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Shareholder Democracies?Corporate Governance in Britain and Ireland before 1850$

Mark Freeman, Robin Pearson, and James Taylor

Print publication date: 2011

Print ISBN-13: 9780226261874

Published to Chicago Scholarship Online: February 2013

DOI: 10.7208/chicago/9780226261881.001.0001

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Constitutional Rights and Governance Practice

Constitutional Rights and Governance Practice

The Proprietorship

(p.108) Chapter Five Constitutional Rights and Governance Practice
Shareholder Democracies?

Mark Freeman

Robin Pearson

James Taylor

University of Chicago Press

Abstract and Keywords

This chapter places shareholders at the centre stage, examining the roles that shareholders could be called upon to perform, from the active promotion of companies to the election and appointment of directors and salaried officers, the setting of remuneration, the oversight of major strategic decisions, and the amendment of the company constitution itself. The chapter aims to advance the understanding of this aspect of corporate governance by tracing more systematically the shifting constitutional balance between shareholder obligations and benefits. It shows that the right of shareholders to intervene in company affairs was traditionally bound up with various obligations and restrictions placed on shareholders, ranging from the requirement to extend the business to limitations on their freedom to contract with other companies. At the same time as they were divested of their powers over strategy and management, however, they were also shorn of their economic obligations, turning instead to ways of protecting their financial stake in the company. Thus, in an important sense, they were complicit in the reconfiguration of power within the company. Though they did this in the name of protecting their investments, the irony is that this trade-off left their investments vulnerable to depredations by unchecked directors and managers. Thus, the rights of shareholders examined in this chapter illustrate the great range of constitutional arrangements in joint-stock companies.

Keywords:   constitutional rights, governance practice, shareholders, companies, business, financial stake, joint-stock companies

The principles of a free constitution are irrecoverably lost, when the legislative power is nominated by the executive.—Edward Gibbon1

Shareholders, as Dunlavy has observed, are largely absent from Chandlerian representations of business history.2 It can be argued that this absence reflects the legal distinction between the corporation and its members. In Ireland's words, the principle of the separate legal personality of the corporation “is based on a conception of the company as not merely an entity with an independent legal existence from its shareholders but an object which has been effectively cleansed of them.”3 For a long time, and with some notable exceptions, the legal marginalization of the shareholder was mirrored in the historiography.4 However, as historians have begun to disentangle the complex economic, legal, and political relationships that characterized the joint-stock economy of the eighteenth and nineteenth centuries, the shareholder has reappeared as a significant figure. The motivations for investment, the mechanisms for protecting shareholders' interests, and the levels of shareholder participation in the governance of companies have all been discussed.5 In this chapter we place shareholders center stage, examining the roles that shareholders could be called upon to perform, from the active promotion of companies to the election and appointment of directors and salaried officers, the setting of remuneration, the oversight of major strategic decisions, and the amendment of the company constitution itself. In chapter 6 we examine the various forms of franchise by which shareholders (p.109) were accorded a say in company affairs and the role of the GM in corporate governance. In chapter 7, we discuss the ways in which constitutions attempted to safeguard the interests of shareholders, in particular by limiting their liability, but also by providing for company dissolution, together with other forms of protection. The picture that emerges is of the transfer of power in joint-stock company politics from the GM to the executive, with the result that shareholder participation gave way to more “autocratic” forms of government by directors and managers.

This relocation of power happened alongside—and, it can be argued, as a result of—changing motivations for investment in joint-stock companies. Debates about “prudent” versus “speculative” motives had already reached a climax in the years leading up to the South Sea crisis of 1720, and they never entirely disappeared thereafter.6 In his study of eighteenth-century canals, Ward made a distinction between investors motivated by “economic” and “financial” considerations. The former had a direct interest in the scheme being promoted and were usually local merchants or manufacturers; the latter were rentiers, interested solely or mainly in dividends.7 Early “economic” investment in canals gave way to “financial” investment as they began to offer returns on capital. In the same vein, Wilson applied the terms “strategic” and “speculative” to gas shareholders in the northwest of England. Early investment in gas supply was predominantly “strategic,” dominated by those likely to consume the gas in their own businesses, whereas “speculative” investment grew in importance over time, with a wider geographical spread of shareholding and the rise of a rentier class, drawing the high dividends that many gas companies offered.8 Hudson adopted a similar distinction between “economic” and “financial” investment in her study of West Midland canal and railway investors.9 This has also been observed in shipping, where many shareholders had a personal involvement in shipping goods, but where the growth of rentier investment has also been identified.10

By the 1840s, if not earlier, the need to source capital from wider geographical areas, particularly in the railway and banking sectors where large firms increasingly predominated, resulted in a growing secondary market for shares and a broader investment base. By 1851, according to one estimate, there were 268,191 share owners in England alone.11 Preda relates the growth in shareholding to the availability of financial information in the form of market periodicals and stock lists, while others have emphasized the size of returns available in the form of dividends, compared with the yield from government bonds and other alternative (p.110) investments.12 Rutterford cites an article in the Statist published in 1888 that distinguished between four kinds of investors: those expecting a steady return, who might otherwise invest in government bonds; those seeking high dividends and willing to take risks with their money; those who speculated with small sums; and the “premium hunter,” for whom the “vitriol” of the Statist was reserved. Rutterford identifies two further types: the “greedy shareholder,” probably a retired person or widow, and the “informed business man, happy to receive a reasonable dividend from his investment in a company with which he was probably involved, as a director or customer.”13 Only the latter corresponded in any way to the “economic” investor in the early canals, and even for him the dividend was a significant consideration. This illustrates the extent to which the predominant motivations of shareholders had shifted by the later nineteenth century.

Of course, the distinction between the two kinds of investment is somewhat artificial: it is clear that both motivations could, and did, operate simultaneously. The distinction, however, is useful for our purposes because of its implications for joint-stock politics. By the 1840s, the state recognized the changing roles of investment and began to intervene more systematically in the relationships between companies and the wider public, especially in the “network industries.”14 These attempts reflected a realization that “strategic” investment in public utilities was giving way to speculative shareholding with the maximization of returns and the search for capital gains rather than the provision of a particular service as the main objective. For most of our period, the extent of speculative investment as a gamble on the rise of share values was largely limited to the major company promotion booms such as in 1824–5. As we note below, this began to change in the railway era when company directors first tried to make a distinction between those investing for “financial” motives, with a primary interest in dividend yields, and those who speculated in “scrip”—advance allocations of railway shares before they were issued—in anticipation of selling these quickly for a profit.15 For the purposes of the present discussion, however, we lump both types of “speculative” investor together in order to make the distinction between these types and the “economic” investor clearer. “Economic” or “strategic” investors, ceteris paribus, were more likely to take an active role in the government of their company. By contrast, “financial” or “speculative” investors were likely to intervene only when their returns were threatened or, less commonly, when share values suffered. The growth of (p.111) a rentier class of shareholders, content to receive high dividends but capable of being moved to action when returns on capital fell, was a widely observed feature of the first half of the nineteenth century and aroused renewed concern about the evils of “speculation.” It has also begun to be examined by historians. Alborn regards the shift away from shareholder participation, especially in banking, to be the result of a “political” desire among company promoters to secure a more compliant proprietary. He links this to notions of “respectability” inherent in the wider debates on the political franchise in the nineteenth century.16 Similarly, Dunlavy links the emergence of the “plutocratic” shareholder franchise in US corporations to the transformation of the small shareholder from an active participant in corporate governance to a mere “passive investor.”17

This chapter advances our understanding of this aspect of corporate governance by tracing more systematically the shifting constitutional balance between shareholder obligations and benefits. It shows that the right of shareholders to intervene in company affairs was traditionally bound up with various obligations and restrictions placed on shareholders, ranging from the requirement to extend the business to limitations on their freedom to contract with other companies. At the same time as they were divested of their powers over strategy and management, however, they were also shorn of their economic obligations, turning instead to ways of protecting their financial stake in the company. Thus, in an important sense, they were complicit in the reconfiguration of power within the company. Though they did this in the name of protecting their investments, the irony is that this trade-off left their investments vulnerable to depredations by unchecked directors and managers, as we demonstrate in chapters 7 and 8.

