With their legal personhood, permanent capital with transferable shares, separation of ownership and management, and limited liability for both shareholders and managers, the Dutch East India Company (VOC) and subsequently the English East India Company (EIC) are generally considered a major institutional breakthrough. Our analysis of the business operations and notably the financial policy of the VOC during the company’s first two decades in existence shows that its corporate form owed less to foresight than to constant piecemeal engineering to remedy original design flaws brought to light by prolonged exposure to the strains of the Asian trade. Moreover, the crucial feature of limited liability for managers was not, as previously thought, part and parcel of that design, but emerged only after a long period of experimenting with various, sometimes very ingenious, solutions to the company’s financial bottlenecks.

Dutch East India Company, VOC
Trade (jel F1), Economic Development (jel O1), Institutions and Growth (jel O43)
Erasmus Research Institute of Management
hdl.handle.net/1765/32952
ERIM Report Series Research in Management
Erasmus Research Institute of Management

Gelderblom, O, de Jong, A, & Jonker, J. (2012). The Formative Years of the Modern Corporation: The Dutch East India Company VOC, 1602-1623 (No. ERS-2012-007-F&A). ERIM Report Series Research in Management. Erasmus Research Institute of Management. Retrieved from http://hdl.handle.net/1765/32952