The 1606 Charter: Not Ready for Prime Time

The 1606 Charter: Not Ready for Prime Time

Reflecting the petition, there were two distinct “sub” joint stock companies created as subsidiaries of the conglomerate–which was the entity that was empowered by the King’s charter (signed in April 1606). England’s claim in North America was divided by parallels into a northern, middle and lower. Plymouth got the northern territory, Virginia got the southern, and the middle was left undetermined or unspecified. So from the start two separate colonies were to be founded. Andrews asserts “the creation of two companies instead of one was undoubtedly due to the intense rivalry which prevailed at this time between London and the outports, and to the jealously that existed among the West County ports because of commercial supremacy of London [99] Andrews, Vol. 1, p.83, footnote 1. The design, writing and setting the seals for the charter, did involve the King, his Privy Council, and most likely was dominated by the advocates who filed the petition.

The charter seems to have been forged with the sense it was not intended to be the permanent charter for either colony, but for a specific period in which the colony was established–in five years years several key provisions were to expire. These terms would have been incorporated into the bonds and indentures that were used to finance the voyages. Section 19, Osgood states seemingly  did not prohibit grants of land to individuals by either of the two colonies, in neither colony during the period of the 1606 charter was it contemplated. Various other clauses support the assertion that only one port was to be created, and there would be no geographic dispersion outside a ten mile by ten mile boundary. The sub-corporations were given power to recruit and transport settlers/adventurers, and the right to trade.–but no mention was made of a monopoly.

Duty taxes were levied on trading transactions, and foreigners were to be taxed a higher rate for the first twenty-one years of the colony. While it was anticipated that funds would be raised through additional sub-joint stock corporations, the number was limited to three in the first five years. All trade within the colony would pass through (exported) a “magazine” (sort of company trading store), and imports would be handled by ‘three factors” chosen by the company. These seemingly pedestrian details will become important to the future evolution of Virginia’s domestic economic base, and the former restriction did complicate the supply of the settlement after the first expedition.

the [allowed] functions of the the patentees [the companies] … were proprietary, that is industrial and commercial in their character. This group of men furnished the capital for the enterprise, procured settlers, had immediate charge of trade, and expected a profit as a result of their efforts. … The colonies they founded were plantations , worked by servants [as customary for a plantation] and laborers under various forms of contract and managed by overseers or factors. [99] Osgood, Vol. 1, p. 27. As such the governing charter entered into areas of workforce, and contemplated at least two categories of recruits, freemen or servants (considered as property legally, and bound by a term contract)–what has come to be called indenture.

The initial Virginia Company corporation was governed by three distinct “councils” (arguably equivalent to boards of directors). The first was resident in England, and the other two resident in each plantation. The more powerful council, resident in England, was entitled the “Royal Council” and it was intended to be the vehicle through which they King exerted control over both ventures, and their corporations. “To the Royal Council was given control of, and for all, matters that shall or may concern the government” in their respective territories. The King was empowered to appoint the members of the council (13 or 14), and in practice the King appointed only members from the patentees, but the King was free to adjust the size and composition of its membership as he pleased.

What this means is the “board of directors” for the conglomerate joint stock company–the Virginia Company–which managed the two subordinate joint stock companies (London and Plymouth) was a “royal” board, appointed by the King and responsible-accountable to him–not to the shareholders. While the King sidestepped the issue a bit by appointing the kingpins of the investor group, the potential for conflict between and among the investor group was built in to the conglomerate structure–and the limitations on the council’s ability to implement decisions without the King’s (Privy Council) approval meant a prolongated a more rigid-inflexible, and to the degree that minority interests could access the King, bias the decision-making. There is a question on the initial balance of public-private was not too tilted to the public–which, of course, is what the original merchant advocates wanted. But not everybody–certainly not those associated with the Plymouth Company. Andrews sees the problem:

Who was responsible for the idea of the Royal Council is far from clear. As Sir Thomas Smythe, Sir Walter Cope, Sir Francis Popham (eldest son of the Lord Chief Justice), Sir Ferdinando Gorges, and the sundry merchants of London, Plymouth and Bristol were among the first members of that council, it might be thought that the instructions as well as the first draft of the charter were the work of the original group of promoters. But as far as the West Country petitioners and merchants generally are concerned, this does not appear to be true [99] Charles Andrews, Vol. 1, p. 85

Andrews then goes on to cite a variety of Bristol and Plymouth public officials and merchants who were not onboard with the Royal Council, previous to the approval of the charter. They wrote to a “godfather” parliamentary official, Robert Cecil, with strong ties to the Parliament (for example, Edwin Sandys) for support against the Council, and indicated that they were not willing to go forward with any approval.

Andrews believes the lawyers of the Privy Council, including the great Popham, and Coke (a Commons activist), along with Bacon believed the King ought to maintain control over the Company responsible for England’s initial colonization–if only to (1) convey the civil and economic rights of those who emigrated to be equivalent to those who remained in England, and (2) since the precise location of the two colonies was not yet known, a set of issues could arise, some risking involvement by France or Spain, that necessitated the King keep a strong hand over the Virginia Company [99] Andrews, Vol. 1, pp. 85-6; finally, (3) they wished to be clear the land claimed by each colony within its borders was the King’s land, granted only by the charter and which could upon termination of the charter revert to the King.

This insistence of royal authority was congruent with the “plantations” founded in Ireland, and very much based on a view that the foreign trade, colonization, and settlement of North America was within the policy-making province of the King. In a real sense it was in “the spirit” of what will be called in a later module, a “regulated joint stock corporation”. That this was a hotly contested issue between Parliament and the King since 1604 (explanatory discussion will follow in a future module), only reinforces the Bristol-Plymouth appeal to Cecil as invoking the involvement of Parliament in the negotiations on the original 1606 charter. For various reasons, Parliament did not choose to enter into the process–in the aftermath of the Gunpowder Plot Parliament had backed away from its aggressive debate with the King, at least choosing to pick its fights carefully.