Shareholder Obligations and Benefits

It might seem obvious that the primary obligation of shareholders was to pay the calls on their shares, yet this was one of the most contested areas of joint-stock politics in our period. Calls became politicized in the late eighteenth century when responsibility for them shifted from the GM to the board of directors: while 33.3 percent of companies established between 1720 and 1789 gave the GM sole authority over all calls, this fell to just 3.6 percent of companies established after 1789.18 Defaulting shareholders were the most common topic of discussion at the GMs of (p.112) many companies.19 Chronic nonpayment could seriously hamper a company's prospects. Failure to pay often stemmed from the straitened circumstances of individual shareholders, but it could also be caused by a loss of confidence in the viability of a scheme or the way it was being managed: companies that were plagued by defaulters also usually suffered from low attendances at GMs. Directors, therefore, had to be careful to stress that calls were made only when strictly necessary. The directors of the South Metropolitan Gas Light and Coke Company, for example, told their shareholders in 1836 that they anticipated only having to make one call that year but hoped that shareholders would cheerfully pay a second if required, as the directors “have been, and still continue most anxious to avoid all expenditure which may not tend to the interest and prosperity of the Company,” and “will not unnecessarily call upon the Proprietors.”20 To try to render the call-making process more transparent and less controversial, some company constitutions, particularly in the unincorporated sector, contained a fixed schedule of calls. The Rochester and Chatham Gas Light Company (1818) issued shares of £50, and the schedule for paying up the first £35 was specified in the “deed of copartnership.”21 Even explicit provisions such as these, however, did not prevent considerable numbers of share forfeitures in the early phase of a company's life as shareholders defaulted.22 Constitutions typically granted directors the power to enforce payment of calls through the courts and to divest defaulters of their shares in the event of continued refusal to pay. Directors, however, often proved reluctant to use these powers, preferring instead to rely on exhortation and persuasion at GMs.23

The extent to which the issue of calls could come to dominate a company's affairs is illustrated by the case of the Ashby-de-la-Zouch Canal Company (1794). The company's act had clear rules on payment of calls: those who failed to pay a call within thirty days could be fined up to £5 per share. The company could sue shareholders for nonpayment, and shares were forfeited if calls were not paid within six months.24 The inadequacy of these rules soon became clear. By April 1795, £30 had been called up on each £100 share, which should have generated £45,000. The sum actually raised, however, was barely £29,000, leaving a shortfall of nearly £16,000. Letters were sent to each shareholder in arrears, and notices were placed in the press warning that if payments were not made before the next board, steps would be taken to enforce payment.25 By the following April, after £25 more of calls, the deficit had grown to (p.113) nearly £28,000. The GM unanimously voted to initiate legal proceedings against one shareholder, Bullivant, who had not paid calls on nineteen shares. Bullivant agreed to terms with the directors, but the larger problem did not recede.26 In April 1796 the biggest defaulters received another letter threatening legal proceedings but to little avail. In the following month, the directors appointed two shareholders to “wait in person upon the Subscribers in arrear in order to receive their several arrears or to take their reasons for their withholding the payment thereof.”27 By October the deficit had swollen to over £33,000, and the directors referred the problem to the GM, which unanimously gave them authority to launch legal actions against any defaulter.28 After three further rounds of threatening letters, the directors finally launched actions against fifty-four shareholders in November 1797 and January 1798. In April the GM voted that a list of defaulters was to be hung up in the meeting room, in an attempt to shame them publicly.29 All of this had some effect. By October 1798, the amount owing had fallen to £22,500, but as the final calls were made over the following months, the deficit shot up again, to more than £34,000. The GM resolved that no interest be paid on calls except to proprietors who had already paid their full subscriptions.30 Flurries of legal actions gradually had an effect, wearing down the size of the deficit to just over £14,000 by 1803.31 The company's debts were not paid off until 1828, at which point it paid a dividend for the first time.

English court judgments had an increasing influence on the problem of making calls. Indeed, calls on shareholders, and their resistance to this liability, were the dominant issues in English legal cases involving joint-stock companies between the 1790s and the 1840s and touched upon several other aspects of the legal framework within which English stock companies operated in this period.32 Four points emerge from a reading of these cases. First, the law courts were increasingly concerned to regulate the process of making calls, including the schedule of calls and term of notice given and the authority employed for calls and forfeitures of shares upon default of payment. This usually involved making detailed reference to a company's act of incorporation and, less frequently (because unincorporated companies appeared in the courts more rarely than corporations such as canals and railways), to deeds of settlement as the key constitutional document whose authority the judiciary sought to uphold.33 Second, proof of share ownership became the key point upon which many of the cases turned. This issue, in turn, was central to other cases involving different categories of shareholder liability, (p.114) especially liability for company debts.34 Third, as the number of such cases increased, the courts became concerned to tighten the definition of who could be sued for default. In a judgment involving the Huddersfield Canal Company in 1796, for instance, it was ruled that subscribers were not liable for calls after they had assigned their shares.35 Two judgments in 1840 held that directors holding shares “in trust” for a dock company were liable for outstanding calls.36 Fourth, following the share boom and bust of 1835–6, there were signs of declining judicial tolerance for defaulting shareholders as numerous investors, with the help of their lawyers, tried to wriggle out of their financial commitments using increasingly desperate arguments.37 Particularly with regard to railway share issues, enormous legal problems were caused by quick transfers of scrip and the uncertain liability of vendors for subsequent calls. As noted above, the courts tried to follow the protocol for share transfers as set out in company constitutions, but they also gave increasing leeway to companies pursuing recalcitrant defaulters, for example, with regard to irregular or incomplete entries in share transfer books.38

Legal proceedings against defaulters on calls did not always succeed. In Ward v. Matheson (1829), the defendant refused to pay the second call of £1 on his shares in the Edinburgh Portable Gas Company until the contract of copartnery was prepared. When the latter was finally completed, it contained several elements that differed from those in the original prospectus. The Lord Ordinary, and subsequently the Court of Session, ruled that Matheson did not have to pay the call because the changes had not been ratified by a GM. A similar decision was reached in Learmonth v. Adams (1831), which related to a call made on shares in the Commercial Marine Insurance Company of Scotland.39 In England, company prospectuses, when tested, were also held to be legally binding on their promoters. The directors of the newly minted Alliance British and Foreign Life and Fire Assurance Company were successfully taken to court by a shareholder in 1824 because they had attempted to extend the business to marine insurance following the repeal of the monopoly of the two London marine insurance corporations. The plaintiff sued for a return of his subscription on the grounds that there was no mention of marine insurance in the company's original prospectus, which had been issued before the repeal bill was passed.40

What about obligations beyond paying calls? Williston argued that in corporations, the duties of the shareholder “were fewer and simpler than his rights,” and consisted mainly of the requirement to pay calls.41 (p.115) Constitutionally speaking, this was true: only two corporations in our sample imposed any other constitutional requirements on their shareholders. However, where shareholders were seen as active investors promoting the broader economic interests of their company, they were expected to do more than simply hold shares. This applied to shareholders in unincorporated and incorporated companies alike. At the first ordinary general meeting (OGM) of the Insurance Company of Scotland (1821), the directors asked for “a steady and continued exertion on the part of the Partners, by bringing all the Insurances they can obtain to the Company, and by strongly recommending to their friends to become shareholders.”42 In 1838, the directors of the Ashton, Stalybridge, Hyde and Glossop Bank called on proprietors to “exert their individual and collective influence” in promoting the local circulation of the company's banknotes.43 When a company was in dire financial straits, shareholders were expected to help by making sacrifices or by drumming up business. Several shareholders in the struggling Thames and Severn Canal Company helped in the 1790s by building boats at their own expense and letting them to the company.44 A GM of the Medway Bathing Establishment in 1836 appointed a committee of twelve shareholders “to go round the towns to obtain subscriptions” to finance a new floating machine. When the response to a new share issue proved disappointing, the GM appointed another committee “to go round to the shareholders to get the shares taken.”45

Obligations, often vaguely expressed, were sometimes written into the constitutions of unincorporated companies. In the contract of copartnery of the Insurance Company of Scotland, for example, the parties “faithfully promise[d] and oblige[d] themselves severally to promote and advance the interest of this Company to the utmost of their power and ability.”46 Unincorporated companies, however, often set out additional requirements of their shareholders that went well beyond promoting the company, and this set them apart from corporations. Table 5.1 shows that in the period 1720–1809 a majority of unincorporated companies in our sample set some kind of prerequisite for share ownership. The table also breaks these requirements down by type. Arguably the key characteristic of an ideal “economic” shareholder was the transaction of business with his or her company. This was imposed as a prerequisite of share ownership in 17.6 percent of unincorporated companies established in the eighteenth century, one in four established in the 1800s, and nearly one in three of those launched in the early 1820s. In (p.116)

Table 5.1. Percentage of unincorporated companies imposing prerequisites for shareownership by time of prerequisite and subperiod








Any prerequisite

1720–99 (N = 17)








1800–9 (N = 20)








1810–9 (N = 8)








1820–4 (N = 19)








1825–9 (N = 33)








1830–4 (N = 31)








1835–9 (N = 72)








1840–4 (N = 24)








All unincorporated companies (N = 224)









1 = Must be approved by existing shareholders

2 = Must have some other connection with the company (e.g., transact business with it)

3 = Residential requirement

4 = Must not be involved with another company in the same sector (sometimes exempted those whose only connection was holding shares in another joint-stock company)

5 = No corporations or partnerships could hold shares

6 = Any other prerequisite

this way, joint-stock companies acquired some of the features of mutuals, where the owners were also the customers, although in most cases the customer base was larger than the proprietorship. In the eighteenth century, 23.5 percent of unincorporated companies restricted their shareholders' involvement (holding shares or office or transacting business) in competing companies. Shareholder exclusivity was most commonly insisted upon in banking (19.0 percent of all unincorporated banks), while additional connections were most commonly required in insurance (21.3 percent) and shipping (19.0 percent).

