Shareholder Democracies? English Stock Companies and the Politics of Corporate Governance during the Industrial Revolution

English Historical Review

Volumn 117, Issue 473, 2002, Pages 840-866

  Pearson, Robin ^a  

^a UNIVERSITY OF HULL   (United Kingdom)

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EID: 85068282037     PISSN: 00138266     EISSN: 14774534     Source Type: Journal    
DOI: 10.1093/ehr/117.473.840     Document Type: Article

References (130)

1. Related issues include executive remuneration, financial regulation, business ethics and shareholders' rights. The modern literature on these subjects is voluminous. It includes John Kay and Aubrey Silberston, 'Corporate Governance', National Institute Economic Review, no. 151 (August 1995), 84-97;
2. Jonathan Charkham and Anne Simpson, Fair Shares: The Future of Shareholder Power and Responsibility (Oxford, 1999);
3. W. Michael Hoffman and Jennifer Mills Moore (ed.), Business Ethics: Readings and Cases in Corporate Morality (2nd edn, New York, 1990).
4. A recent historical survey of corporate governance is focused firmly on the twentieth century, Mairi Maclean, 'Corporate Governance in France and the UK: Long-term Perspectives on Contemporary Institutional Arrangements', Business History 41 (1999), 88-116.
5. Colleen Dunlavy, however, is currently engaged in an important comparative study of stockholder voting rights and corporate strategies in the United States, Britain, France and Germany between 1830 and 1910, which will help to redress this neglect. For a taster, see Colleen A. Dunlavy, 'Corporate Democracy: Stockholder Voting Rights in Nineteenth-Century American and Prussian Railroad Corporations', in L. Andersson-Skog and O. Krantz (ed.), Institutions in the Transport and Communications Industries (Canton, Mass., 1999), pp. 33-59.
6. John F. Wilson, British Business History, 1720-1994 (Manchester, 1995), p. 45. Further factors may have been the traditional focus of historians on small partnerships and family businesses in industry and trade, together with the emphasis placed by Victorian legislators on the regulation of utilities and financial institutions.
7. John Brewer, The Sinews of Power: War, Money and the English State, 1688-1783 (London, 1989);
8. J. V. Beckett and M. E. Turner, 'Taxation and Economic Growth in Eighteenth-Century England'. Economic History Review, XLIII (1990), 377-403;
9. Patrick O'Brien, Trevor Griffiths and Philip Hunt, 'Political Components of the Industrial Revolution: Parliament and the English Cotton Textile Industry, 1660-1774', Economic History Review, XLIV (1991), 395-423;
10. V. E. Dietz, 'The Politics of Whisky: Scottish Distillers, the Excise, and the Pittite State', Journal of British Studies, 36 (1997), 35-69;
11. Ron Harris, 'Political Economy, Interest Groups, Legal Institutions and the Repeal of the Bubble Act in 1825', Economic History Review, L (1997), 675-96.
12. Timothy L. Alborn, 'The Moral of the Failed Bank: Professional Plots in the Victorian Money Market', Victorian Studies, 38 (1995), 199-226;
13. George Robb, White-Collar Crime in Modern England: Financial Fraud and Business Morality, 1845-1929 (Cambridge, 1992); G. R. Searle, Morality and the Market in Victorian Britain (Oxford, 1998);
14. Jane Garnett, 'Commercial Ethics: A Victorian Perspective on the Practice of Theory', in C. Cowton and R. Crisp (ed.), Business Ethics: Perspectives on the Practice of Theory (Oxford, 1998), pp. 117-38;
15. Stewart Jones and Max Aiken, 'British Companies Legislation and Social and Political Evolution during the Nineteenth Century', British Accounting Review, 27 (1995), 61-82;
16. Stewart Jones, 'A Cross-sectional Analysis of Recommendations for Company Financial Disclosure and Auditing by Nineteenth-Century Parliamentary Witnesses', Accounting, Business and Financial History, 5 (1995), 159-86.
17. Timothy L. Alborn, Conceiving Companies: Joint-stock Politics in Victorian England (London, 1998).
18. A list of the companies and their records is available from the author. Details of most of the holdings are given in H. A. L. Cockerell and Edwin Green, The British Insurance Business: A Guide to its History and Records (2nd edn, Sheffield, 1994).