The decisions of the Privy Council were not challenged and accordingly the Parliament more or less deferred to the King, at least at that point, in the writing of the 1606 charter. Still, a warning bell had been rung. A series of progressively stronger rings was to follow.

The formal CEO of the Royal Council, however, was specified by the charter, which assigned as Treasurer Sir Thomas Smythe. Andrews further notes that while the London merchants seemed satisfied, the West County Mayor of  Plymouth expressed dismay at the composition of the Royal Council which he described “as strangers to us and our proceedings” [99] Andrews, Vol. 1, p.85. In this criticism we may surmise the London commercial merchants was perceived by some in the Virginia Company, as operatives from London, and not sensitive to the agendas of the outports and West County.

Other correspondence regarding this topic includes dissidents from Exeter who threatened to not approve of the proposed draft charter (which might mean Gorgas himself in opposition either to the composition of the Royal Council, or the Council itself as an unwelcome intrusion of the King. A take away is there was real tension and separation between the activists of each of the two proposed colonies–and the root cause was London-vs non-London merchant adventurer rivalry. Also, London adventurers (cloth merchants particularly) were closely tied to the Crown, non-London merchants much less so, and more tied to Parliament.

The idea of a royal council and a Crown colony-led venture was likely not appealing to them, Once again, the 1606 Charter left Parliament out of the approval process; that made it even more a Crown initiative. The 1606 Charter had no role set for Parliament either in its approval or the design of its charter and governance. The King enjoyed considerable power in approving what today could be considered an executive order (which any succeeding king/queen could alter or revoke–and which could be terminated by him. The imposition of duties/custom or otherwise was a royal prerogative, one that in short order Parliament would contested (the impositions issue).

[A] great issue that aroused intense debate and at times great bitterness of feeling is the jealously which the outposts [non-London municipalities]—Bristol, Exeter, Newcastle, Hull, York, and others—felt toward London, a city which, having been influential in bring about the expulsion of foreign merchants [therefore creating a vacuum for municipal foreign trade strategy], was drawing the trade to itself and becoming rapidly not only a leader in commerce, but also an important factor in determining governmental, that is royal policy. …

Some of the outposts—notably Bristol and York—mercantile centers that were older than London—resented the latter’s determination to conduct business in her own interest, and to frame regulations that were to her own advantage. [The outposts] were aided in [this] struggle, partly because of the natural increase in trade … and partly by their growing importance in the House of Commons, which was the successful opponent of the King and Privy Council …

London had few members in the lower house, while the outposts had many, and the London companies having obtained their charters from the King were more or less bound to support him by loans and [their] influence. Mercantile interests were not a major interest of the house, who were largely the country gentry [landholders, not merchants] … but were content to [support] the outposts against the Londoners because in so doing they were supporting the parliamentarians against the king. [99] Charles M. Andrews, the Colonial Period of American History, p. 38.

What is remarkable to me, and interesting given our sub-state economic development focus, is the salience of inter-municipal competitive rivalries that reflected their own strategies on how to compete with larger cities and enhance their own economic base. As we shall see in this chapter, structural, strategy, and, of course, political culture distinctions between the two colonies hatched from the 1606 charter suggest he politics, rivalries and bitterness of English local economic development ambitions could so deeply affect the future economic and political development of Virginia is a wonder indeed–albeit indirectly, and over an extended interval.

So when the prospective American settlers prepared for, and set forth on their separate voyages, they were not compatriots nor all happy campers. Each followed their own schedule, financing, and decision-making.  These strange bedfellows joined together to kick off this colonization thing, and their first set of initiatives were as much exploratory, even experimental, as opposed to permanent settlement. Most of their economy-related exploration was closely tied to a trading factory-hub so to set in motion a quick payment of bonds, and a fast dividend. The 1606 Charter was a means to an end–an end which was not yet certain. In essence the 1606 Charter was never written “in stone”; it was a transitional relationship–not a faithful replica of the East India charter.

As we shall see, the 1606 charter will be twice amended within five years, and in the two amendments exhibited a different policy-making process that did involve Parliament, and did more seriously and directly affect the structure, strategy and operations of the Virginia Company.

Thoughts and Implications–The Royal Council was, as Osgood relates, “the creature of the King“.  [99] Osgood, Vol. 1, p. 28. Yet the King himself had little to do with it. To dot the “i”, this council was more a council acting in the king’s name, than a proprietary board of directors. In fairness, however the Privy Council and the leaders of the joint venture corporation did spend considerable time after the April approval to work out some details and draft specific instructions from the Royal Council, (i.e. make decisions to which the lower councils were to implement when resident in their respective colonies.

Through this Royal Council, the enterprise was rendered “public” with the operation of the enterprise entrusted, yet monitored by the Royal Council, to the two resident councils in America, with the operation of the colony in America, consistent with the directives/decisions of the Royal Council, bound by oath to England. The American-resident councils, however, were proprietary, private in character of their decision-making and the composition of the council, which could chose their president and fill such vacancies as may occur. Very detailed instructions, written by the Royal Council, as to limitations in judicial affairs, and in very precise detailing of the location and the workplan of the colony were sent with the expedition. Probably anticipated, but not to the extent the future revealed, settlement governance would enjoy at least temporary infusion of authority and autonomy given three thousand miles of ocean, and the harsh seasonality of winter travel.

But we ought take note of the special structure commanded by the 1606 charter. This was a royal expedition, governed and monitored by a royal council he appointed and could dominate at his volition. True the private sector put up the money, assumed the real risk, and tasked itself with the execution of a trading and settlement strategies. Given the rather detailed instructions issued to the local council, instructions that for the day may have verged on micromanagement, the decisions of local authorities were far from carte blanche–that nobody I could find these instructions were not warranted, or were not wise suggest no one really understood what they were in for in 1606.