Shipping companies—the great majority of which were unincorporated—often required their shareholders to have some involvement with the trades in which their ships were engaged.47 All the proprietors of the Stockton and London Shipping Company (1839), for instance, had to be “shippers,” while in the London and Edinburgh Shipping Company (1809) each proprietor had to be “connected with some profession which leads him to ship goods” between the ports of Leith and London, although the directors could waive this requirement at their discretion.48 The intense competition in local trading routes and the complex business connections of some investors were recognized at the Berwick Shipping Company (1820), where (among other requirements) shareholders (p.117) were not permitted to ship goods, except for corn and grain, in another company's vessels on any route served by the company.49 Manufacturing and trading companies had similar rules, sometimes reflecting the particular circumstances of their establishment. The Duns Linen Company (1765) comprised weavers and “Gentlemen” who subscribed for the purpose of organizing local linen manufacture. The “Gentlemen” were constitutionally barred from engaging in any other linen manufacture in Duns for a period of seven years.50 At the Birmingham Flour and Bread Company (1796) and the Bristol Flour and Bread Concern (1800), shareholders were required to buy bread from their companies in proportion to the number of shares held.51 Similarly, in insurance shareholders were often required to insure their property with their company.52 Twenty-one percent of insurance companies in our sample imposed some such requirement. The involvement of shareholders was also actively promoted in gas companies, which were usually small in scale and territorial ambition and tended to have a local body of shareholders. Twelve of the thirty-two unincorporated gas companies in our sample had some prerequisite for share ownership: seven imposed a residential requirement.

In banking and insurance, however, directors were more concerned about the character and substance of shareholders than their place of residence or business.53 This would ensure the availability of capital and minimize share forfeitures, while also reassuring third parties—policyholders, depositors, note holders—of the security of the concern. The promoters of the North British Insurance Company (1809), for example, were concerned “to prevent in so far as is practicable the admission of doubtful or improper names among the subscribers.”54 As discussed in chapter 3, companies often adopted large share denominations to attract the “right” kind of investor, and directors in unincorporated companies reserved the right to control access to shares. An extra layer of control was sometimes added in the eighteenth century, which shareholders themselves were called upon to exercise. At the Aberdeen Banking Company (1767), for example, the rules stipulated that GMs could expel any “improper Partner or Partners” from the company.55

Another way in which speculative investment could be minimized was by imposing a cap on dividends. This would encourage “responsible” investment and discourage shareholders for whom the “financial” returns on offer were the primary motivation. Forty companies, 7.8 percent of our sample, imposed a dividend cap. The lowest cap was 4 percent, and seven were at 5 percent (the traditional usury limit), but the modal figure (p.118) (nineteen companies) was 10 percent. The lowest dividend caps were mostly found among unincorporated insurance companies, while the 10 percent cap was more common among corporations, especially canal, harbor, water, gas, and bridge companies. Seven of these corporations-six bridge companies, one harbor—were established with a view to their eventual conversion into trusts. Although private companies, they had a definite public purpose and would eventually be transformed into public institutions, so, to that extent, the limitations on profit making were understandable.

The flipside of the obligations and restrictions imposed on “economic” investors was the availability of benefits from the company business: for example, free or subsidized use of the canal or railway that the concern was established to build. The Midland Railway and the Manchester, Sheffield and Lincoln Railway, as well as several Scottish railway companies, allowed shareholders free passage on their trains to attend GMs.56 The unincorporated Scarborough Cliff Bridge Company (1828) allowed holders of five or more shares to cross the bridge for free, using a ticket that could itself be sold.57 Among our corporations, only two water companies—Liverpool (1822) and Deal (1826) —and the West India Company (1826) offered their shareholders benefits from the company's core activity as a constitutional right. In the latter case, the highly regulated benefit was the right of shareholders, with the concurrence of three-quarters of the directors, to borrow money from the company against the security of land in the West Indies.58 This resembled the benefit available in a number of banks, particularly in Scotland, where loans could be advanced against the security of paid-up capital, although, again, this was usually subject to the discretion of the directors. Nineteen banks in our sample (29.7 percent) offered such benefits. Twelve of these were in Scotland. The earliest was the Commercial Bank of Scotland (1810), where shareholders, at the directors' discretion, could borrow up to one-half of the amount paid up on their shares.59 The first English banks in our sample to offer this kind of benefit were formed in 1829, and others followed in the 1830s. The advisability of such loans was widely debated at the time. In 1836, Peter Watt, former manager of the Nottingham and Nottinghamshire Joint-Stock Banking Company, defended the practice, pointing out that shareholder debts to a bank were “a real and preferable lien over the paid-up capital and marketable value of their shares.”60 Some historians have been more critical. Checkland, for example, argued (p.119) that the Western Bank of Scotland's lending to many of its 1,280 shareholders was a “dangerous policy” and a reason for its failure. By contrast, Lamoreaux, referring to New England, regards “insider lending” as more benign: banks rarely failed because of it, thanks to rigorous internal vigilance and public monitoring of bank affairs.61

Where shareholders were conceived of as “economic” or “strategic” investors, it was not surprising that they often attempted to enforce their will on the board of directors to advance what they saw as the economic interests of their company. Although directors and managers were eager for an active proprietary, the line between activity and interference could be a narrow one, and a sensitive board could easily take umbrage when they felt the line had been crossed. At the Edinburgh Sugar House Company (1752), many of the issues that dogged the internal politics of companies later in our period were rehearsed in a bitter dispute between the “Managers” (i.e., the directors) and their “Constituents” (the shareholders). As in other companies, the proprietors were encouraged to support the sugar house's business. In 1755 the managers “recommend[ed] to the General Meeting that in order to promote the sale of our sugar the partners will take the trouble to direct that no other be used in their Familly but what is the Manufactory of the Company and that they will recommend the Same to their Friends.”62 The managers had the power to veto share transactions and thereby to influence the composition of the proprietary. Some shareholders objected to this power, especially insofar as it applied to the disposal of shares at death. In the early 1760s growing complaints about the way the company was managed were partly assuaged by a continuation of the usual dividend, even though the profits did not warrant the payment of 4 percent. By 1762, however, the shareholders were in open revolt. The managers expressed concern “to find themselves the Objects of the Suspicion of [the GM], as Persons, who in the Purchases of the Materials of their Manufacture, have not acted agreeable to the trust hitherto reposed in them by the Company.” The GM had apparently removed some of the managers' powers to import raw sugar and had insisted that a standing committee oversee their actions.63 In response, the managers emphasized their superior knowledge of the trade, and this seems to have won the day, as the affair eventually blew over. The incident, however, shows how the encouragement of shareholder engagement could backfire on business leaders in this period.

(p.120) The Accommodation of “Financial” Investment

There was a reconfiguration of the relationship between shareholders and directors during the first half of the nineteenth century. Although “financial” investment had traditionally been associated with “speculation,” directors increasingly came to see the benefits of attracting investors who looked for nothing more than a reliable return on capital. Such investors were easily managed and unlikely to express an interest in strategic issues. The “financial” category of shareholders could include both speculative and steady investors. While the former could be kept out by a variety of measures from high share denominations to directorial oversight of share transfers, the latter could be let in by a relaxation of the traditional obligations imposed on shareholders. Thus, the obligations and duties that had been an important feature of company constitutions were gradually abandoned. Table 5.1 shows that the proportion of companies imposing prerequisites on share ownership declined from over 50 percent to less than 15 percent between the eighteenth century and the 1840s.

The increasing emphasis on the financial motivations of shareholders is also marked by the decline of the dividend cap. Among all companies in our sample, capping dividends became less common during the first half of the nineteenth century: 12.3 percent of companies capped dividends in the eighteenth century, rising to 20.6 percent in the 1810s, but the proportion fell to 6.1 percent in the period 1825–9 and to zero in 1830–4 before rising again to 9.6 percent in 1840–4. Companies that began life with a dividend cap sometimes regretted it as time went on. In 1828, the directors of the Liverpool and Manchester Railway, incorporated two years earlier with a sliding-scale dividend limitation, concluded that the repeal of the clause would be “highly desireable.” In this instance, however, they were advised by William Huskisson, former president of the Board of Trade, that they should not attempt a repeal.64 Indeed, from the late 1830s the revival of the dividend cap was imposed from without, by the state, which was beginning to insist on greater regulation of the “network industries.”65 The Gasworks Clauses Act and the Waterworks Clauses Act, both passed in 1847, capped the dividends of incorporated gas and water companies at 10 percent and made provision for rates to be reduced if company profits exceeded the prescribed limit.66 Statutory dividend caps thus reflected in part the growing profitability of these companies following technological improvements. However, (p.121) they also underlined the growing belief that motivations for investment were increasingly “financial” in character and that shareholders' desire for profit needed to be curbed in the public interest.67

As the obligations and restrictions enshrined in constitutions fell away, new clauses designed to protect the financial interests of shareholders were inserted. In this context, shareholders were not necessarily innocent victims of the reconfiguration of the balance of rights and responsibilities within the joint-stock company. Rather, they conspired in this process, enjoying their newfound freedom from responsibility and doing their best to defend the financial benefits they derived from holding shares. Some of these protections were even offered in corporations, where the supreme protection of limited liability was already available. Although in most corporations the payment of dividends from the capital stock was expressly prohibited and widely condemned by commentators as fraudulent, forty-five corporations (15.5 percent) and twenty-four unincorporated companies (10.7 percent) either gave interest on paid-up capital (i.e., had a minimum dividend) or explicitly permitted a reserve fund to be used to support the dividend. Interest on paid-up capital was most common in the eighteenth century, but it came back into favor in the 1840s. A related benefit offered by some companies—again, mainly incorporated companies—was interest on payments made in advance of calls on shares. This was less desirable from a “financial” point of view than interest on paid-up capital, but as the latter practice declined in the early nineteenth century, an increasing proportion of companies were paying interest on advance deposits. The practice was most common in railway companies (43.3 percent of companies in the sector), harbor companies (29.6 percent), and bridge and property companies (both 27.3 percent). Although not a single corporation in the eighteenth century offered this benefit, by the 1840s 72.7 percent of corporations did so: mostly railways, but also canal, property, gas, and water companies. Sometimes, as in the North British Railway Company (1844), it was available in conjunction with interest on paid-up capital.