19. The average paid up capital of nine provincial fire offices established between 1771 and 1809, for which we have data, was £25, 000, compared with an average capital of £10, 000 for country banks. For this and further comparisons, see Robin Pearson, Insuring the Industrial Revolution: Fire Insurance in Great Britain, 1700-1850, ch. 1 (forthcoming).
20. Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations, 2 vols, ed. R. H. Campbell and A. S. Skinner (1776, reprinted Indianapolis, 1976), vol. 2, p. 741;
21. Gary M. Anderson and Robert D. Tollison, 'Adam Smith's Analysis of Joint-stock Companies', Journal of Political Economy, 90 (1982), 1237-56;
22. Andreas Ortmann, 'The Nature of Corporate Negligence, Sham Lectures, and Ecclesiastical Indolence: Adam Smith on Joint-Stock Companies, Teachers, and Preachers', History of Political Economy 31 (1999), 297-315.
23. While about one-quarter of the industry (fire insurance only, there are no figures for life) disappeared by merger or bankruptcy, especially during the second quarter of the nineteenth century, the great majority of insurance firms founded between 1760 and 1850 survived as independent concerns, regardless of size.
24. Wilson, British Business History, pp. 44-5;
25. Joel Mokyr, 'Editor's Introduction: The New Economic History and the Industrial Revolution', p. 103n, in J. Mokyr (ed.), The British Industrial Revolution: An Economic Perspective (Boulder, Colorado, 1993), pp. 1-131.
26. The orthodox view also recurs in Philip Mirowski, The Birth of the Business Cycle, (New York, 1985) pp. 271-6
27. and N. Crafts, 'The Industrial Revolution', in R. Floud and D. N. McCloskey (ed.), The Economic History of Britain since 1700, vol.1 1700-1860 (2nd edn, Cambridge, 1994), pp. 44-59.
28. For older arguments about the limited impact of the Act, see A. B. Dubois, The English Business Company after the Bubble Act, 1720-1800 (New York, 1938);
29. B. C. Hunt, The Development of the Business Corporation in England 1800-1867 (Cambridge, Mass., 1936).
30. Ron Harris, Industrializing English Law: Entrepreneurship and Business Organization, 1720-1844 (Cambridge, 2000), pp. 170-92.
31. In addition to Harris's sources, see, on flour and bread companies, Joshua Bamfield, 'Consumer-Owned Community Flour and Bread Societies in the Eighteenth and Early Nineteenth Centuries', Business History, 40, no. 4 (1998), 16-36;
32. on gun companies, Clive Behagg, 'Mass Production without the Factory: Craft Producers, Guns and Small Firm Innovation, 1790-1815', Business History, 40, no. 3 (1998), 1-15;
33. on commercial property companies, K. Grady, 'The Georgian Public Buildings of Leeds and the West Riding', Publications of the Thoresby Society, LXII, no. 133 (1987);
34. on cemetery companies, the essay by Julie Rugg in R. J. Morris and R. H. Trainor (ed.), Urban Governance: Britain and Europe since 1750 (London, 2000);
35. on company mills in the West Riding wool textile industry, see Pat Hudson, The Genesis of Industrial Capital: A Study of the West Riding Wool Textile Industry c.1750-1850 (Cambridge, 1986), tab. 3.6, p. 79
36. and Ruth Strong, 'Textile Communities in the Making: Pudsey and its Neighbourhood, 1700-1840', Publications of the Thoresby Society, 2nd ser., 5 (1995), 27-66.
37. Harris, Industrializing English Law, pp. 194-6
38. Philip Mirowski, 'The Rise and (Retreat) of a Market: English Joint Stock Shares in the Eighteenth Century', Journal of Economic History, XLI (1981), 559-77.
39. J. A. Hassan, 'The Growth and Impact of the British Water Industry in the Nineteenth Century', Economic History Review, XXXVIII (1985), 531-47;
40. M. E. Falkus, 'The British Gas Industry before 1850', Economic History Review, XX (1967), 494-508;
41. J. F. Wilson, Lighting the Town: A Study of Management in the North-West Gas Industry 1805-1880 (London, 1991), table 3.1, p. 71.
42. Harris, Industrializing English Law, pp. 141-7.
43. H. E. Raynes, A History of British Insurance (London, 1948), pp. 130-1, 212;
44. Dubois, The English Business Company, p. 30;
45. Hunt, Development of the Business Corporation, p. 12;
46. Clive Trebilcock, Phoenix Assurance and the Development of British Insurance vol. 1, 1782-1870 (Cambridge, 1985), p. 72.