In any event, the Virginia Company was a joint stock company was truly an experimental public-private partnership that deviated materially from past joint stock ventures. This seems to have been understood, as we have earlier mentioned the charter was not considered to be “permanent” but a transitory arrangement, meant to expire on its own terms after five years or so.[99] See Osgood, Vol. 1, p. 27. p. 29

The planning behind the Jamestown expedition, as described in our first module in the Virginia Chapter, reflected a perspective that the primary goals of early Jamestown were exploratory in nature, with trading, mining and fishing, Indian relations, not to mention installation of a permanent self-sufficient economic base, had to flow from the knowledge revealed from the explorations. From the start both colonies were dependent, almost totally on the supply ships to be sent on regular intervals.

What was not anticipated for sure, was the effect of the Ulster Plantation, then under intensive debate, would so materially affect the financing capacity of the Virginia Company. That will be evident in the push to get the bonds issued and purchased. We will discuss that in detail below, but it is in the financing that we see Thomas Smythe most clearly. He was very involved in that; he used his contacts, which at least among the guilds was mixed. But he did likely bring over investors from the East India Company. The planning for the first expedition, he left to relatives and friends. There is little sense Smythe got much involved with that; he was, if the fog of history is not so thick as it may be, a great delegator–which explains how the managed so many diverse and serious responsibilities simultaneously.

To me it is apparent that in 1606, the rush was on to get the charter approved, secure the king’s involvement, protect the interests of the two competing parties, and get the boats loaded and sent off to North America as quickly as possible. The Charter was approved in April,1606, but the final detailed boundaries, letters of instruction, and other necessary documents were not in place until November. The Jamestown expedition arrived in May, 1607, having left England in December, a trip of 144 days). The Plymouth Company backed “Popham Plantation” (Maine) or Sagadahoc as it is known today, arrived later, after a two month voyage, in August of the same year. The timing of Sagadahoc proved to be a disaster, and was, as much as anything responsible for its quick fate. Bluntly, there was not a lot of time to get the finances in order, and the planning, recruitment, ship leasing, and supply purchase to be completed, especially for Jamestown (about two months).

 

James Takes the Plunge

The patent, which was signed on April 10^th, 1606, granted the adventurers a considerable measure of encouragement, and is perhaps chiefly important as recognizing explicitly that the movement for colonization was a national one. The charter itself is wanting in precision and it is to be construed in close relation to the ‘Instructions for the Government of the Colonies’ which were dated in November of the same year. Inasmuch as the scheme for an American plantation had been developed independently in London, and in the western sea-ports, the charter authorized the formation of two distinct colonies. [the respective geographies are specified] … the management of the [entire] enterprise was committed to a Council of thrteen persons nominated by the Crown, and acting under instructions received from the King. The supporters of the venture who were resident in the vicinity of London … known as the ‘First Colony’ or the ‘London Colony’. The ‘Second Colony’ which was to be supplied from Plymouth and the outports [99]  William Robert Scott, The Constitution of Finance of English, Scottish and Irish joint stock corporations to 1720 (Alpha Edition, Cambridge University Press, 1910, 2019) pp. 246-7.

Other detail, such as the transportation of servants and the process by which trade and export were to be handled (i.e. a cape merchant, exports to England and custom farmers) is provided by Herbert L. Osgood, the American Colonies in the Seventeenth Century, Vol 1 (Forgotten Books), pp. 26-8; Charles M. Andrews provides detail identification of those who signed the perition for a patent, as well as his version of the 1606 charter—and some more precise estimations of the chronology of the process Charles M Andrews, the Colonial Period in American History, Vol. 1 (Yale University Press, 1934),  pp. 80-90,

If there was to be a joint stock corporation, it would be at the discretion of the subsidiary corporations. The “First”, or the London Company, did. The sovereign board, however, was not joint stock but was the board responsible for the overall management and conduct of the entire corporation; it was that board that was tagged with responsibility for conformity to the charter issues by the king—and in 1606 it had serious monitor responsibilities that intruded deeply into the management of each of the two subsidiary corporations.

Provisions was made for three councils [boards of directors], one resident in England, and one in each of the two colonies. The First was called the ‘Royal Council for Virginia’. Its members were appointed by the Crown. The charter provided they should be thirteen in number but the first instruction [November} reveal the fact that there were fourteen. They were, however, selected partly from the patentees for the first colony and partly from those of the second. Experience soon revealed the fact that it was very difficult to bring enough of these together to do business, and for that reason by an ordinance issued in March 1607, the number increased, at the request of the patentees themselves to about forty.

In both of these documents it was stated that the king might increase or change the membership at will. The council was then his creature. Each of the two [subsidiary] councils consisted of thirteen members appointed by the royal council under instructions from the king, but endowed with the power to chose their own president and fill vacancies among their own number. …Through these bodies, and by means of instructions given to them, the king governed the colonies. …To the royal council was given control ‘of, and for all matters that shall or may concern the government not only within the colonies, but to the [unspecified latitudes between the colonies] [99] Herbert L. Osgood, the American Colonies in the Seventeenth Century, Vol 1 (Forgotten Books), pp. 28-9;

In 1606 the King named its membership, That seemingly meant the king intended to have powers sufficient to enforce his will, whatever autonomy the joint stock corporation might, by its nature,  hold. While that may well have been his intentions, Osgood reports his actions suggest he intended to directly affect the corporation’s decision-making when he desired. While, as stated immediately above he empowered the corporation’s Royal Council with near absolute jurisdiction over the entire geography assigned to both subsidiary corporations. But, ”it was not required to report to the privy council. Not any of its members [Royal Council] were privy councilors …. Moreover all appointees on the king’s council for Virginia were members either of the London or Plymouth companies. If the creation of something resembling a council of the Indies had been contemplated [East India Company], it is hardly supposable that its personnel would have been selected from so narrow a circle”. Osgood assumes this is because the king intended not to use intermediate bodies to exert his influence, but to rather inject himself directly “into the faces” of the corporation’s chief leadership. “It has very much the appearance   of a device, the purpose of which was to guard the interests of the king within each of these companies” [99] Herbert L, Osgood, the American Colonies in the Seventeenth Century (MacMillan, 1907), p. 20