The dividend, of course, was the most important consideration for the financial investor. During the eighteenth century both incorporated and unincorporated companies tended to permit GMs to declare dividends. The constitutions of the earlier corporations were often silent or ambiguous on this issue, but they never prevented GMs from declaring dividends, and minute-book evidence suggests that, in practice, their GMs usually declared or approved the dividends.68 Although our database (p.122) shows a dramatic increase in the proportion of new incorporated companies allowing their GMs rights over the dividend, rising from 28.0 percent in the period 1720–1825 to 79.3 percent after 1825, what was happening in these companies in the later years was almost certainly a formalization of what was a de facto situation. Conditions in the early unincorporated companies were similar to those in the corporations, the only difference being that the right to declare a dividend, either by the board or by the GM, was more often spelled out in the more detailed constitutions typical of these companies. From the 1820s, however, there was an increase—accelerating in the 1830s—in the number of unincorporated companies that explicitly denied these rights to GMs, and this was when the two types of company diverged significantly. While 79.3 percent of corporations after 1825 gave their GMs this right, only 42.5 percent of unincorporated companies did so. Insurance pioneered this constitutional feature: the earliest twelve companies in our database explicitly to deny these dividend declaration rights were all insurance firms (1780–1821). Twenty-six unincorporated companies were established in other sectors before 1821, but none of them explicitly denied shareholders this right. Thereafter, other types of unincorporated companies began to imitate insurance companies: banks (beginning in 1824) to the same extent as insurance companies (50 percent), other sectors to a lesser extent: manufacturing and trade (from 1824), shipping (1826), gas (1829), colonial (1829), and property companies (1832). The practice filtered only slowly into the incorporated sector. Just five corporations in our database explicitly denied shareholders the right to declare dividends—the first in 1834. Three were railway companies, underlining the point made elsewhere that railways in the 1830s were pioneers in the incorporated sector in circumscribing shareholder rights, albeit on a small scale in this instance.69

The explanation for the divergence over time between incorporated and unincorporated companies in the power over the dividend accorded to their shareholders is thus clearly associated with sectoral differences. Banks and insurance companies, almost all unincorporated, were far more likely to reserve the declaration of dividends to boards of directors (33 out of 64 banks in our database, and 33 out of 60 insurance offices) than, for example, canal corporations. This probably reflected the widespread argument that the sophisticated nature of these financial services meant that shareholders could not be trusted to have an informed input on dividend decisions, as they could not be expected to understand the (p.123) financial situation of their companies. Indeed, it is notable that, among all unincorporated companies, those permitting their shareholders good access to company accounts were more likely to allow their GMs to declare dividends. Sixty percent (18 out of 30) of companies that allowed individual shareholders to inspect books, also allowed the GM to declare the dividend, compared with 38.8 percent (31 of 80) of companies that explicitly prevented individuals inspecting the books.

Some companies, both incorporated and unincorporated, guaranteed a certain level of dividend prior to reserve-fund appropriations. Although this did not amount to a minimum dividend, as it was dependent on company performance, it too went some way toward protecting the “financial” or “speculative” interests of proprietors. Thirty-seven companies (7.2 percent of the total) offered this kind of protection, all but two established in the period 1827–42, and six of them corporations. At the Exeter Water Company, shareholders could decide whether or not to establish a “sinking fund” up to £3,000, but not before a dividend of 5 percent had been paid. At the Victoria Park Company (1837), no money could be transferred to the reserve fund that would impinge on a dividend of 4 percent.70 Of the thirty-one unincorporated companies that protected shareholders' returns in this way, twenty-six were banks, only one of which was Scottish.71 The near absence of this provision in Scottish contracts of copartnery may reflect the other benefits widely available to bank shareholders in Scotland, particularly loans against paid-up capital, discussed above. Protections of this kind often reflected a complex balance between safeguarding the dividend and augmenting the reserve. A fairly typical example was the Saddleworth Banking Company, where up to one-quarter of the annual profits could be placed in the reserve fund, but not so as to impinge on a 4 percent dividend. One declared object of this fund was to smooth out dividend fluctuations, although this was at the “absolute discretion” of the directors. It was also explicit that any profits above £15,000 must be divided among the shareholders.72 The use of reserve funds to smooth out dividend fluctuations in gas and water companies was given statutory sanction by the Gasworks Clauses and Waterworks Clauses acts of 1847, which, along with fixing the dividend cap at 10 percent, allowed the reserve fund to be used to bring the dividend up to this figure.73

Thus, by the end of our period, the dividend was enshrined as the most important and best-protected benefit enjoyed by shareholders, the result of a major shift in the outlook of directors and shareholders alike. (p.124) Company proprietors were well aware that regular and large dividends were very effective in securing their compliance. The Equitable Gas Light Company began paying dividends in 1833, the year its deed of settlement was signed, but it was not until 1840 that the shareholders discovered that these had been paid, without exception, from capital, and that because of incompetent and corrupt management the company had not made a profit in any year. The committee of shareholders that exposed the fraud wrote bitterly that the directors “by throwing gold dust in our eyes at every Meeting in the form of spurious and fallacious dividends … put the Proprietary to sleep and disarmed their vigilance.”74 Company minute books reveal that once a firm established regular dividends, shareholder interest in governance often tapered off quite dramatically. At the Uttoxeter Gas Light and Coke Company, the first dividend was declared at the OGM of 1844.75 At earlier meetings, significant decisions had been taken regarding the leasing of the gasworks, raising money on mortgage and the issue of new shares, but subsequent minutes rarely recorded any business other than the unanimous election of the board and the declaration of the dividend.76 In 1849 the directors openly acknowledged that shareholders' “financial” motivations were their primary concern: “The Directors beg to assure the Proprietors that the strictest economy has been studied throughout in the application of the Company's funds; at the same time keeping in view the paramount importance of preserving that efficiency, which is the true interest of the Shareholders.”77

While directors were now encouraging “financial” investors, a line was clearly drawn to exclude “speculative” shareholders, a line that became more pronounced during the second quarter of the nineteenth century. Unrestricted trading in railway scrip during the promotion manias of 1836 and 1845 went a long way toward negating any controls that railway companies might wish to exercise over the composition of their proprietaries.78 In the unincorporated sector, however, it was common for this right to be abridged by directorial control over share transfers. Although almost unknown in corporations (only 7 out of 290 allowed any directorial control over transferees), the right of directors to veto transfers existed in 77.7 percent of unincorporated companies. The proportion steadily increased during the nineteenth century until in the early 1840s only one unincorporated company in our sample (the Tunbridge Wells Gas Company, 1843) allowed unrestricted share transfers. Of course, even where there was no veto, shareholders still needed to find (p.125) someone to buy their shares, which might not be easy in a company that was experiencing difficulties or did not pay dividends and where “economic” motivations had guided the early investors. As we show in chapter 6, legal rulings undermined directorial oversight of share transfers in some respects in the later nineteenth century, but in our period control by directors was clearly exercised, and not just at the start of a company's life.79 Other companies set a time restriction on share transfers: some allowed transfers only at certain times of the year, others prevented the sale of shares before a certain proportion had been paid up, and others disallowed sales in the first phase of a company's existence. Such prohibitions were increasingly common over time, especially in the unincorporated sector. In total, 19.6 percent of unincorporated companies and 7.9 percent of corporations restricted share transfers in this way. They were particularly widespread in banking but could also be found elsewhere. For example, at the North of Scotland Fire and Life Assurance Company (1836) no transfer of stock was allowed within a year of the first GM, while at the Usk Tram Road Company (1814) a quarter of the £50 shares had to be paid up before they could be sold.80 By such measures, directors could attract passive investors while keeping those with purely speculative objectives at bay.