47. 22 Geo.III c.48, sec. IV-X. A bond was required for up to the 'probable amount' of six months' duty estimated to be collected on each company's fire insurances. A fine of £50 per day plus twice the amount of premiums received per day was levied for unlicensed offices, see Cornelius Walford, Insurance Cyclopedia, vol. III (London, 1874), pp. 420-1, 485.
48. Harris, Industrializing English Law pp. 236-41.
49. Hunt, Development of the Business Corporation, p. 23.
50. Guildhall Library, London (hereafter GL) MS 16170/2, Atlas Assurance, Board of Directors' Minutes (hereafter DM), 30 June 1814.
51. Harris, Industrializing English Law, p. 239.
52. C. Hadfield, British Canals: An Illustrated History (London, 1950), p. 34;
53. Wilson, Lighting the Town, p. 68.
54. Interestingly, a similar concept of public utility, but couched in republican rhetoric, was employed in post-colonial United States to justify the rising tide of business and non-business incorporations during the 1780s and 1790s. Pauline Maier, 'The Revolutionary Origins of the American Corporation', The William and Mary Quarterly, 3rd Ser., L (1993), 51-84.
55. Robin Pearson and David Richardson, 'Business Networking in the Industrial Revolution', Economic History Review, LIV (2001), 657-79.
56. See also Robin Pearson, 'Collective Diversification: Manchester Cotton Merchants and the Insurance Business in the Early Nineteenth Century', Business History Review, 65 (1991), 379-414.
57. See, for example, the notices by Salop Fire Office in Shrewsbury Chronicle, 13 May, 24 June 1780.
58. H. Peet, Liverpool Vestry Books vol.1, 1681-1834 (London, 1912), pp. 264-5, entry for 17 Apr.1781;
59. Centre for Kentish Studies, Maidstone (hereafter CKS), U2593/B6/3, Kent Fire Office, DM, 26 June 1805.
60. 7 & 8 Vict. c.110 (1844) introduced the incorporation of stock companies by registration, but without the privilege of limited liability; 19 & 20 Vict. c.47 (1856) introduced general limited liability.
61. J. H. Baker and S. F. C. Milsom (ed.), Sources of English Legal History: Private Law to 1750 (London, 1986), p. 130;
62. M. J. Daunton, Progress and Poverty: An Economic and Social History of Britain, 1700-1850 (Oxford, 1995), pp. 238-40.
63. See J. H. Baker, An Introduction to English Legal History (3rd edn, London, 1990), p. 351.
64. Harris, Industrializing English Law, p. 154.
65. Trebilcock, Phoenix Assurance, pp. 75-6.
66. CKS, U2593/B6/1, Kent Fire Office, DM, 19 Oct. 1802.
67. Harris, Industrializing English Law, p. 143.
68. Wilson, Lighting the Town, pp. 73-5.
69. GL MS 15032/2, Sun Fire Office, Take-Over Papers, An Abstract of the Deed of Settlement of the Bristol Union Insurance Company, 25 Mar. 1819, clause 51.
70. A survey of fire insurance records alone reveals 112, 000 shares of 17 offices to be in circulation by 1810. A full list with sources is available from the author. At that date there were 52 fire offices, mostly stock, in operation in Britain and Ireland. See Pearson, Insuring the Industrial Revolution, ch. 1.
71. James Wetenhall, The Course of the Exchange (London, 1720-1850); Mirowski, 'Rise and (Retreat) of a Market'.
72. Harris, Industrializing English Law, appendix 2.
73. GL MS 15032/8, Sun Fire Office, Take-over Papers, Papers relating to the New Newcastle Office, Richards to Ford, 7 Feb. 1838; Mitchell Library, Glasgow, TD446/5/18/1, North British Assurance Office, Minute Book no. 1, Preamble to List of Subscribers, 9 Mar. 1809.
74. E. P. Thompson, The Making of the English Working Class (Harmondsworth, 1968), p. 899.
75. Leeds City Archives (hereafter LCA), acc. 3393, box 41, Leeds & Yorkshire Assurance, Secretary's Letterbook, Wilks to Hewitt, 3 Jan., 22 Jan. 1825.
76. This was not strictly a requirement by law, but it was nonetheless important for companies to do this. Shares owned by a married woman were regarded under common law as legal choses in action which her husband had the right to convert into his own personal property, and for which, as a contract signed by her, he was liable, including for any further calls on capital. Lee Holcombe, Wives and Property: Reform of the Married Women's Property Law in Nineteenth-Century England (Oxford, 1983), pp. 25-7.