The below the surface issue is the royal council membership included a very heavy dose of “public” officials or their representatives. Even the Plymouth and London subsidiary corporation leaders chosen were the more “public”—Popham, the chief justice for England’s highest court, Smythe was au currant James’s “czar” for foreign negotiations at that time, Gorgas and De La Warre were soldiers, the English Solicitor General and even the Lieutenant of the Tower of London (what a looming presence he must have been). The kingpin himself Earl of Salisbury, sent his deputy, Sir William Cope.

American readers take note: this was not a joint stock corporation that was managed by private board members. Let’s call it as it was: the board of directors of the sovereign board, the royal council, were public and the Virginia Company, as it started out, was set up as the king’s monitor and agent of control. Sandys joined the body in 1607, but he could hardly be thought of as a private member savvy in merchant trade or plantation-building. While the king would pass this off by saying to the Spanish ambassador that the ambassador should have no worries concerning the Virginia Company because it was just private individuals and thus “a private affair”, to which the Spanish Ambassador was described as “incredulous”.

The king “packed” this key body with his own people. From an American perspective this was no “business corporation”; it was a national initiative under control of the nation’s sovereign. [99] See for example D. Alan Williams, “Introduction” in Frank E. Grizzard, Jr. & D. Boyd Smith (Eds), Jamestown Colony: a Political, Social and Cultural History (ABD-CL
>IO, 2007),

So the king was in a position to require the Virginia Company to conform to his wishes, and to serve as an instrument in the royal conduct of England’s foreign policy—a bone of contention, I might add with the parliament who wanted in on this foreign policy thing especially because this king was new, Scottish, and had friends like Catholic Spain they didn’t like. The king, we might remember, had just signed a year before a major treaty with Spain ending wars that had persisted over the last thirty years.

Say it another way, the king could impact the flow of business transactions and impose fees, customs duties and taxes for his own use. Say, it still another way, the Virginia Company was in partnership with the King of England—and if the king wasn’t satisfied he could simply terminate the charter—and that would be that. It is my guess that the king’s control was not intended to intrude into management of the colony per se—three thousand miles of ocean dispels any such ambitions from the start—but rather to spring into action on broad major matters of concern to him. These, of course, likely meant entrance of parliament into into Virginia Company decision-making.

If so, while many commentators will treat the Virginia Company as “private”, as indeed it was in structure, it was also “public”, governmental, and “partisan” from its start. Today we call these organizational affairs a public-private partnership—in those days they had no name for such an inconceivable hybrid- but in the advent of a royal versus parliament struggle, the king intended that the Company would be “his”, not “theirs”. All this would have been consistent with the battles waged during the 1603 to 1605 parliamentary sessions.

Thomas Smythe, whose return in September 1605 as James’s Ambassador to Russia, was a loyal royal ally, and my suspicion he was injected by Salisbury into the formation of a “London” corporation, possibly to counter the heavy parliamentary influence within the Plymouth corporation, is a conjecture I confess to holding. Unlike the relatively transparent process that led to the Plymouth Corporation, the formation process of the London Company appears (at least to me) to have begun only when Salisbury linked up with Popham and Gorgas—with the former apparently drafting the 1606 charter for both. Smythe had some rather “heavy duty”, travel intensive assignments upon his return, and I suspect the Virginia Company was thrown in as well. That he was also the undisputed leader of the merchant adventurer grouping I do not dispute.

What are the immediate takeaways?  First there is nothing simple about his public-private conglomerate in this day and age. It should not be dismissed as just a company filled with greedy shareholders seeking a quick profit. Secondly, the governance structure, unlike a proprietary merchant adventurer association, was its own maze of checks and balances, closely watched by the by close court monitoring, and plenty of potential for each of the three internal company corporations to collide, collude, and a burden to coordinate. “[Future] Relations between the Crown and the Virginia Company … will be observed that the transactions occurred chiefly between the king and the company, and not between the king and the colonists. So long as the work of colonization was in the hands of corporations resident in England, this was necessarily the form which the exercise of royal control assumed. [99] Herbert L, Osgood, the American Colonies in the Seventeenth Century (MacMillan, 1907), p. 25 The parliament in the very initial years, however, was simply not involved.

Osgood goes on to suggest that in that 1606 period, it was the king who exerted an impact on the “instructions” sent with the colonists, and which were not mere guidelines but orders. Osgood supports this by referring to the specific criteria to be used in locating the colony—criteria that placed the colony out of  Spanish “harms way”, and to “nullify so far as eastern North America was concerned, the provisions of the papal bull [which greatly interfered with English ambitions] [99] Herbert L, Osgood, the American Colonies in the Seventeenth Century (MacMillan, 1907), p. 26. It is not clear the extent to which the “trade-export”-related instructions originated from the corporations, or reflected Crown preferences (or both). I can only content myself with the belief the instructions did reflect in part at least, royal wishes.

The “instructions”, more specifically described in a future memo, did address economic diversification, but left it in the hands of the “gentlemen” sent over. Staples farming was not stressed, partly because as carried out by conventional trading company practices would have been satisfied through trade with the natives. John Smith was to be an explorer, and captain of the militia. Arguably, the most egregious mistake made in the instructions was its “setup” of local governance. The head official, the president of the city council, was elected for one year, had two votes instead of one, but no additional powers. The Council was more a committee, and the president was at best a weak executive—whose instruction-designed occupant seems overmatched relative to his responsibilities.

