Enterprise, 1575-1630 (the Economic History Review, New Series, Vol. 19, No. 1 (1966), pp. 70-81; Theodore K. Rabb, “Sir Edwin Sandys and the Parliament of 1604 (the American Historical Review, Vol. 69, No. 3 (April, 1964), pp. 646-670; History of Parliament, https://www.historyofparliamentonline.org/volume/1604-1629/member/smythe-sir-thomas-1558-1625; History of Parliament, https://www.istoryofparliamentonline.org/volume/1604-1629/survey/viii-officers-and-servants-house; History of Parliament,  https://www.historyofparliamentonline.org/volume/1604-1629/member/sandys-sir-edwin-1561-1629.

Up to 1604, during the Elizabethan period, free trade was quite controversial, generating repeated legislation, to little avail. Final reform of the joint stock corporation was not achieved until 1623 “Statute of Monopolies”, but English courts did from time to time (1601 being an important court-imposed limitation) impose limits and conditions to what the royal charter could grant to a trading company. [99] See Frank Evans, The Evolution of the English Joint Stock Limited Trading Company“, Columbia Law Review, Vol. 8, No. 5 (May, 1908), pp. 339-361.

Parliament’s issue previous to 1604 was attachment to a joint stock corporation the right of its membership (shareholders/investors) to exercise a monopoly over sale of certain products derived from its foreign trade. This power was granted through a regulation, by the Crown no less, of the joint stock corporation. So, if one traded abroad for fur skins, only a member of the trading company could sell-license them in the English market. This is the razor “blade” that made the profit from the trading ‘razor”.

As one might expect, the rancid nature of this power generated a nexus of corruption, arguably the chief deficiency being that only favored individuals could take advantage of the profits derived from foreign trade. Those excluded wanted in. Since the Queen was among those who was in the inner circle, this legislation went no where. In 1604, a new generation of parliamentary leaders tried a new definition of free trade and attacked the lack of access problem from a different angle. Free trade in 1604 attacked the problem by submitting legislation to end “regulated joint stock companies”.

Regulated joint stock corporations could legally restrict their membership to include only those who were licensed to trade a specific product or commodity. Such regulation usually included training, an apprentice, and membership in a guild relevant to the specific products. The Company of Merchant Adventurers had forged this regulation and had convinced the Queen of its usefulness to her–and them. Regulated joint stock trading companies then could restrict who could be members, and could impose qualifications for holding higher office and board (or court) inclusion. A relative few of a company with thousands of members could hold and perpetuate their hold on the decision-making bodies of the trading company.

Moreover, an individual not of that particular occupation, nor a member of the appropriate guild, could not invest–i.e. become a member of a regulated joint stock trading company. As more and more new wealth flowed to non noble or merchants, however, a new grouping, called gentry, had disposable capital to invest–and they wanted in on foreign trade and sell of trade goods. They could not participate in foreign trade through trading company investment. This closed trading company, closely tied to the great twelve guilds, and their fraternity with the Crown was the target of gentry activists in the Blessed Parliament–and they saw an opportunity to press their dislike of regulated trading companies by taking advantage of a new (1601) joint stock corporation type that had been promulgated in 1621–the “limited” or non-regulated trading company we know as the East India Company.

the fourth item on his list had been monopolies, by which he had meant the special licenses given to individuals by the crown, granting the sole right to sell or manufacture certain commodities such as playing cards. These grants had come under heavy attack during the last two Elizabethan Parliaments, and legislation against them was passed again in 1604. But another kind of monopoly figured prominently at this session [1604] for the first time: the grants made to the great trading companies whose tight membership received complete control over large areas of overseas enterprise. Unlike their predecessors the gentry of the seventeenth century opposed and attacked several holders of this second type of monopoly [regulated joint stock trading companies] [99] Theodore K. Rabb, “Sir Edwin Sandys and the Parliament of 1604 (the American Historical Review, Vol. 69, No. 3 (April, 1964), p

Originally the East India 1599 charter was a regulated joint stock corporation, with all the traditional monopoly rights attached thereto. But within a year the East India Company was not able to raise sufficient funds to operate its proposed East Indies voyages–indeed, investors had signed on, but many just did not pay up–and so still enjoyed the rights and monopolies attached to the Company. The regulated charter included no penalties for partial payments and so such defaulted investors still enjoyed the unlimited rights of the regulated Corporation. So the Company attained a revision to the charter that granted such rights only to those who invested and paid fully their investment–not the entire membership. Say it in legal terminology the new charter “limited” the rights of investors to monopolies–hence the origin of the contemporary term for English private corporation: “Limited”. In any case, the East India Company became in 1601 a limited joint stock trading corporation–the only non-regulated English trading company.

