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based on one vote per member. Only gradually, beyond our period, was the strict equality of the EIC voting system altered.

The Charter, together with the by-laws, created a participatory framework for managing the EIC (Harris 2005). Membership in the EIC afforded both voting rights and information. Members received information on EIC affairs in Asia and in London on a regular basis. The records of the early days of the company are packed with examples of how information that reached the executives was in fact shared with the Committees and members according to the prescription of the Charter and the by-laws (Harris, 2005). Members could elect directors and officers and be elected as such and elections were conducted annually. The EIC was a democratic and egalitarian company compared with the oligarchic, two shareholder classes, governance structure of the VOC. Subscription to the joint stock of a specific voyage entitled the subscriber to receive a proportional share in the company’s profits. Principal and profits were shared at the end of each voyage, unless it was decided explicitly, on a case-by-case basis, by the General Court to carry capital from one voyage to the next. In this respect as well, the EIC was substantially different from the VOC that locked-in capital for 10 years.

The VOC and the EIC faced different challenges when raising their initial capital. The VOC benefited from the pre-existence of a bond market, from government support and assistance in locking-in investors, and from the gradual development from pre-companies to a united company. The EIC had to raise external finance without these benefits. It had to develop institutional means for fostering impersonal cooperation. The better starting point of the VOC was not foreseen by LLSV, who expected the common law origin to provide England with a better investor protection law. Rajan and Zingales emphasize the capture of the State by classes and interest groups. For them, the fact that in England the aristocracy was dominant while in the Dutch republic the merchants were dominant is conclusive for predicting that the Dutch would develop business corporations and share markets earlier. For North and Weingast, the fact that the Dutch republic gave rise to a major corporation and to a primary market would be a surprise as the English were the first to solve the credible commitment problem. For them, there are three ways around this. First, they would say that they have predictions primarily regarding bond markets. Secondly, they might say that they were willing to reconsider their tentative conclusion that the Dutch did not solve the credible commitment earlier than the English. Thirdly, they would say that even though the Dutch were able to develop as large a corporation as the VOC and a secondary market, these were in fact traditional coercive institutions while the EIC was a modern institution based on voluntary and informed cooperation. With these insights from the literature, I shall turn to a discussion of the rise of the secondary market.

4. Secondary Share Market

The VOC and the Rise of the Share Market

In the Netherlands, despite the preexistence of a stock market, the VOC did not raise equity capital on a purely voluntary basis. Why did the insiders lock-in the external investors of the VOC? Because the mechanism that had performed quite well in the earlier period – that of per-voyage partnerships and pre-companies – collapsed with the transition. The VOC was not formed for a single voyage. On the contrary, it was formed as a perpetual enterprise. The intention was to send annual voyages to Asia and to maintain permanent agencies and warehouses – fortified, if needed – in India and Indonesia. For this reason, its Charter incorporated a new and separate legal personality that would exist for at least 21 years. Further, the Charter created joint stock that would exist for 10 years. This shift from a single voyage to a long-term horizon was

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