Female Shareholders

We have written extensively before about women shareholders in jointstock companies, so this section summarizes the findings of our earlier work, to which we refer the reader for a more detailed discussion.81 Based on datasets showing women as a proportion of total shareholders in 191 joint-stock companies and women's shares as a proportion of share capital in 80 companies, we were able to draw several conclusions about the trends in female investment.82 First, the presence of women shareholders in the joint-stock economy before 1850, even if minimal in places, was widespread. Fewer than one in five companies in the first dataset above had no female shareholders. Second, the proportion of women shareholders declined during the last decades of the eighteenth and the first quarter of the nineteenth century to an average of around 7 percent. The levels were higher during the first half of the eighteenth century, reaching between 10 and 20 percent of shareholders in many companies. Indeed, in the 1750s one in four owners of Bank of England stock and one (p.126) in three owners of East India stock were women.83 The decline reversed around 1830, and by 1850 the mean percentage of women among shareholders was over 20 percent. This upward trend appears to have continued throughout the rest of the century, so that in some cases, the Ulster Bank, for example, women made up as much as half of all shareholders in the decades before the First World War.84

Third, our data revealed that the mean percentage of share capital held by women (6.6 percent) was little more than half the percentage of women among shareholders (12.5 percent), demonstrating that on average women were twice as important to their companies in terms of numbers than they were in terms of their shareholdings. Behind this general result lay trends over time. A rise in the percentage of share capital owned by women in the 1790s and 1800s suggests that wealthier women, or at least women who were able to make larger investments, were subscribing to the joint-stock companies of this period and reducing the gap between the average shareholdings of men and women. After 1830 that gap widened again as growing numbers of female small investors entered the market for company shares, attracted by the lower share denominations of many new companies, and aided by the burgeoning financial press advertising and offering advice on railway and other share issues. Indeed, as the joint-stock economy became more diverse in this period, the increasing dispersion of female shareholding levels across the sector (measured by coefficients of variation) suggests that some types of company were more attractive to women than others. High percentages of female shareholders were to be found most often in banking, canal, and gas companies, indicating some clustering in favored investments, similar to the clustering observed by economic historians in certain “women's” trades (food, retail, textiles).85 However, the highest standard deviations of the female proportion of shareholders occurred among insurance and railway companies, so that in these sectors the propensity for women to invest was least predictable.

Our data also confirmed that the great majority of women who owned shares were widows and spinsters holding shares in their own name and that many women's shares were held in family clusters, with their shares listed alongside those of their parents, siblings, husbands, sons, and daughters. One possible reason for the assignation of shares by men to other family members, including women, was the desire to maximize voting power by splitting shareholdings—we discuss “stocksplitting” in chapter 6.86 Together, these factors suggest that most women (p.127) bought shares, or had shares transferred to them, as “financial” rather than “economic” investors, with their interest primarily being in the dividend payment. Very few female shareholders had occupations recorded in shareholder lists, and very few reveal direct business interests in the companies they invested in. Before the Married Women's Property Act of 1870, under the English law of coverture married women were denied the right to hold shares in their own name, and a few companies did explicitly bar married women from owning shares. More frequently, however, companies required female shareholders to inform them of any change in marital status, and women were expected, upon marriage, to have their shares reregistered in their husbands' names.

The founders of some new companies also actively discouraged the purchase of their shares by women on the grounds that men were better placed to promote the business of the company, but this was relatively unusual. The great majority of companies accepted the presence of female shareholders. A few denied them the right to vote in board elections, a few restricted women to voting only by proxy, and a handful of Scottish companies barred women from acting as proxy voters for others. As we show in chapter 6, however, it was far more common for companies to enable women, together with any shareholder—male or female—living at a distance from the location of the GM, to vote by proxy without requiring them to do so.87 Most joint-stock companies assumed that women might wish to be active shareholders, attend GMs, and vote on company affairs, and restricting women's rights as proprietors was not widespread in company constitutions. In practice, however, these rights were seldom exercised. Women were never entirely absent from governance in most companies in our period, but they participated in GMs infrequently and in small numbers.

Shareholder Powers and the Authority of the General Meeting

We now turn to more general areas of shareholders' involvement with the operations of their companies. The role of proprietors in corporate governance varied considerably, both constitutionally and in practice. Through the mechanism of the GM, shareholders had a theoretical power of oversight, and as we have seen, there were many examples of shareholders trying to use the GM to shape company policy. It was common practice in the eighteenth century for incorporating acts to include (p.128) a general clause giving the GM wide-ranging powers of control over directors, even if it was not expected that these powers would be exercised in normal circumstances. A typical example occurs in the Leeds-Liverpool Canal Act (1770), which gave the board of directors the power to run the affairs of the company as it saw fit, “Provided always, That such Committee [of Management] shall from Time to Time be subject to the Examination and Controul of the said General Assembly, or other Meetings of the said Proprietors as aforesaid, and shall pay due Obedience to all such Orders and Directions in and about the Premises, as they shall from Time to Time receive from the said Proprietors at any such General or Special Assembly or Meeting, such Orders and Directions not being contrary to any express Directions or Provisions in this Act contained.”88 Thus, in theory at least, whatever rights were reserved in the act to the committee of management, in this “model-Α” type of constitution the GM could overrule the committee and enforce its own will.89 Many incorporating acts, however, were vague about the extent of shareholder involvement even in core operational decisions. In many companies, for example, borrowing could be undertaken by “the said Company”: it was thus not clear whether the committee of management could borrow money without GM authority.90 Although later acts tended to delineate the respective roles of the executive and GM more carefully, contradictory clauses could still appear. In 1844, the act incorporating the North British Railway Company explicitly set out the rights of directors and shareholders, yet even here there were ambiguities. For example, two articles vested the dismissal of salaried officers of the company in the hands of the directors, but another clause gave the GM powers of suspension and dismissal.91 All this cautions against reading too much into many of the provisions of these incorporating acts. In practice, as our examples will show, the affairs of companies could be conducted in ways very different from those envisaged in their constitutions.

The most obvious role of shareholders in internal decision making was in the election of directors. In every company in our sample, shareholders had some constitutional involvement in the choice of directors. In 463 companies, 00.1 percent of the total, they elected all the directors, either annually or on some kind of rotation. We have identified four other ways in which directors were chosen. In six companies directors served for life or until they were removed or became disqualified. In each of these a successor was chosen by the shareholders. Second, in (p.129) seventeen companies, of which sixteen were unincorporated, some directors were permanent and some temporary, although all were chosen by the shareholders: the permanent directors upon death, disqualification, or removal and the temporary directors annually or according to a stipulated rotation. There are examples of this kind of directorate in banking, insurance, shipping, and manufacturing/trade, but it was most common in the gas sector, where six companies chose their directors in this way. A third group, comprising eight companies, all unincorporated, elected some of their directors, while other members of the board were appointed by the directors themselves. Five of these were insurance companies. The final group of companies were those in which the shareholders appointed some, usually a majority, of the directors, but outside bodies either elected one or more members of the board or had ex officio representation. Twenty companies fell into this category, sixteen of them corporations. Examples occur in the bridge, canal, colonial, gas, harbor, insurance, railway, and water sectors. There was a modest increase in the popularity of nonstandard election procedures over time, peaking at 14.0 percent in 1840–4, but even in this subperiod, most companies placed the full constitutional responsibility for choosing directors with their shareholders. Those that did dilute shareholder rights in this respect were also more likely to set out longer terms for their directors. In companies that permitted shareholders to elect all the directors, the mean term of office was 2.4 years, whereas the figure for elected members of nonstandard boards was 3.3 years.

Trends in the right of shareholders to dismiss directors point clearly in the direction of a move away from shareholder participation over time. This right was widespread in the eighteenth and early nineteenth centuries: shareholders in 69.9 percent of companies established in the period 1720–99 enjoyed the right, as did 65.9 percent of those established in the 1810s. By 1835–9 the percentage had fallen to 37.7 percent, though it jumped to 63.2 percent in the following quinquennium. Variations by sector were clear: the right of dismissal existed in 79.4 percent of bridge companies and 78.3 percent of canals but in only just over one-third of gas and shipping companies. The mean nominal capital of companies where rights of dismissal existed was £277,867, compared with £414,304 where no such rights were given, indicating that larger companies were less likely than smaller ones to concede this right. The average term of office of directors was lower where the right of dismissal (p.130) existed (2.4 years, against 2.6 years where no such right existed), so here too there were longer terms for directors coupled with fewer shareholder rights of dismissal.

Arguably no less important than the right to elect and dismiss directors were the procedures for filling casual vacancies on boards. Here there are revealing political parallels. In acts of incorporation, the wording used in the clauses dealing with casual vacancies often echoed contemporaneous acts for local government, where procedures varied considerably. In select vestries, under the legislation of 1819, vacancies were filled by popular election, whereas in the poor-law unions created in 1834 there were no by-elections, and interim vacancies on boards of guardians were left unfilled.92 Select vestrymen and poor-law guardians were all elected annually, and so the procedure was less important than in the case of councillors chosen to serve in municipal corporations, who were elected for a three-year term. Under the Municipal Corporations Act of 1835, casual vacancies were filled by election within ten days of the death, resignation, disqualification, or refusal to serve of the councillor.93 In parliamentary seats, casual vacancies were filled by means of the by-election. In our period, however, uncontested by-elections were becoming more common: the proportion increased from just under 40 percent in the Parliament of 1832–5 to almost three-quarters in that of 1841–7.94

Joint-stock companies initially resembled vestries and municipal corporations in relying upon popular election to fill vacancies, but over time, the choice lay increasingly with the directors themselves rather than the GM. Figure 5.1 shows the procedures for filling casual vacancies in all companies where the directors' term of office was longer than one year. In the early decades of the nineteenth century, a clear majority of companies vested in the GM the task of replacing directors who died or became ineligible for service. During the 1820s and 1830s, however, there was a definite move away from this procedure, so that by 1840–4 directors filled casual vacancies in 68.6 percent of new companies, and in a further 11.8 percent they did so subject to subsequent GM approval.95 Even in these cases, some commentators thought that GM approval was nothing more than a formality. One author, for example, referring to the London and North Western Railway Company in 1853, pointed out that through the manipulation of proxies, directors were always able to secure the confirmation of their own nominees to vacant seats.96 A similar trend away from shareholder participation is seen in those companies (p.131)