The basic problem, however, was that Hakluyt’s business plan and image of Virginia’s plentitude and potential of an economic base was way ahead of what the colonists saw when they landed on the Virginia shore. There were no long-time East Indies historical elites waiting for them, no trading urban areas rich in native staples and tools; they were met by the Powhatan, who were in wonderment why these Europeans landed in the middle of their home base and a handful of miles from their king’s birthplace.

Despite the king’s intention to safeguard his position in the founding of this colony, his idea was to delegate this colonization thing to the two private joint stock corporation, supposedly overseen by an all-powerful royal council, composed almost exclusively of joint stock board members, sitting three thousand miles away from where the action was to be, required an awfully lot of hope, and even more prayers, if it was to be successful. Could it be the Virginia Company, the first royal colonization partnership, was in 1606 poorly thought through first tentative step into the North American New World? Could it be the king was correct in his fear that parliament would not eventually miss an opportunity to inject itself into this venture?

There was a built-in autonomy, decentralization, that was intended between the subsidiary corporations, but also the sovereign board. This invited tensions and conflict and bad management as officials would have to navigate all this, but in the minds of the policy-makers the idea was to launch a few ships and send them on their way. The financing that was authorized was for a fleet, packed with settlers who were employees of the corporation, and enough to supply them for as long as the funds lasted. If more was needed no funds, sell more shares, and such would be required. That was going to require some additional authorizations and bond issuances—which, of course, meant dividend/interest, but also collateral, i.e. profits. If this was to be a permanent, and growing settlement, than the 1606 charter was likely to be revisited.

The problem which now confronted the patentees of 1606 [after being awarded the charter] was briefly this: with the limited capital at their disposal they must procure a sufficient number of colonists for their purpose, convey them in the small sailing craft of the time across the ocean, establish them in chosen sites … , and maintain and protect them there until they should become self-supporting. …  It is to be noted that very much of the [past] experience upon which they could draw for examples [of how to accomplish this feat] had been gained by purely commercial companies [organized by the merchant adventurer associations], which [patents] had limited the efforts [of the patentees] to the founding of trading factories in the East [99] Herbert L. Osgood, the American Colonies in the Seventeenth Century, Vol 1 (Forgotten Books), pp. 29-30;

Charles Andrews specifies that Gorges, not Popham, took the lead in dealing with affairs after the patent was issued. He comments that Popham had taken the lead in the drafting and approval of the charter because he was committed to making these expeditions a public not private initiative. The charter makes obvious the limits of his success, but certainly the charter and the instructions that follow make the project a national affair, controlled by the king. With this accomplished the seventy-five year old Popham turned the mechanics over to the forty year old Gorgas. He puts it this way:

The [subsidiary] companies were to provide money for equipment and furnishing of ships and were to secure such men as the council approved, willing to make the venture. Just how the money was to be raised, or how far the companies were to control the trade of the colonies are points not made clear, either in the charter or the instructions. Probably each company assumed a corporate charter in order to provide common stock from the contributions of its own members. There is nothing to show that the public was invited to purchase shares. Charles M Andrews, the Colonial Period in American History, Vol. 1 (Yale University Press, 1934),  pp. 88-90,  [Subsequent to Andrews history, records were found and tapped for the issuance of stock. We shall discuss this matter shortly, as we will be able to provide some limited description of who subscribed to the Virginia Company and when during this period.

Here we see more clearly how the change in the business plan for the Virginia Company, from trading factory to permanent settlement, had not filtered down into the Company’s financial plan, nor had been thought through sufficiently by the time (November) when the “instructions” were issued. My speculation is that holds true for each of the two subsidiary companies, as both would commence settlement by their recruitment and commissioning of voyages. With the patent signing in April, the first ship to Sagadahoc left in August 1606, and the London Company’s Virginia expedition left in December—the former without benefit of the November instruction. The words “bums rush’ comes to my mind as each company developed its plans to commence colonization.

One senses that the authors “knew” that “they did not know” what lie ahead, but would deal with it as it came up. Their temperaments reflect their past lives and experiences. This is fair enough assumption, so the reader should be sensitive that the Virginia Company corporation was “an experiment”—and intended to be so. For the makers of the Virginia Company, the understood business plan (to be discussed below) was, to them, clear enough-but the devil lie in the details—and they would work their way through the problems. In today’s parlance, the Virginia Company was a “work in process”.

Inadvertently, the structure, even if intended to be modified, had at least two built-in governance deficiencies. The charter required a dividend be paid to the shareholders—that is what they expected and that was what the charter required. Dividends strongly implied profits, or someone to step up and add to the corporation’s equity. In the temper of the times, the shareholders were serious; they expected a dividend—and as we shall see, when they time came the money was not there. The payment date was extended later but it would come due in seven years. With no cash in its company bank accounts, the dividend; when it came, was in the form of a land grant. The reader should suspect I am setting them up; when the time comes there will be an avalanche of implications of major consequence to the long-term development of the colony.

The second built in governance problem lie in the open-ended nature of a joint stock corporation. Previous merchant adventurer trading associations had all they could handle dealing with the restricted partnership members. The Virginia Company had that also because entities like the individual guilds could—and did—buy shares. But shares could be purchased on the installment plan, and the initial payment was sufficient for the shareholder vote. No payment of the installments because a real problem, and this fiscal instability became chronic. Collection and the prospect of denying a shareholder the right to vote led to the inevitable conclusion that a shareholder could make an initial payment, vote, and dodge the collection agency. Voting would be by voice, and one share for each voice—not weighted by number of shares owned. Meetings could be stacked!

But this shareholder voting and one very profound consequence. It opened up the Virginia Company to what we today call “partisanship”. As we shall see the business plan was pretty loose, and while profit was the agreed upon end or goal, how that profit was acquired was not. At any point the shareholders were likely to be fragmented by their ambitions and perspective as to what this colonization was, and what was the most profitable way for it to be accomplished. Board management of shareholders could be a full time job in itself. Even more troublesome was that parliamentarians en masse bought shares, became shareholders who given the chance could take off on their own in one or both of the subsidiaries.

