Mercantilism

Many European nations chartered corporations to lead colonial ventures, such as the Dutch East India Company or the Hudson’s Bay Company. These chartered companies became the progenitors of the modern corporation. Acting under a charter sanctioned by the Dutch government, the Dutch East India Company defeated Portuguese forces and established itself in the Moluccan Islands in order to profit from the European demand for spices. Investors in the VOC were issued paper certificates as proof of share ownership, and were able to trade their shares on the original Amsterdam stock exchange. Shareholders are also explicitly granted limited liability in the company’s royal charter.

In England, the government created corporations under a Royal Charter or an Act of Parliament with the grant of a monopoly over a specified territory. The best known example, established in 1600, was the British East India Company. Queen Elizabeth I granted it the exclusive right to trade with all countries to the east of the Cape of Good Hope. Corporations at this time would essentially act on the government’s behalf, bringing in revenue from its exploits abroad. Subsequently the Company became increasingly integrated with British military and colonial policy, just as most UK corporations were essentially dependent on the British navy’s ability to control trade routes.

Labeled by both contemporaries and historians as “the grandest society of merchants in the universe”, the British East India Company would come to symbolize the dazzlingly rich potential of the corporation, as well as new methods of business that could be both brutal and exploitative. On 31 December 1600, the English monarchy granted the company a 15-year monopoly on trade to and from the East Indies and Africa. By 1611, shareholders in the East India Company were earning an almost 150% return on their investment. Subsequent stock offerings demonstrated just how lucrative the Company had become. Its first stock offering in 1613–1616 raised £418,000, and its second offering in 1617–1622 raised £1.6 million.

A similar chartered company, the South Sea Company, was established in 1711 to trade in the Spanish South American colonies, but met with less success. The South Sea Company’s monopoly rights were supposedly backed by the Treaty of Utrecht, signed in 1713 as a settlement following the War of Spanish Succession, which gave the United Kingdom access in to trade in the region for thirty years. In fact the Spanish remained hostile and let only one ship a year enter. Unaware of the problems, investors in the UK, enticed by extravagant promises of profit from company promoters bought thousands of shares. By 1717, the South Sea Company was so wealthy (still having done no real business) that it assumed the public debt of the UK government. This accelerated the inflation of the share price further, as did the Bubble Act 1720, which (possibly with the motive of protecting the South Sea Company from competition) prohibited the establishment of any companies without a Royal Charter. The share price rose so rapidly that people began buying shares merely in order to sell them at a higher price, which in turn led to higher share prices. This was the first speculative bubble the country had seen, but by the end of 1720, the bubble had “burst”, and the share price sank from £1000 to under £100. As bankruptcies and recriminations ricocheted through government and high society, the mood against corporations, and errant directors, was bitter.

In the late 18th century, Stewart Kyd, the author of the first treatise on corporate law in English, defined a corporation as: a collection of many individuals united into one body, under a special denomination, having perpetual succession under an artificial form, and vested, by policy of the law, with the capacity of acting, in several respects, as an individual, particularly of taking and granting property, of contracting obligations, and of suing and being sued, of enjoying privileges and immunities in common, and of exercising a variety of political rights, more or less extensive, according to the design of its institution, or the powers conferred upon it, either at the time of its creation, or at any subsequent period of its existence.

India has limited domestic sustainable investment market or infrastructure in the listed equity space. There is little interest in sustainable investment in India’s rapidly growing mutual fund and life insurance market at the current time. India is still relatively unprepared for foreign sustainable investment and that this should be seen as a strategic risk to the country’s global competitiveness and sustainable development. It appears that among Indian businesses, there is a widespread lack of action in the realm of CSR. Companies in the construction, energy, information technology and metals and minerals sectors are more inclined towards CSR activities while other sectors are still catching up.

For India’s small- and medium-sized enterprises (SMEs), it has also proven difficult to engage in an Environment Social Governance philosophy that would attract socially responsible investor, due to such factors as lack of time or resources to be able to identify, exploit and maintain sustainable opportunities. According to some researchers, Indian benchmark stock index has experienced a 16 percent plunge worse than their emerging market peers like China, South Korea and Taiwan after global recession. It was also noted that that foreign institutional investor have being pulling out money from Indian stocks. There could be many reasons for this: One, global debt worries may be prompting them to move funds to safe havens such as treasuries, money market funds and gold. Two, they are re-shuffling their portfolio within the emerging markets as they find Indian equities pricey. This can defiantly conclude that CSR hasn’t yet played a major role among Indian firms, a fact that suggests a correlation with the nation’s extremely low Socially Responsible Investment (SRI) figures. Attracting domestic or foreign SRI investor by enacting CSR policies throughout India’s companies in the private sector should be a force of social good which can encourage further proper adherence of CSR law.