Constitutional Rights and Governance PracticeThe Proprietorship

Figure 5.1. Procedure for filling casual vacancies on committees/boards in all companies where directors' term of office was more than one year by subperiod

(p.132) where all directors were elected annually. In these companies, directors were responsible for filling casual vacancies in 11.1 percent of companies established in the period 1720–1824 but 46.1 percent in the period 1825–44.97

Another indication of the extent of shareholder participation was the involvement of the GM in appointing and dismissing salaried officers. Most constitutions made some provision for the appointment of managers, although such provision could be couched in fairly vague terms. A number of incorporating acts vested in the GM the right of appointing and dismissing the directors “and any Officer or Officers under them”; such “Officers,” presumably, included employees. In many cases where more detail was given, the only rights of appointment conceded to shareholders were of the most senior salaried employees. In a large company, it was clearly impossible for the GM to exercise control over the appointment of numerous subordinate officials. That being said, changes over time and differences between sectors may also have reflected changing conceptions of the role of shareholders. The proportion of companies allowing shareholders some rights over the appointment of employees ranged from 90.0 percent of canals to just 10.9 percent of banks. There was a general trend for this right to decline over time. In the eighteenth century, such rights were conceded to shareholders in 79.5 percent of companies, but this fell to below 50 percent after 1820. As with many of the developments discussed in chapter 4, the larger companies led this shift away from shareholder participation. The mean capital of companies where shareholders were allowed to appoint salaried officers was £95,564, compared with £602,074 where they were not.

As with appointments, the proportion of companies established after 1800 that gave shareholders some rights over the dismissal of employees was considerably lower (between 40 and 60 percent) than it had been in the eighteenth century (over 70 percent). Even where the right was conceded, it was sometimes qualified by the requirement that directors also support the dismissal. At the Royal Bank of Liverpool 1836), for example, shareholders could only confirm (or reject) a board decision to dismiss the manager, and a two-thirds majority was required.98 Variations by sector resembled those in the appointment of employees: 90.0 percent of canals allowed shareholders rights of dismissal, compared with just 12.5 percent of banks. Here as elsewhere in their constitutions, banks offered less participation than most other joint-stock companies. Their denial to shareholders of the right to appoint or dismiss managers was in (p.133) accord with their denial of access to financial data and their exclusion of small shareholders from voting, which is discussed in chapter 6.99

Sectoral variations were thus an important factor behind the trends in shareholders' rights over time. In general, the procedures for the appointment and dismissal of managers and employees reflected a move away from participatory politics in the joint-stock economy. We can also see, however, the influence of the two generic constitutional models identified above, namely, those that set up the GM as the source of all power in the governance of a company and those that gave the GM authority over the directors and gave the directors the power over most of a company's affairs.100 As noted already, corporations tended to adopt a variant of the first model, while unincorporated companies, especially the larger businesses appearing in the 1820s to 1840s, led the move toward the second. Thus, shareholders appointed the managers in 66.9 percent of incorporated companies, whereas in unincorporated companies the proportion was 28.1 percent, and the decline in these rights over time was particularly marked among the latter. As figure 5.2 shows, by the early 1840s fewer than 10 percent of new unincorporated companies granted this right to their shareholders.101 This dichotomy between constitutional types and between corporations and unincorporated stock companies tended to reinforce itself in other areas of shareholder rights. Of those unincorporated companies that exclusively vested in the board the right of appointing trustees, only 5.9 percent (6 out of 102) permitted shareholders to appoint managers, while 92.2 percent (94 of 102) explicitly denied shareholders this right. Of those that conceded to the GM some rights of appointing trustees, 50 percent (27 of 54) also permitted the GM to appoint managers.102

With the data in this chapter and in chapter 6, it is possible to construct a broad profile of the type of company and constitution that offered relatively high levels of participation and accountability compared with those that did not. Companies that allowed shareholders to appoint managers also tended to give them rights over dismissal (88.7 percent of such companies), while companies that explicitly denied shareholders the right to appoint also denied them the right to dismiss (85.7 percent). Companies that allowed shareholders to appoint managers also generally held more OGMs than those that did not (1.5 per annum versus 1.3 per annum) and had directors who served shorter terms of office than those that did not (1.9 years versus 3.1 years), suggesting that such directors were more answerable to their GMs. Companies that permitted (p.134)

Constitutional Rights and Governance PracticeThe Proprietorship

Figure 5.2. Percentage of companies allowing shareholder rights over appointment of managers, by type of company and subperiod

(p.135) small shareholders to vote were much more likely to permit their GMs to appoint managers than those that prevented small shareholders from voting (62.5 percent versus 25.9 percent).103 Companies that explicitly allowed the GM to declare dividends were more likely to allow the GM to appoint managers than those that explicitly denied the GM the right to declare the dividend (53.7 percent versus 11.7 percent).

In practice, especially in smaller companies, it was possible for shareholders to be actively involved in the appointment and dismissal of officers, regardless of the terms of the constitution. The Rutherglen Gas Light Company (1841) illustrates this well. Its contract of copartnery explicitly reserved to the directors the right to appoint and decide the remuneration of the salaried officers.104 There was no explicit reference to the procedure for dismissing salaried officers. However, when the company's “gas maker,” Alexander Adamson, was dismissed by the directors in 1842 without the reasons being made public, a large group of shareholders succeeded at an SGM in forcing a statement from the board regarding the dismissal. These shareholders were able to force a rather farcical compromise, whereby Adamson and his replacement, James Dowie, would each be employed for a trial period. Meanwhile, another group of shareholders began to complain about other aspects of the company's operations, and the directors themselves became divided over the Adamson-Dowie controversy. Eventually, fed up with the situation, Adamson resigned in June 1843.105 This episode demonstrates the potential for shareholders to overturn the verdicts of a board, even where the constitution was silent on the matter and, as in this case, gave the directors control over the appointment of employees. Although the board was eventually able to make matters so uncomfortable for their engineer that he left the company voluntarily, the GM had demonstrated its potency in this trial of strength with the directors. It is significant, however, that this occurred in a small company where the shareholders were the main customers and thus could exercise additional leverage over its affairs. In larger companies, there is less evidence of shareholder intervention in appointments and dismissals, even where constitutions gave them this right. At the Insurance Company of Scotland (1821), which had some seven hundred shareholders, the contract of copartnery gave the GM ultimate, if indirect, control over the fate of the manager, although his dismissal needed first to be proposed by the board. When such a proposal was made, a GM would appoint a committee to decide whether the manager should indeed be removed.106 When the first manager, Robert (p.136) Alexander, resigned in 1834, the directors remarked in their annual report that the aforementioned clause of the contract “placed the Manager in a great degree beyond the control of the Board” and that “it was of the utmost importance that such a state of things should not continue.” As a result, they wrote a new bylaw that forced the manager to resign if five directors (of a board of eight) signed a minute requesting it. Under this bylaw, the directors themselves would be “the sole judges of the sufficiency” of the cause of dismissal. Retrospectively, this bylaw was unanimously approved at an OGM attended by seventy shareholders.107

Elsewhere, directors were less concerned to revise constitutional rights, seemingly secure in the knowledge that shareholders would never use them. The West Middlesex Waterworks Company's act (1806) gave the GM the right to appoint, dismiss, and set the salaries of all company officers.108 Yet within six months, the GM had delegated the appointment of the secretary and the engineer and the fixing of all the salaries to the directors.109 The company went on to have chronic problems with its officers. Its first engineer, the notorious Ralph Dodd, was sacked in 1806 after a disagreement with the board over the best location for the company's reservoirs.110 His replacement, William Nicholson, had to be let go after a few months, as his “pecuniary difficulties” prevented him from doing his job properly. Nicholson was succeeded briefly by John Millington, previously clerk of the works, but he in turn was replaced by Ralph Walker in 1808. Walker resigned in 1810, his inattention to the works in favor of pursuing his own interests having been condemned by the directors. Millington once more took over but was removed months later for being “grossly and generally negligent.” Only when he was replaced by William Clark in 1811 did the company find an engineer with whom they were happy. Throughout this catalog of errors, the shareholders confined themselves to occasionally confirming the actions of the board at a GM. The shareholders could hardly be described as passive during this time: there were heated disputes over a deal made by the board with one of their number to purchase land in Kensington for the erection of a steam engine and over the fact that a majority of the directors also sat on the board of the York Buildings Waterworks, a rival company.111 Directorial elections were also regularly contested. Yet despite the liveliness of the company's politics, issues concerning employees were increasingly seen as the natural province of the board.112

In banking, where shareholders enjoyed explicit rights over the dismissal (p.137) of salaried officers in only 12.5 percent of companies, some felt that the directors' oversight of managers was sufficient for the protection of shareholders. Writing in 1836, Peter Watt argued:

The danger arising to the proprietary, through the necessity of intrusting their interests to a set of office-bearers, is, humanly speaking, amply checked by the constitution of joint-stock banking companies. The office-bearers enjoy official existence only so long as they act prudently and honestly. They are removable at the pleasure of the directors, on good grounds arising for their dismissal. Hence, the managers, and other office-bearers, have not only the usual motives of unblemished reputation, rank in society, and preservation of a good conscience, to induce them to act justly and honourably towards the partners of the bank, but they have the fear of instant dismissal before their eyes.113

The decline of shareholder rights over company employees was a significant element in the reconfiguration of the power relations within companies that took place in these years. The GM shifted from being the source of all power in the company to performing a more closely specified and restricted role within a broader system of checks and balances, characterized by directorial oversight of management and GM oversight of the board. In this reconceptualization of joint-stock politics, the directors possessed all the powers not specifically reserved to the GM. It is revealing to contrast the Leeds-Liverpool constitution of 1770 cited above with that of the Manchester and Leeds Railway Company of 1836, which stated, “Directors shall have full Power and Authority to do all Acts whatever for the Management, Regulation, and Direction of the said Company in relation thereto which the said Company are by this Act authorized to do, except such as are required and directed to be done at a General or Special General Meeting of the said Company.”114 Similar redefinitions of power relations can be found in unincorporated companies, such as the Hampshire Banking Company, whose deed of 1834 stated that “in all cases not provided for by the deed of settlement, the Directors may act in such manner as may appear to them best calculated to promote the interest and welfare of the Company.”115 In this version of joint-stock politics, shareholders were expected to be much less active in company affairs and to look mainly to the protection of their “financial” interests, which they could do through the evolving system of auditing, which we examine in chapter 8.