In our contemporary world, we could easily say the Virginia Company was politicized from its birth. Indeed, it seems the second in command of the Virginia sub-corporation, they called it the London Company (for a reason), was a major parliament leader who had led the opposition to the merchant adventurer monopolies in the parliaments of these years, and who wanted in on the Virginia Company, was chosen—no doubt by accident I am sure. Edwin Sandys is a name the reader ought not forget. If he does I will constantly remind him.

Past “Driftwood” that Entered into the First Charter

–For example, the first thing the colonists at Jamestown were told to do was find a spot to settle which was way upstream so the Spanish couldn’t find it or attack. The first one they liked was next to a mosquito-laden swamp, from which they could get water. The first urban infrastructure they built was a palisade and fort. They quickly set up a “watch” at the base of the river, the James—and surprise they build aircraft carriers and submarines there now. Stuff like that will pop up all the time in future modules.

The king wanted profits, he called it taxes, custom fees, and worse. That meant he too shared in “le grand consensus” that underlie the Company. He also was attracted to colonization. Referred to as a “plantation”, a colony from the king’s eyes and pocketbook was a way to extend the power of his kingdom, but was also a place from which he could make money. It was to be the job of the Virginia Company, if he was to issue them a charter (a license to govern a colony), to provided opportunities for both. A colony also offered opportunities for the king to create patronage, grant land for startup projects, but mostly to harvest revenues. Imports require the colony be able to construct infrastructure, and entrepreneurs can “startup”. From his own self-interest then, the king could “defer” his taxes and fees for a period of time thus offering an incentive. There will be a royal tax/fee incentive in the Virginia charter.

It is no accident I suspect the patronage he liked best were “custom farmers” who were granted monopolies in goods that arrived from foreign lands—including English colonies. These custom farmers paid the king for their position and in return they could see the goods domestically or reship them to other countries. Needless to say London and the West Country ports could be interested in this. The reader is now alerted: England made the real money from the imports, the outputs of the colony. Back in 1604, those outputs were undefined. Everybody had ideas of what was out there, gold is the famous one, but the English had enough trade experience to know that the quest for Spanish-like gold was complicated at best, and so they had a menu, lumber, food stuffs, mining for metals lacking in England. They thought the best place for all that was to trade with the natives—as they had begun doing in the East Indies.

As to who the natives were, well, they still hadn’t found out what happened to Roanoke. There was a lot to be learned and so they hired an adventurer, John Smith, and one of his tasks was to find out about Roanoke and then travel around and make maps. The point of all this, the reader asks, is that there was a lot of hope and expectations involved in the Virginia Company—and a lot of ignorance too. That is a very important point. The Virginia Company was conducting a startup experiment—and some very big, nicely-placed venturesome egos were already waiting on the pier for the ship to sail—the king was already there and he owned the pier. This is not just any business—this was the king’s business.

So the first secret about the Virginia Company is that it is not just a Company, a run of the mill business. The ideas, ambitions, expectations and egos that fostered its creation would said on board with it, and otherwise be waiting for its outputs at the ports. In the meantime they would lend the company the money, issue shares and sell bonds, and collect interest. This Company was on the verge of being a “national” project, in which the king would partner with any who bought shares in the Company. The managers would be the company leadership, and being a royal partnership, the king would appoint them. So now we move to the organization that was the Virginia Company

The 1606 Charter “Strategy Nexus”: Not too Clear on the Plantation Concept and England’s trading experience in 1606  was limited to their understanding of the East Indies and the Spanish/Portuguese in the West Indies and Brazil.

In Virginia. the distinguishing feature of the Charter’s instructions to the resident Jamestown council was its clear linkage to the “plantation” form, and, given its exploratory role, a restriction against dispersion of the population into the hinterland–at least temporarily. The trading factory mentality did take hold sufficiently to perceive Jamestown as less a capital of a settlement colony than the hub of exploration, trading, and resource development– a hub that was easily defended, and adjacent to open waters to facilitate access by supply ships. There was in the charter no power to create local governments. “Dispersion of the colonists was not contemplated. The establishment of a single fortified post, which should serve as a center for exploration, for the discovery of mines, for trade with the Indians, and the exploiting of the resources of the country for the support of the colonies and the benefit of the adventurers” [merchants] [99] Osgood, Vol. 1., p. 33

Osgood correctly observes the company proprietors “being at the outset merchants or knights, and noblemen who were acting under the commercial impulse, they were guided, as we have said to the experience of older commercial companies … Though they were under direction from home, yet the colonists must in the main provide for their own defense, develop relations with the natives, give spirit and extension to the institutions of government … Then economic interests were of prime importance, and the connection [i.e. the link] between [company goals] … and the colony was especially close“, [99] Osgood, Vol 1, p. 31,

Since no one really knew what settlement required, most of the planning for the first expeditions were based on past exploitive-mining-trading opportunities that realized quick (almost one off) profits that could within a short time pay off/substantially reduce the investor’s loans in the expedition.

To avoid the failures of the past, the patentees of 1606, especially the London group, drew from their own commercial experiences the chartered trading company as the model for managing their enterprise. The trading company minimized the financial risk to large and small investors alike. It also allowed for the investment of service [i.e. labor] as well as capital. Thus men who had no money, but who were willing to trade their labor for a share of the profits, could perform a vital service in the operation. Finally the trading company could bring together the talents and expertise of specialists, providing thereby a fund of information and skills that could further enhance the chances of a successful adventure [99] “the Beginnings”, the Old Dominion in the Seventeenth Century: a Documentary History 0f Virginia, 1606-1689 (edited by Warren M. Billings (Institute of Early American History and Culture, University of North Carolina Press, 1975), p. 4.