77. Shropshire Record Office, MS 3008/1/1/1, Salop Fire Office, Articles of Agreement, 22 June 1780, clauses 39, 40, 43; MS 3008/1/1/58, Salop Fire Office, General Meeting Book, 10 Aug. 1792; Birmingham Fire Office, Copy of the Deed of the Birmingham Fire Office, (Birmingham 1806).
78. Trebilcock, Phoenix Assurance, p. 351; GL Ms 16170/1, Atlas Assurance, DM, 13 May 1808; GL MS 14281/1, Guardian Assurance, General Court Minutes, 19 Nov., 27 Nov. 1821, 7 Feb. 1823; LCA, acc. 3393, box 41, Leeds & Yorkshire Assurance, Secretary's Letterbook, Wilks to Clarke, 17 Nov. 1824.
79. LCA, acc. 3393, box 41, Leeds & Yorkshire Assurance, Secretary's Letterbook, Wilks to Gilmour, 31 Dec. 1824.
80. For examples from Halifax and Barnsley, see LCA, acc. 3393, box 41, Leeds &Yorkshire, Secretary's Letterbook, Wilks to Baines, 4 Jan. 1825, Wilks to Shepherd, 17 Mar. 1825.
81. GL MS 14281/2, Guardian Assurance, General Court Minutes, 7 Apr. 1826; Sun Alliance plc., County Fire Office, Letter Book M, Beaumont to Hull, 16 Nov. 1821.
82. On the local committees of Norwich Union, nearly fifty of them by 1817, see Roger Ryan, 'The Norwich Union and the British Fire Insurance Market in the Early Nineteenth century', in Oliver M. Westall (ed.), The Historian and the Business of Insurance (Manchester, 1984), pp. 39-73.
83. GL MS 11935E, Sun Fire Office, Take-over Papers, Salamander Fire Office, Deed of Settlement 8 Jan. 1823, p. 58;
84. GL Ms 16217, Manchester Fire and Life Assurance Company (hereafter MFLAC), Deed of Settlement, 1 May 1824, clause 74;
85. GL Ms 16223/1, MFLAC, General Court Minutes, 4 May 1825.
86. Sun Alliance plc., County Fire Office, Minutes of County Meetings, 17 Mar. 1819, 18 Mar. 1820, 5 Mar., 15 Mar. 1822, 18 Mar., 8 Apr. 1823, 1 Mar., 15 Mar. 1824.
87. GL MS 15032/2, Sun Fire Office, Take-over Papers, An Abstract of the Deed of Settlement of the Bristol Union Insurance Company, 25 Mar. 1819, clauses 46, 48, 55.
88. GL MS 11935E, Sun Fire Office, Take-over Papers, Salamander Fire Office, Deed of Settlement, 8 Jan. 1823, p. 24;
89. Birmingham Fire Office, Copy of the Deed of the Birmingham Fire Office (Birmingham, 1806), pp. 11-12, 14.
90. Dunlavy, 'Corporate Democracy', 41; Maier, 'Revolutionary Origins', 77.
91. GL MS 16217, MFLAC, Deed of Settlement, 1 May 1824, clauses 9, 16, 28, 30, 119; GL MS 16223/1, MFLAC, General Court Minutes, 17 Oct. 1827.
92. CKS, U2593/B6/2, Kent Fire Office, DM, 10 Jan., 21 Jan. 1805.
93. CKS, U2593/B15, Kent Fire Office, Financial Summary for the 7 year period - date of establishment to Dec. 1809. Lediard's note is dated 7 Sept. 1810.
94. CKS, U2593/B6/6, Kent Fire Office, DM, 7 Sept. 1810. The importance of this resolution was underscored by it being pasted into the inside cover of each successive volume of directors' minutes for the years 1812 to 1815.
95. The entire board only met at special meetings, and at the annual shareholders meeting held at Sittingbourne. All business was transacted at the Maidstone office, but clearly the administration there was poor.
