Simeon E. Baldwin
AMERICAN BUSINESS CORPORATIONS BEFORE 1786
American Historical Review, volume 8, 1902-1903
The title of this article requires a definition of the terms employed. The
subject must necessarily be examined from a statistical standpoint, and
statistics are of little value unless the basis upon which they are made up is
stated with some precision. The phrase "business corporation" will be employed
to denote only corporations formed primarily to promote business enterprises,
either by the investment of money as a productive capital, or by encouraging and
facilitating such investments on the part of others. The term "American" is used
in accordance with its conventional acceptation in this country, as restricted
to what pertains to territory included within the limits of the United States.
The year 1789 has, of course, been selected as the close of the period to be
considered because from that time on the country came under the influence of new
social and political conditions. It was a year marked by two events as one of
the great dates of world-history. The States General of France were convoked,
after a slumber of a century and a half, to begin for Europe the work of pulling
down the ancient forms of centralized authority. The first Congress of the
United States at the same time was assembled at New York -- a Congress which
also exercised the functions of a constitutional convention- to begin for the
United States the work of building up a new form of centralized authority, that
of a strong central government with a narrow field, side by side with many
strong local governments, each with a wide field. For Americans, 1789 is the
year when a uniform continental system of political administration was first set
up with powers adequate for the due protection of tights of person and
property.(1)
During the colonial era all large business enterprises had been checked by our
dependence on a country whose commercial interests were thought to be
antagonistic to our own. The first years of our political independence had been
spent in making independence secure. Then came as many more, darkened and
confused by differences and rivalries between the states. Not until the new
government under our present Constitution came into active operation in the
spring of 1789 was a fair field open for the permanent investment of capital in
large operations with such an assurance of safety as could command general
public confidence.
There is but one mode in which such operations can be conducted with lasting
success. It is through some form of corporate organization. There must be a
franchise from the state. A business corporation consists of one or more persons
authorized by law to use the name and to trade at the risk of another person.
This other person is an artificial one, into whose hands is placed the precise
amount of money which those who compose it are inclined to put at hazard. if it
uses its talent well and makes a profit, they share it among themselves. if it
proves an unprofitable servant and cannot pay its debts, they lose, under the
principles of the common law, only their original investment, and its creditors
lose the rest. Nor is this unjust, for the creditor knew from the first that
this artificial person could bind no one but itself.
The joint-stock association, not unfamiliar in our colonial history, such as the
Massachusetts land-banks, traded under a company name, but it was not the name
of another person. It was not the name of any person, natural or artificial.
The statistics upon which this article is based are mainly derived from one of
the recent series of "Yale Bicentennial Publications,"(2) and they show that it
was but a small part that the business corporation played in our industrial life
before the adoption of the Constitution of the United States.
During the days of colonial government there were in all but six of these of
strictly American origin or character. They came in this order: (1) The New York
Company "for Settleing a Fishery in these parts," 1675; (2) The Free Society of
Traders, in Pennsylvania, 1682; (3) The New London Society United for Trade and
Commerce, in Connecticut, 1732; (4) The Union Wharf Company in New Haven, 1760;
(5) The Philadelphia Contributionship for the insuring of Houses from Loss by
Fire, 1768; (6) The Proprietors of Boston Pier, or the Long Wharf in the Town of
Boston in New England, 1772.
A corporate character has sometimes been attributed to certain associations of
the kind to which reference has been made, formed under a company name for
business purposes in the seventeenth century. There seems, however, to be no
sufficient evidence that any of these were more than great commercial
partnerships. There can be no incorporation without authority from the sovereign
power or from some one entrusted by the sovereign power with the fight to grant
such authority in its behalf. There can be no business corporation, in the
ordinary and proper sense of that term, without a voluntary acceptance of
corporate privileges so granted for business purposes.(3)
In the foregoing list of colonial charters none has been included that was
granted directly by the home government. That of the Massachusetts Bay Company,
out of which soon grew the colony and province of Massachusetts, was an example
of one type of these; the monopolistic charters of the Hudson's Bay Company and
the Ohio Company, of another.
At the opening of the eighteenth century there were in England but three
joint-stock companies under full charters for purposes of foreign commerce.(4)
America claimed one -- the Hudson's Bay Company. This had a crown charter from
Charles II, confirmed for seven years by act of Parliament in 1690.(5) The Ohio
Company, composed partly of Englishmen and partly of Virginions, was chartered
in 1749 to promote a land speculation, and the Virginia assembly was compelled
by the home government to make it a grant of 600,000 acres.(6) The Susquehanna
Company, formed about the same time (1743), which made the settlement at Wyoming
out of which grew the short-lived county of Westmoreland in Connecticut, had no
charter,(7) although they sought one from the Crown, and with the full consent
and approval of the Connecticut legislature.(8) Like almost all the land
companies of the eighteenth century, it was a mere partnership.(9) Some of these
had nearly a thousand members; others, only two or three.(10)
There were numerous instances of the incorporation or quasi-incorporation of
proprietors of lands by the colonies, for the purpose of improving their
property by concerted effort. The earliest of these occurred in Massachusetts in
1652, when thirteen owners of land upon Conduit Street in Boston were
incorporated (though with no company name) to enable them to supply houses on
that street with water. Each had an equal share in the undertaking, which was
successfully prosecuted.(11) Many quasi-corporations of more importance were
subsequently formed in other colonies to promote the drainage of low lands.
Several "marine" societies were also incorporated in the interest of navigation,
the main object of which was to bring seamen together in a friendly way for
mutual aid and assistance in case of need. These I have regarded as social
rather than business corporations. The province of Massachusetts incorporated
three such.(12) The first of these acts directed the governor to issue a charter
under the seal of the province. He had doubts as to his power to do this, and
the question was ultimately referred to the official solicitor or counsel of the
Lords Commissioners for Trade and Plantations, Richard Jackson. His opinion,
given in 1774, was that as both the colonial and the provincial charters
conferred full powers of legislation, this included a power to incorporate.(13)
Mr. Jackson was a dissenter, owned lands in New England, had been the colonial
agent of Connecticut, and had recently received the degree of Doctor of Laws
from Yale College, a corporation chartered by that colony.(14) The point in
dispute could hardly have been submitted to one whom circumstances would more
naturally dispose to a favorable judgment. A very different opinion had been
announced by the crown lawyers in the preceding century, when the incorporation
of Harvard College was set up as one of the grounds for vacating the
Massachusetts charter.
Of the six colonial incorporations in the list which has been given, two belong
to the seventeenth and four to the eighteenth century. The first, dating back to
1675 a New York fishing company, was chartered by the governor and council of
New York, acting for the Duke of York under the liberal terms(15) of his patent
of 1664. The capital stock was divided into shares of the par value of ten
pounds.(16) This was under the administration of Governor Andros. Governor
Dongan, in 1684, was authorized to promote the formation of ...
|
|
|
|
|
|
|
|
|
Go to the beginning of the document
Go to previous page
Go to next page
Go to the end of document