Indeed, the investor (five year term) loans were due for pay off in 1611—at high interest. It also meant that those settlers who could not pay their way became (unpaid) employees of the Company—a practiced that continued through 1614. I could argue the settlement strategy nexus was incompatible with this financial structure. One posits the expeditions were doomed from the start; but the 1606 Jamestown expedition was exploratory (as was the Sagadahoc expedition). Settlement was a strategy in process in 1606. They clearly did not focus on the bigger picture of colony-building in the North American wilderness in the short interval from final approvals to ships sailing of the horizon.

One of the expedition’s apparent purposes was the establishment of a permanent settlement, but perhaps its first concern was erecting an outpost as a means of determining how the further exploitation of Virginia should proceed. The exploratory nature of the undertaking seems to be confirmed in the additional instructions [Document 4: 1606 Instructions from the London Company to First Settlers] [This will also explain a great deal of John Smith’s activities while in Virginia] [99] Warren M. Billings, “the Beginnings”, the Old Dominion in the Seventeenth Century, pp. 4-5

The “joint stock company” was the most effective combination of powers and was the preferred alternative for larger and sustained trading-settlement ventures. It required a royal charter, but in return a “monopoly” trading within a particular geography was granted. It was this monopoly that caused the controversy among local municipalities, because once granted by the King/Queen, the other communities could not join in the fun and profits. London, the biggest and the bully on the block, usually got the best deals. The joint stock corporation was best suited to raising large amounts of capital in multiple issuances. This was because its flexible membership required as an entrance “fee” the purchase of a stock subscription which was the basis for the corporation’s capital raising. More capital, more members (or shareholders).

Members were anyone who bought the prescribed amount of capital, and that meant one did not have any restrictive qualifications on who could join—and that by default led to members whose principal motivation was making a profit, usually in the shortest time possible. The profit came in the form of a corporate “dividend”. That the 1606 colony was a sub-corporation of a master corporation, controlled by appointees of the Crown (in the Royal Council), a quick return of the original investment was sought and was essential to participation in future bond issuances.. There was nothing, however, in the structure of a joint stock corporation that required a rapid return of investment or dividend (bonds were to expire in 1612,1613), only the motivations of the investor did that. English investors in the early 1600’s were not known to be “patient capital”. It was, however, risk capital in that these colonizing adventures were just that: risky dangerous adventures.

The problem for the company with its commitment to a series of supply ships–the lifeline of the Jamestown colony–was that each, being a separate venture, required by the conventions of the day, to form a new sub-company specific for that purpose. That new corporation would issue a new bond for that supply voyage. Sort of a “pay as you go” process. Each additional subscription (bond issuance), however, meant more members, enlarging the company’s voting membership, and potentially attracting individuals with ambitions not in sync with company management who could vote in future elections. It was also time-consuming.

In that both colonies were “plantations, owned, officered and managed by the proprietors of the company … [and] the colonists [i.e. the workforce] were servants [indentured by contract] to the company … fed, housed out of products of the total labor of the colony, supplemented by cargos of provisions received from [England]. When, if ever, the colony became able to furnish a surplus product … it was sent home in the vessels of the company and sold for the benefit of the adventurers” [99] Osgood, Vol. 1, p. 34. This meant the Virginia Company had to cook breakfast, lunch and supper for whoever was alive over there.

In return, those Virginians were, among other tasks, the ones who were supposed to find the exports that would pay for that supper in the form of the next supply ship. As one reads through the convolutions the colonists/their resident council went through to find stuff to send back for sale, one understands they did so not for colonist personal profit, but for both the corporation’s fiscal stability from which their future breakfast and supper were to be paid. Jamestown exports to England were an essential part of the Virginia Company’s very fragile, if not unbelievably unrealistic financial plan. Yes, there was some gold seeking, but more likely Indian trading and mining were also on the list.

The reader ought commit these realities to memory, as they underlie life, politics, economics, and society in the colony–at least to 1612 or more realistically to 1619.

Shareholders and Bondholder (the Investors) in the Virginia Company

Each of the two subordinate trading companies (London and Plymouth) were expected to raise their own funding through the purchase of shares in their corporation. Both the charter, and the Privy Council instructions were silent on how to do so. So likely each company formed its own sub-corporation; Andrews believes “each company assumed a corporate  character in order to provide a common stock from contributions of its own members. There is nothing to show where the public was invited to purchase shares. For this reason the organization was rather a semi-joint stock variety than the joint stock, as each voyage [including supply voyages] were expected to pay for themselves” [99] Andrews, Vol. ., p.88.

The initial expedition was financed relatively quickly–Smythe and the King’s involvement greased some wheels sufficient to send off three ships and 104 colonists by December 1606.. The financing of the Virginia Company followed the traditional formula of Elizabethan merchant trading companies, i.e. an amazing small and closed group of investors purchased such shares as they deemed appropriate to their commitment to the project. Rabb’s study uncovered that in 1606 the Virginia Company attracted twenty-two investors–many overlapping with East India, Muscovy and Levant. An additional nine signed up in 1607 and 1608. [99] Theodore K. Rabb, “Investment in English Overseas Enterprises, 1575-1630 (the Economic History Review, New Series, Vol. 19, No. 1), see p.78 Table.

Sagadahoc having imploded in 1606-7, meant the Plymouth Company was temporarily out of the colonization business and focused on the debts and obligations from Sagadahoc.

It is likely the earliest shareholders-investors were wealthy trading merchants, a few guilds, and aristocrats committed to trading and a few to something called a plantation, or a permanent settlement. At most over these three-four years, thirty one shareholders have been identified by Rabb, merchant adventurers and gentry being the largest element. It is also likely their level of involvement was limited, and until receipt of news from Virginia, little attention was required of them. That changed rather abruptly and profoundly by December 1608. We shall pick up on that change in later sections. December 1608 is when, as they say, light dawns on the marble heads of the London shareholders.