96. CKS, U2593/B6/8, Kent Fire Office, DM, 21 Sept. 1814.
97. H. F. Reed, Some Notes on the Early History of the Kent Insurance Company, 1802-1952 (Maidstone, 1952), p. 33.
98. CKS, U2593/B6/8, Kent Fire Office, DM, 21 Nov. 1814.
99. CKS, U2593/B6/8, Kent Fire Office, DM, 30 Nov. 1814.
100. CKS, U2593/B6/8, Kent Fire Office, DM, 20 Dec. 1814, 23 Jan. 1815.
101. GL MS 16170/2, Atlas Assurance, DM, 16 May 1816.
102. GL MS 16170/3, Atlas Assurance, DM, 29 Aug. 1816.
103. Alborn, Conceiving Companies, pp. 113-4.
104. GL MS 16170/3, Atlas Assurance, DM, 16 Jan. 1817.
105. GL MS 16170/3, Atlas Assurance, DM, 20 Feb. 1817.
106. GL MS 16222/8, MFLAC, DM, Special Report on the State of the Accounts, 25 Jan. 1844.
107. The Courier, 9 Sept. 1846. Thomas Markland, Manchester cotton merchant, and, among other honorary positions, treasurer of Manchester Infirmary, was aged 61 in 1846. He was one of the original directors of 1824.
108. Alexander Kay was mayor between 1843 and 1845. Arthur Redford, The History of Local Government in Manchester, vol. 2 (London, 1939), p. 92.
109. For example, music halls, churches and political meetings. Cf. Douglas A. Reid, 'Popular Theatre in Victorian Birmingham', in D. Bradby, L. James and B. Sharratt (ed.), Performance and Politics in Popular Drama (Cambridge, 1980), pp. 65-90;
110. Robin Pearson, 'Knowing One's Place: Perceptions of Community in the Industrial Suburbs of Leeds, 1790-1890', Journal of Social History, 27 (1993), 221-44.
111. Gilbert Winter, Manchester cotton twist dealer, wine and spirit merchant, boroughreeve of Manchester in 1823, one of the original trustees of 1824. J. B. Wanklyn, leading Manchester tory and anti-corporator, first joined the Manchester Assurance board in 1844.
112. Manchester Assurance Company, An Account of the Manchester Assurance Company from the Date of its Foundation (Manchester, 1899).
113. Select Committee on Joint-Stock Companies, Parliamentary Papers (1844) VII, 1;
114. Select Committee on Assurance Associations, Parliamentary Papers (1852-3) XXI, 1.
115. Although Alborn dates the onset of this process in banking to the crisis of 1836-7, he also emphasizes the years 1844-66, with their several banking crises, as marking a period of 'post-democratic' consolidation. Alborn, Conceiving Companies, pp. 116-40.
116. On the Life Assurance Companies Acts, see Raynes, History of British Insurance, pp. 355-8.
117. On the Fire Offices Committee, see Oliver M. Westall, 'David and Goliath: the Fire Offices Committee and Non-tariff Competition, 1898-1907', in Westall (ed.), The Historian and the Business of Insurance, pp. 130-54.
118. Alborn, 'The Moral of the Failed Bank'; Robb, White-Collar Crime in Modern England, pp. 169-80. There were parallel developments in the US after the 1830s as stock companies moved away from a democratic suffrage towards more plutocratic forms of governance characterized by one-share-one vote, Dunlavy, 'Corporate Democracy'.
119. Garnett, 'Commercial Ethics'; Boyd Hilton, The Age of Atonement: The Influence of Evangelicalism on Social and Economic Thought, 1795-1865 (Oxford, 1988), pp. 255-67;
120. A. W. B. Simpson, Victorian Law and the Industrial Spirit (Selden Society, London, 1995).
121. Jürgen Habermas, The Structural Transformation of the Public Sphere (Cambridge, 1989), p. 73.
122. See, for instance, Donna T. Andrew, 'Popular Culture and Public Debate: London, 1780', Historical Journal, 39 (1996), 405-23
123. and the essays in E. Hellmuth (ed.), The Transformation of Political Culture: England and Germany in the late Eighteenth Century (Oxford, 1990).
124. Habermas, Structural Transformation of the Public Sphere, pp. 94-5.
125. John Kemp, The Philosophy of Kant (London, 1968), p. 86.
126. William Blackstone, Commentaries on the Laws of England (1765-9, reprinted Chicago, 1979), book I, p. 463.
127. Jeremy Bentham, 'Essay on Political Tactics', ch. 2, in J. Bowring (ed.), The Works of Jeremy Bentham, vol. II (Edinburgh, 1843);
128. William Hazlitt, 'The French Revolution', in idem., Selected Writings (Oxford, 1991), pp. 86-8.
129. Habermas, Structural Transformation of the Public Sphere, p. 100.
130. Trebilcock, Phoenix Assurance, vol. I, p. xviii.