As such, those who invested in the stock of a limited company could become a member and enjoy whatever the rights of such conveyed on the membership. Literally, that limitation meant individuals did not have to become licensed by the company to be members. but membership was secured by simply by purchase and payment of shares. The original revised charter was limited to a period no longer than 1609, but was renewed in 1610. [99] See Frank Evans, The Evolution of the English Joint Stock Limited Trading Company“, Columbia Law Review, Vol. 8, No. 5 (May, 1908), pp. 343. The purpose of the 1604 proposed legislation was to formalize this “limitation” and to create a second type of joint stock corporation whose membership was open to any could purchase and pay for a share in the trading company. The effect of this legislation was that any investor, of any occupation or even class, could purchase a share and become an owner. with all rights and dividends thereto.

While the 1604 legislation was successful in the Commons, approved with only forty dissenting votes, it was not approved by the Lords–despite aggressive advocacy by its activist leadership. The matter again came up in the Parliament of 1605, when leaders of the merchant community proposed another regulated trading company, the Spanish Company. The legislation for the incorporation of the company as a regulated joint stock corporation failed–and from that point on it was clear, no incorporation of a trading company would be successful if it were “regulated”. Accordingly in 1606, the first official non regulated trading joint stock corporation was incorporated: the London and Virginia Company.

It took a long time to get to this point–but hopefully the reader now sees the relevance of the topic. While the 1606 Virginia Company was structured in accordance with the wishes of the King–and Parliament–although no role for Parliament was made by the King in its 1606 Charter–it was chartered as a joint stock corporation whose sovereign governance body was a “council” appointed in 1606 directly by the king, and tasked with “national” objectives and accountability.

 As important, the two subsidiary corporations, where the “action was meant to occur” did not have their corporate structure specified, and as we shall see the London Company opened up its membership to anyone who would buy a share or more. In 1605, Edwin Sandys bought his shares. He was not alone. In this sense, the Virginia Company was a regulated joint stock corporation. After all if it walks like a duck, it must be a duck, even if it doesn’t quack.

When the time came to revise the 1606 Virginia Company charter, three years later, 1609, Parliament and the King were in a different mentality and negotiating posture–and the negotiations for that 1609 and 1612 revision were dramatically different from the 1606 charter. The Virginia Company being the first, and the change in the investor configuration exacted immense repercussions on the organizational vehicle, the joint stock corporation. These repercussions rendered our Virginia Company unable of developing a coherent colonization and settlement program and strategy that satisfied its new investor membership. Virginia will bear the brunt of that division. Like a divorce of mother and father, the sibling will feel the consequences most. After this module, the reader will see how.

So what should the reader get from all this? First, certainly the key organizational structure intended to be the backbone of colonization, foreign trade, and permanent settlement was in a flux–caught in an interchange between a divine right king, and a Parliament (a fledgling national legislature) at odds, starting down a path that will lead to England’s most destructive and turbulent period in her history: the pre-Civil War, the Civil War, the various stages of Cromwell and Protectorate, and Restoration of the Stuart monarchy. In 1605-6 Parliament did not YET want to “control” foreign trade or colonization, but rather wanted its fair share of the benefits from it. The King wanted as much of both as he could get.

That is not a spectacular core consensus capable of engaging both parties to make the corporation work soundly and to some extent efficiently and effectively. To compound matters as we shall see, James, far more than his son, was not especially focused on the policy area, but his bureaucracy injected its own royalist perceptions into the process. With Smythe in charge of the London Company, Sandys relegated to being his deputy, and the initial 1605-6 shareholders mostly merchant adventurers and allied guilds, it was sufficient to proceed.

For all practical purposes, however, the 1606 corporate structure would break down, leaving the colony badly exposed and by 1608 on the edge of survival. As we shall what really hurt in the first year was not the overall corporate structure per se, but the corporate business and financial plan—none of which made its way into the charter in any significant sense. It was what the charter didn’t say or deal with that hurt Jamestown the most.

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