Bond Issuances: That these colonists required a seemingly never ending series of supply ships and replacement servants (because of the death rate) the immediate task was to send off the first expedition and wait until reports of its success could be used to start the process for funding the first supply ship — and so on. Any glitch or outright failure would crush the next financing effort. Unsurprisingly, Rabb reports that between 1607 and 1608, only nine additional investors signed on to the Virginia Company in 1607 and 1608. [99] Theodore K. Rabb, “Investment in English Overseas Enterprises, 1575-1630 (the Economic History Review, New Series, Vol. 19, No. 1), see p.78 Table

With only three bond issuances allowed by the charter, corporate expenses and costs that followed the settlement also had to be financed–making the sums larger and the need for an expanding investor “pool”–or rather deep pockets from a few wealthy investors. The latter was never expected. Even Smythe was not on board for that. Baron De La Warr (we shall talk of him in this module series, he was the first official governor) was, I believe the largest single investor in Virginia. Small wonder that after him, three of his four brothers were to be governors as well–continuing to 1642. In any event bond investors were both shareholders, and more likely financial lenders ranging from guilds to wealthy individuals as well as business lending entitles. Have no fear, James was not among them.

Invested money bought shares in the company, and that granted right to vote in corporate elections, serve on corporate “committees”, and participate in some form in corporate decision-making. Over time, this had to dilute the dominance of the original investors. Eventually, to stop the flood of opportunistic investors making corporate decisions led the company to seek to raise funds through municipal lotteries (1613), a controversial approach to public fundraising in and of itself. A lottery conducted by, and the funds expended on the behalf of the Virginia Company, a “monopolistic trading companies, invited a toxic reaction from some quarters of both Parliament and public opinion. We will deal with this later, but from 1606 on, a series of new bonds were issued to finance the company’s activities, recruit immigrants/servants and supply ships being primary. This created a very tight-fisted, clumsy, illiquid fiscal structure for the company. It also likely made inevitable the continuous restructuring of the 1606 charter.

Bond issuance at the time of the East India and Virginia Company was by subscription, i.e. an individual purchased or subscribed to a portion of the total issuance, often paying over a series of installments. While the first installment had to be paid, subsequent installments, if not paid, would negate the subscription and terminate any owner’s rights to the company, offered as a term and condition of the subscription. This detail concerning installments was much more than that; it became a very serious problem for the Virginia Company as years elapsed, and as expectations of dividends and profits faded.

When one issued a bond, therefore, the tendency was to overcommit and induce more investors to pay the first installment sufficient to meet the costs of the proposed supply expedition and estimated company expenses. This is no way to run an airline today, and it was not helpful to a 17th century maritime trading company. A note of clarification: participation in a bond subscription did not convey shareholder rights to vote in the corporation boards. Bondholders had rights regarding the management of the individual bond issuance in which they participated. Their power was fiscal in nature and default was the option, an option which could lead to at least the threat of bankruptcy.

Indebted as I am to Professor Theodore Rabb who has complied a study of investors into the English trading companies during the period 1575 to 1603, I offer an intro into the 1606 corporate membership. Rabb’s database offers comparison of the Virginia Company to investors in other trading company’s like the East India, as well as provide us a looksee into who invested in Virginia. [99] Theodore K. Rabb, “Investment in English Overseas Enterprise, 1575-1630, The Economics & History Review, New Series, Vol. 19, No. 1 (1966), pp.70-81

To describe how the British East India Company was financed, Rabb describes, Sir Thomas Smythe’s early 20,000 pound subscription to the East India Company–a huge sum for an individual, but with an investor membership of only eighteen investors, over two decades shareholders invest $2.9 million pounds. One can see how “closed” the East India was, and access by the many to opportunity to profit from overseas ventures was nonexistent. [99] Theodore K. Rabb, “Investment in English Overseas Enterprise, 1575-1630, The Economics & History Review, New Series, Vol. 19, No. 1 (1966), pp.70-81. In any event the 1606-8 Virginia Company attracted only 31investors (the East India in this period, 29). Obviously, the Virginia Company’s 1606 (and 1607-8) bonds were purchased by a few investors raising larger sums. [99] Theodore K. Rabb, “Investment in English Overseas Enterprise, 1575-1630, The Economics & History Review, New Series, Vol. 19, No. 1 (1966), see Table 1, p. 78.

The secret as to how this could work is simple: each bond sponsored by a merchant trading company was limited in purpose to the voyage at hand, costs a major concern, with a short, initially three year term specified. The general expenses of the company were intended to be handled by shareholder purchase, which in 1606 was only twenty one shareholders. The cost of a share was not prohibitive to the upper and middle class, but risks so huge that potential investors, without incentives, were unwise to foolish to buy many shares. Rabb, whom we discuss below, found shareholders did not invest a great deal in each company—asserting that Smythe himself did not invest more than 20,000 pounds in the Virginia Company.

A voyage of several ships, and an unknown series of future voyages, with each bringing a new infusion of people and supplies, returning with exports-all aspects of a permanent colony–was a brand new set of bond-debt stipulations and expectations, and that meant a new financial plan. Neither happened in 1606 as we know. The closed circle that dominated the formulation and approval phases of the companies’ incorporation were the likely heavy hitters in the 1606 expeditions; who they tapped, we do not know, but the guilds, a few at least that Smythe could access, were the “usual suspects”. As Andrews also comments this method of financing had its risks; a failure or something perceived as a failure would almost certainly condemn the entire enterprise to its fiscal death–whatever was really going on in America. Indeed, he goes on, with, I think, considerable justification, that “from the outset [this fiscal structure and] the form of control provided by the charter was not well adapted to promote a successful colonizing movement” [99] Andrews, Vol. 1, p.88 .