(p.138) Constitutional Amendments

Finally, we turn to the ways in which the constitutional settlement could be changed during the life of a company. In 245 companies, 47.7 percent of the total, the GM was empowered to amend the constitution, although in 17 of these the approval of the directors was also required. In incorporating acts, the right to amend the company constitution was usually given in a longer clause outlining the rights of the GM. A typical example was the Macclesfield Canal act (1826), which, with certain restrictions, permitted the shareholders at a GM to “revoke, alter, amend, or change any of the Rules or Directions herein prescribed and laid down with regard to their Proceedings among themselves, as to them shall seem meet.”116 In all incorporating acts that permitted constitutional amendments, a simple majority at a single GM was required.117 In unincorporated companies, by contrast, the original constitution was defended more carefully. Seventy-nine companies, 35.3 percent of all unincorporated companies, set the threshold for amendments at above 50 percent of the votes. These barriers rose over time, so that by the 1840s a majority were fixed at two-thirds or higher. Furthermore, while 97 of the 175 unincorporated companies that allowed amendments required a simple majority (or did not stipulate a threshold), many required this majority to be obtained at two successive GMs, and many also stipulated a higher quorum than normal.118 It was particularly difficult to amend the constitution of the English and Scottish Law Fire and Life Assurance and Loan Association (1841), where 80 percent of the votes were required at two successive GMs, at both of which the quorum was twice as large as was required for normal GM decisions.119

There were significant differences between corporations, where amendments were permitted in just 23.8 percent of cases, and unincorporated companies, where 78.1 percent allowed amendments. Even where shareholders in corporations were allowed to amend the constitution, there were usually clearly stipulated exceptions. Of the sixty-nine corporations that allowed amendments, sixty-seven had some exceptions. All but one of these restricted changes to the procedures laid down in the act for calling GMs, the “time and place of meeting and voting,” and electing directors. Eighteenth-century incorporating acts were much more likely to allow constitutional amendments than those in the nineteenth. In our sample, 73.2 percent of eighteenth-century constitutions permitted amendments, falling to 21.7 percent in the period (p.139) 1800–29 and just 2.5 percent in 1830–44. In the Companies Clauses Consolidation Acts of 1845, there was no provision for constitutional amendments, demonstrating that by the time of the railway boom, the procedure was almost unknown. This sharp decline may partly be explained by the increasingly detailed constitutional provisions that were appearing in acts of incorporation. Whereas many eighteenth-century canal company acts had a single clause that contained most of the “proceedings among themselves,” constitutions had become considerably more thorough by the mid-nineteenth century, and thus there may have been less need to revise them subsequently. But the decline also highlights the significance of the GM as a forum for shareholder participation in the eighteenth-century corporation and the shift toward more passive proprietaries in the nineteenth century, a passivity all the more dangerous because, as chapter 3 suggests, shareholders in corporations played little part in framing their constitutions.

Unincorporated companies were moving in the opposite direction, increasingly allowing GMs to amend constitutions, although, as noted above, procedures for doing so were often stricter than in those corporations where amendments were allowed. In the eighteenth century, 70.6 percent allowed amendments, and although this figure fell to 50.0 percent for companies formed in the first decade of the nineteenth century, the proportion steadily increased thereafter, rising to 91.7 percent in the years 1840–4. Table 5.2 shows that banks—in many respects the least “democratic” of all joint-stock companies—were the most likely to concede the right to amend. It may be that banks felt that they needed these provisions so that they would not miss the opportunity to engage in new areas of business or in branching where these were not already permitted by their deeds of settlement. Certainly several insurance companies found themselves encumbered by their original deeds restricting them to one line of underwriting or to particular forms of investment.120 Consequently, relatively few banks or insurance companies required very high majorities at GMs to effect changes to their constitutions (table 5.2). The power to amend constitutions appears to have been less important for gas, shipping, and property companies, perhaps because their founders envisaged fewer opportunities for diversification outside their core activities, or perhaps because their deeds were less specific in the first place. After all, unlike banking or insurance companies, they were not in the business of selling trust in an invisible service or an invisible product with uncertain returns. (p.140)

Table 5.2. Percentage of unincorporated companies allowing constitutional amendments in main sectors


(a) Number of companies

(b) Percentage allowing constitutional amendments

(c) Number allowing constitutional amendments

(d) Percentage of companies in column (c) requiring majority of over 50%































Note: Companies allowing constitutional amendments include those where the directors' approval as well as GM approval was required. Column (d) expresses the number of companies requiring a greater than 50% majority as a percentage of all companies in column (c), including a handful where the threshold was not given and could not be assumed to be 50%.

Whereas corporations usually prohibited constitutional amendments to the procedures for electing directors and calling GMs, this kind of restriction was less common among unincorporated companies. Seventy-six companies, or 43.4 percent of all those that permitted amendments, disallowed any changes to the liability of shareholders, while 26.9 percent of such companies placed restrictions on changes to the procedure for company dissolution.121 These types of restrictions continued to be part of the wider balance of rights and responsibilities between shareholders and company directors and managers. Nevertheless, there was a basic inequality in the power possessed by shareholders and directors over constitutions. While it was difficult for ordinary shareholders to implement constitutional changes in corporations and unincorporated companies alike, it was easier for directors to achieve the same end through means of the bylaw, as the above example of the Insurance Company of Scotland demonstrates. In corporations, too, the bylaw was a powerful instrument. Directors were usually prohibited from passing any that were contrary to the intentions of the incorporating act, but as early as 1723, in the case of Child v. Hudson's Bay Company, the courts upheld a bylaw that made debts of shareholders to the company a lien on their shares.122 In unincorporated companies, especially banks that lent money to their shareholders, this provision was usually a constitutional arrangement, but the example of the Hudson's Bay Company shows that this kind of rule could be forced upon a body of shareholders without (p.141) their consent. The inequality in power between directors and shareholders can also be observed in how the decision to seek incorporation—one of the most important steps an unincorporated company could take-was made. As noted in chapter 3, the constitutions of unincorporated companies increasingly made provision for a future application for corporate privileges, but in 63.7 percent of such companies the board could make the decision without reference to the GM. In general, if investors wished to shape the constitution and policy of their company, they were in a better position to do so in the early stages of its life or at crisis points and if the company was small. Once a company's affairs had settled down, it was difficult for shareholders to overcome the concerted policy of directors and managers, and, even if their rights were enshrined in the company's constitution, it was often difficult to ensure that these rights were respected.


The rights of shareholders examined in this chapter illustrate the great range of constitutional arrangements that were in place in joint-stock companies in our period. Sectoral differences were clearly important. This is not surprising. As Williston pointed out, “the law regulating the relations of the members [of a corporation] to each other and to the united body must differ according to the nature and objects of the corporation.”123 Small, early incorporated canal, river, bridge, gas, and water companies, for instance, mostly with a localized sphere of operations, gave greater rights to their shareholders than, for instance, the larger unincorporated joint-stock banks and insurance companies of the nineteenth century, not least because many of the former assumed a desire to participate on the part of their “economic” investors and also accepted that their businesses, sanctioned by Parliament, had a “public” purpose and accountability. It is also unsurprising that larger companies generally allowed less active shareholder participation than smaller ones. But across the joint-stock economy as a whole, and in particular among unincorporated companies, there was a reconfiguration of the power relations between shareholders and directors in the nineteenth century as companies moved from one generic type of constitution, which accorded extensive authority to the GM, to another that did not. A dual process, commencing in the early nineteenth century, divested shareholders of (p.142) many of their powers and obligations. This had the effect of relocating the basis of power within companies from the GM to the board of directors and management. The trajectory was uneven and moved at different rates in different sectors. Some companies fought against the trend, and we can detect in the late 1830s and early 1840s a modest reversal of the tendency toward the removal of shareholder obligations and powers. Further systematic studies of company constitutions and governance practices will be needed to confirm trends after 1850. It is clear, however, that by the middle of the nineteenth century shareholders generally enjoyed less influence over the affairs of their companies than they had in the eighteenth century. As the number and size of joint-stock companies grew, many observers concluded that shareholders had little real power, even in areas such as the appointment of directors, where constitutional rights were almost universally vested in them. Moreover, when it came to key strategic decisions, a large body of evidence from the procedural records of companies demonstrates the relative impotence of shareholders when faced with concerted opposition from a united board of directors. As one barrister told a parliamentary committee in 1850, in joint-stock companies, “the shareholders are delivered over, bound hand and foot, to the mercy of the directors.”124 Shareholders were progressively more likely to acquiesce in this deliverance as their priorities shifted. Increasingly “financial” in outlook, they happily renounced powers that were no longer relevant to them and the obligations that had traditionally gone with them, in return for regular dividends and constitutional provisions that protected their “financial” interests. One aspect of this protection was the limitation of shareholder liability, which we discuss in chapter 7. First, however, we turn to the shareholder franchise and the company GM, where the political dimensions of business were most evident.


