June 22, 2022

Editor's Corner: When Lawyers Reigned in the World's Largest Company

“Cursed he be above all others who’s enslaved by love of money.” -Anacreon

Abraham Lincoln, Mahatma Gandhi, Nelson Mandela, and Franklin D. Roosevelt were all proud members of the legal profession. Their accomplishments and contributions to history and the law are well documented. History is not lacking in thousands of unnamed lawyers who have also played a crucial role in the evolution of their societies and the rule of law. The lawyers who reigned in the world’s largest company-(the English East India Company; “The Company,” to historians)- are a continuum of that proud legal tradition.

A Behemoth is Born

There has never been anything like The Company in the annals of recorded human history. Today’s giant multinationals are but dwarfs when compared to this corporate behemoth. At the height of its power, The Company employed one of the largest three navies in the world, and an army of more than 200,000 well trained soldiers. It fought wars against the empires of China and India, and controlled more than fifty percent of the world’s trade at its peak. Its geographic expanse and influence were in par with those of the largest empires in history. Julius Caesar would have envied The Company.

In the process, The Company corrupted the British political system to the point where it was said that every member of Parliament was on its payroll. It also became a model for the corporate multinationals that followed in its footsteps. The Company’s beginnings, however, went unnoticed for many years. It was dwarfed at first by many of the trading companies that had sprung up in 16th century Europe to tap into the lucrative trade with the Indian subcontinent and Southeast Asia. Competition from Dutch and French trading companies was especially fierce. The Company’s growing financial interests, however, would embroil Britain in costly wars with China and other European countries.

Envious of the Spanish and Portuguese trade in the Americas and Asia, a small group of English merchants and investors met in a London pub on September 22, 1599, to plan the formation of a company to trade with Asia. They petitioned Queen Elizabeth for a Royal Charter; on December 31, 1600, the Charter was granted. Thus, was formed the Governor and Company of the Merchants of London trading into the East Indies. Save for a handful of investors, few others took notice; let alone realizing that a multinational Behemoth was born.

Until 1707, The Company was officially known as the English East India Company; after which it, came to be called the British East India Company. Informally, however, it would be referred to as The Company throughout its history. Its initial staff was small-(fewer than two dozen clerks); it made its headquarters at London’s Nags Head Inn. Years later, moving it to the fashionable India House. The Company sold stock to investors throughout Britain and Continental Europe. Its favored politicians were rewarded with both insider information and stock in The Company; whence came the term “ insider trading.”

Out of Control

By the late 18th century, The Company reigned supreme on the Indian subcontinent. It had bypassed the Dutch and French India trading companies in influence and financial returns for her investors. Many of its initial organizers and investors would become some of the wealthiest individuals in Britain; posing a serious challenge to the country’s political institutions. Her stranglehold over British politics would linger well into the mid-19th century. Promoting Leo Tolstoy to write, “A commercial company enslaved a nation.”

The Company’s lobbyists were the most numerous and best funded in the British Parliament; many having served in that institution. The Company also retained an army of prominent legal scholars and literary figures to laud its contributions to Britain’s economy and free trade. Among them, such luminaries as Charles Lamb (England) and Ram Mohan Roy (India). The Company’s propagandists inundated the news outlets with reports of The Company’s efforts to combat inequality, poverty, and the slave trade; neglecting to note that The Company was one of Asia’s biggest slave traders. A prompting a late 18th century Mughal official to remark, “(The Company is) a handful of traders who have not yet learned to wash their bottoms.”

In her quest to maximize profits for her investors, The Company became embroiled in costly military and political entanglements that historically had been the province of the British government; these would later come to roost home. Among these, a series of wars with the Mughal Emperors and princely rulers of the Indian subcontinent, conflicts with the Sultanates of East African over control of the slave trade, wars with China over the opium trade, and even entanglements in the American colonies over the tea trade. Unbeknown to many, The Company played no small role in sparking the American Revolution.

From its inception, The Company’s policy had been to pit the various religious, racial, national and ethnic groups under its governance off against each other. Giving Siks preferential treatment over Muslims in its military; Indians over Chinese in its bureaucracy, light skin Africans over their darker brethren in commerce, and so on. The Company’s policy of divide and conquer came to an ignominious end with the Indian Rebellion of 1857-(also known as the Sepoy or Indian Mutiny); which prompted the British government to take control of The Company’s global commercial empire. Corruption had finally given way to the rule of law.

The Final Curtain

As far back as the Middle Ages, England has had a tradition of legal reformers. They have played an important role throughout much of English history; constituting a respected and powerful segment of her political class. As King John and those that followed him on the English throne would find found out, the English are a nation of laws and lawyers; not of dogma or political zealots. It would only be a matter of time before Britain’s reformist lawyers; allied to their brethren in Parliament, would reign in The Company.

Serious efforts to regulate The Company commenced with enactment by Parliament of the India Act of 1784, which created the India Board; whose task it was to oversee The Company’s trading practices. When abuses by The Company continued, several of its governors-general were impeached; among these, Warren Hastings. Nevertheless, The Company’s powerful lobby was able to blunt many of the legal reformers efforts to curtail its power and influence well into the 19th century.

In 1833, under pressure from both the public and legal establishment, the British government took control over much of The Company’s trade in India; in return for an annual dividend of 10.5% to its stockholders. That dividend continued to be paid for more than 100 years. The Company’s end as a viable business entity, however, came in 1858. In response to the political fallout from the Indian Rebellion of 1857, reformers and the legal establishment lobbied Parliament to enact the Government of India Act; which nationalized The Company. This was followed by the East India Stock Dividend Redemption Act in 1873, which provided for the formal dissolution of The Company a year later. The final curtain had come down.

Lessons to be Learned

The Company was history’s most powerful and enduring multinational business organizations; a de facto state mobile, with few nations able to rival its wealth and influence. It became a model for many of the multinational businesses that followed in its footsteps. It embroiled itself in both domestic and international politics and came to view itself as independent of the British state; responsible solely to its investors. It came to view British law as an impediment to its quest for wealth, and Britain’s lawyers as inconsequential blowhards.

The Times of London would write that The Company, “accomplished a work such as in the whole history of the human race no other trading Company ever attempted.” The Times failed to note, however, that the law and the lawyers that enforced it were not inconsequential and a nuisance as The Company had come to view them; they spanned a proud tradition of more than 1,000 years of English history and were a force to reckon with inside British society and politics.

The Company and her directors, while astute in business, had failed to grasp the important role of the law and lawyers in human governance. The Company‘s wealth and arrogance had blinded it to the realities of British politics and society. While slow to act at first, when the British legal establishment finally acted, it did so decisively at The Company’s detriment. An important lesson to heed for today’s arrogant and self-absorbed multinational corporations.

Closing

The legal profession is not a cult, religion, or political dogma. Lawyers are not a monastic class, ready to evangelize to the world at large. Lawyers are one of the oldest professions in human history and will continue to serve humanity long after many of today’s multinationals and their management are long gone and forgotten. The law is the foundation that enables society to function.

Lawyers as a class, should never forget that they are part of a proud and ancient reformist tradition. Like their 19th century brethren in Britain, they are the firewall that ensures equal justice to both weak and strong alike. These are some of the important lessons we would do well to learn from how Britain’s lawyers reigned in the most powerful business entity in recorded human history.