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the transfer in the VOC books in the presence of two directors, and paying a small fee. Thus, in contrast to the EIC, while passive shareholders had no voice in VOC affairs and their initial investment was locked-in for 10 years, they were able to exit the company by selling their shares. Because a clause in a Charter cannot in itself assure liquidity, the emergence of a market for government debt instruments before 1600 was crucial in facilitating this option.

A recent study (Gelderblom and Jonker 2004) convincingly documented the volume of Amsterdam Chamber VOC shares that were traded in the years 1603-1612 (See Figure 5). The Amsterdam market was sophisticated, with full-time brokers, a meeting place, and several non-spot transactional designs. One may argue that the availability of a government bond market led to the introduction of the exit option for VOC passive investors. That the trade in VOC shares was a natural advance over the non-traded shares in the pre-companies. That a share market naturally follows a bond market. My reading is that this explanation is not sufficient. The exit option and the transfer of shares were introduced because the previous cooperation system, based on reputation, recurring transactions and social networks, had collapsed. They were used with growing frequency because of the dissatisfaction of passive investors with the lock-in of their money and because they were nevertheless deprived of share in control. The exit partly offset the oligarchic and cooperation-damaging effects of the other institutional features of the VOC. It is likely that VOC’s share prices were affected by the lack of voting rights. But this was not necessarily detrimental to active shareholders, whose shares were of a different class. The voting privileges attached to them were not transferable as they resulted from the social status of these active shareholders and could not be bought in the share market, soon to be based in the Bourse building.

The EIC as a Pre-Share Market Corporation

In order to attract external investors, the EIC offered them voice and information on a level far higher than in the VOC, in an attempt to offset the lack of liquidity in the absence of an effective market for shares in 1600 England. Further, the EIC was designed in a manner that would allow its members an exit option despite the lack of a pre-existing stock market. This option had to be formulated in an unusual way, unfamiliar to modern scholars who view exit through the market as the standard form of exit(Harris 2005). Members of the EIC were given the option to invest, or not to invest, in any voyage beyond the first. Some invested; others did not. Often, when not enough capital was raised from existing EIC members, resort was made to outsiders who were invited to invest in the stock and join the corporation. In this sense, the corporation was a club of potential, though not necessarily actual, investors. All potential investors (members) had a voice in the decision to undertake a new voyage and to raise more money. They then received an option to join by investing in the voyage.13 Those who decided not to subscribe for a specific voyage could not get a share of its profits. Different groups of individuals, all supposedly members of the corporation, contributed to each of the first twelve voyages (1600 – 1612). There was significant overlap between the groups of investors but they were not identical in composition. Membership allowed potential investors to receive first-hand information about the outcome of past voyages, the status of ongoing voyages and the prospects and business plans with respect to future ones. Their meaningful exit opportunity did not involve selling their shares in a non-existing market, but rather lay in deciding whether to join unfolding business opportunities. This was not a full exit, because the initial outlay remained invested in the

13 The goods offered to club members, a share in the voyage's profit, was non-rivalrous because there was in fact no upper bound to investment in a voyage. When more capital was raised, more ships could be fitted or more goods (mainly silver) could be loaded on the given ships.

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