THE EAST INDIA COMPANY
Sanjib Dutta
Faculty Member
ICMR Case Studies and Management Resources
Abstract:
Understanding the organization structure, control
systems and governance in theEast India Company.
A company survived for more than 250 years! Sounds amazing given the trackrecord
of modern day companies. To the best of my knowledge very fewcompanies have
managed tosurvive for more than hundred years. Some of thesecompanies are:
Procter & Gamble(1837-); Philip Morris (1847-);American Express (1850-); Johnson
& Johnson (1886-); Merck (1891-); General Electric(1892-); Nordstrom (1901-); 3M
(1902-) and Ford (1903-). The company we are referring to is The East India
Company (EIC) (1600-1858).
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What is the secret behind EIC’s survival for more than two centuries? More than
anything else, I believe the company’s governance and control systems made it
survive for such a long time. The EIC had a range of regulations which defined
and governed the duties of the company’s executives as well as administrative
functionaries. These regulations framed in both the Court Minutes and in “Laws
or Standing Orders” provided full details of the exact duties to be carried out
by the Governor, his deputy, the treasurer, the secretary, the auditors and the
accounts[1].They laid down the modus operandi of the Court of Committees[2] and
the General Court[3] and specified the responsibilities of the clerks in charge
of the shipyards,naval stores, the iron works, the slaughter-house and the
warehouses in London[4].The EIC also laid down regulations regarding the duties
of its factors[5] and terms of employment. |
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[1] K.N.Chaudhuri, The English East India Company: The Study of an Early Joint Stock
Company, 1600-1640, Frank Cass & Co Ltd, London, 1965.
[2] The Court of Directors managed the day-to-day affairs of the company. It
consisted of the Governor,Deputy Governor and twenty-four directors (Committees) elected by the General
Court. The Governor
and the Deputy Governor were assisted by accounts, clerks and cashiers who
worked through seven
committees specializing in accounting, buying, correspondence, shipping,
finance, warehousing and
private trade. The Court of Directors also had the responsibility of supervising
the overseas network of
resident “factors” who managed the local trading posts, or factories. The Court
of Directors made all the
policy decisions (which had to be ratified by the General Court) and directed
all operations.
[3] The General Court included all the shareholders of the company with voting
rights. Thus investors whose
primary motive was profits and dividends dominated the General Court. With a
strength of several
hundreds, the General Court met infrequently and was hardly involved in
day-to-day management of
business.
[4] K.N.Chaudhuri, The English East India Company: The Study of an Early Joint Stock
Company, 1600-1640, Frank Cass & Co Ltd, London, 1965.
[5] Once a person was selected to the EIC
he had to go to the East as a ‘writer’ or ‘apprentice.’ A writer was considered
for promotion to the post of factor only after serving for five years
Organization Structure and Control Systems
GOVERNANCE
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