(1.) Gibbon, Decline and Fall of the Roman Empire, 1:66.

(2.) Dunlavy, “From Citizens to Plutocrats,” 67.

(3.) Ireland, “Capitalism without the Capitalist,” 41. Original emphasis.

(4.) Exceptions include Ward, Finance of Canal Building; Richards, “Finances of the Liverpool and Manchester Railway Again”; Vamplew, “Scottish Railway Share Capital”; Gourvish and Reed, “Financing of Scottish Railways.”

(5.) By, for example, Alborn, Conceiving Companies; James Taylor, Creating Capitalism; Robin Pearson, “Shareholder Democracies”; Carlos and Neal, “Women Investors”; Hickson and Turner, “Trading in the Shares of Unlimited Liability Banks”; Acheson and Turner, “Investor Behaviour.”

(6.) Anon., “Caveat against Bubbling”; Carlos, Maguire, and Neal, “Financial Acumen.”

(7.) Ward, Finance of Canal Building, chapter 5.

(8.) Wilson, Lighting the Town, 82–9, 113–8.

(9.) Sarah J. Hudson, “Attitudes to Investment Risk.”

(10.) Hill, “Galloway Shipping,” 112. See also Freeman, Pearson, and Taylor, “Technological Change.”

(11.) Preda, “Rise of the Popular Investor,” 208.

(12.) Ibid.; Michie, Money, Mania and Markets, 27–30.

(13.) Rutterford, “History of UK and US Equity Valuation Techniques,” 119.

(14.) Foreman-Peck and Millward, Public and Private Ownership, chapter 2.

(15.) See below, p. 124.

(16.) Alborn, Conceiving Companies, 85–8, 98–119.

(17.) Dunlavy, “From Citizens to Plutocrats,” 86–7.

(18.) Fifteen companies, all established after 1824, delegated to the GM the authority over some calls, usually those above a certain specified amount.

(19.) See, for example, Glamorgan Record Office, D/D B Ca 1, Aberdare Canal Navigation, Minute Book; BL, Add MS 27880, Tunnel under the Thames Company, Minute Book.

(20.) LMA, B/S.Met.G/II/1, South Metropolitan Gas Light and Coke Company, Minute Book, 27 Jan. 1836.

(21.) CKS, SEG/AM26/1, Rochester and Chatham Gas Light Company, Deed of Copartnership, 20 July 1818, 5–6 (engrossed into Minute Book).

(22.) Wilson, Lighting the Town, 78.

(23.) There were significant doubts in the minds of some directors whether they really could take their shareholders to court over nonpayment: see, for example, BL, Add MS 27880, Tunnel under the Thames Company, Minute Book, 8 Nov., 15 Nov. 1802.

(24.) 34 Geo III (1794) c. 93, arts. 88, 95, 137.

(25.) NA, RAIL 803/1, Ashby-de-la-Zouch Canal Company, Minute Book, 6 Apr., 8 Dec. 1795.

(26.) Ibid., 4 Apr., 2 July 1796.

(27.) Ibid., 20 Apr., 31 May 1796.

(28.) Ibid., 3 Oct. 1796.

(29.) Ibid., 14 Nov. 1797, 12 Jan., 2 Apr. 1798. The list included Bullivant, who seems to have reneged on his undertakings.

(30.) Ibid., 1 Oct. 1798, 1 Apr. 1799, 7 Apr. 1800.

(31.) Ibid., 3 Apr. 1803.

(32.) This statement is based on a survey of 116 such cases between 1796 and 1843, the majority occurring after 1825. Thirty-three of these concerned the issue of calls, where companies were suing to recover unpaid subscriptions or shareholders were resisting calls as illegal. The cases were extracted in summary form from the LexisNexis database, http://www.lexisnexis.com/uk/legal.

(33.) Examples include Stratford and Moreton Railway Company v. Stratton (1831) 2 B & Ad 518; Baillie v. Edinburgh Oil Gas Light Company (1835) 3 Cl & Fin 639; Birmingham, Bristol and Thames Junction Railway Company v. Locke (1841) 1 QB 256.

(34.) See, for example, Cromford Railway Company v. Lacey (1829) 3 Y & J 80; London and Brighton Railway Company v. Wilson (1839) 6 Bing NC 135. Shareholder liability is discussed more fully in chapter 7.

(35.) Huddersfield Canal Company v. Buckley (1796) 7 Term Rep 36. On the variety of restrictions imposed by companies on when shares could be transferred or sold, see below, pp. 124–5.

(36.) Preston v. Grand Collier Dock Company (1840) 2 Ry & Can Cas 335; Mangles v. Grand Collier Dock Company (1840) 2 Ry & Can Cas 359.

(37.) On the crisis of 1836–7, see Kostal, Law and English Railway Capitalism, 18–21.

(38.) See, for example, South Eastern Railway Company v. Hebblewhite (1840) 12 Ad & El 497; London and Brighton Railway Company v. Fairclough (1841) 5 JP 513. On the difficulties caused by a high volume of scrip trading in identifying shareholders and liability for calls, see the evidence of John Duncan, SC on Joint-Stock Companies, BPP (1844) VII, pp. 164, 167, 170.

(39.) Ward v. Matheson (1829), 7 S. 409; Learmonth v. Adams (1831), 9 S. 787.

(40.) See John Duncan, SC on Joint-Stock Companies, BPP (1844) VII, p. 166; Raynes, History of British Insurance, 242.

(41.) Williston, “Law of Business Corporations,” 160.

(42.) NAS, GD 354/1/1, Insurance Company of Scotland, Sederunt Book, 15 June 1822. On exhortations of this kind, see Robin Pearson, “Shareholder Democracies?,” 852.

(43.) RBS, ASH/8/1, Ashton, Stalybridge, Hyde and Glossop Bank, Minute Book, 30 July 1838.

(44.) GRO, TS166, Thames and Severn Canal Company, Minute Book, 24 Jan. 1797.

(45.) Medway Archives, DE 279, Medway Bathing Establishment, Minute Book, 7 Mar., 8 Nov. 1836.

(46.) NAS, GD 354/1/13, Insurance Company of Scotland, Contract of Copartnery, art. 1.

(47.) Only five of the twenty-six companies in our shipping sample were incorporated. Three of these five were ferry companies.

(48.) Hackney Archives Department, D/B/NIC/2/18, Stockton and London Shipping Company, Arts. of Partnership, 2; NAS, GD301/58/3, London and Edinburgh Shipping Company, Contract of Copartnery, art. 4.

(49.) New shareholders were not required, however, to break any of their existing agreements. BRO, 10/1/31, Berwick Shipping Company, Arts. of Agreement, 16–7; Tony Barrow, “Corn, Carriers and Coastal Shipping.”

(50.) NLS, MS 3707, Duns Linen Company, Rules and Regulations, engrossed in the front of the first Minute Book.

(51.) Bristol Record Office, 39049/1, Bristol Flour and Bread Concern, Deed of Formation, 1; BCA, MS 232/1, Birmingham Flour and Bread Company, Printed Articles, 7–8.

(52.) Robin Pearson, Insuring the Industrial Revolution, 246–7.

(53.) The main exception seems to have been where companies were actively seeking to extend their business in particular districts.

(54.) Quoted in Robin Pearson, “Shareholder Democracies?,” 850.

(55.) BSA, ABC/1/1/1, Aberdeen Banking Company, Contract of Copartnery, art. 19.

(56.) Robbins, Railway Age, 75. Common though these rights were, they were rarely provided for in constitutional documents.

(57.) Scarborough Cliff Bridge Company, Deed of Settlement, 37–8.

(58.) NA, C66/4303, PR 7 Geo. IV (1826), part 1, no. 1, West India Company, Charter.

(59.) RBS, CS/362, Commercial Bank of Scotland, Contract of Copartnery, art. 15.

(60.) Watt, Theory and Practice of Joint-Stock Banking, 25–6.

(61.) Checkland, Scottish Banking, 467; Lamoreaux, Insider Lending, 5–6.

(62.) Edinburgh Central Library, qYHD.9111.8, Edinburgh Sugar House Company, Minute Book, 9 June 1755.

(63.) Ibid., 21 May, 14 June 1759, 11 June 1760, 28 June 1762.

(64.) NA, RAIL 371/1, Liverpool and Manchester Railway Company, DM, 8 Sept. 1828; 2 March 1829.

(65.) From the 1830s caps were increasingly inserted into acts that authorized (p.279) gas companies to enlarge their capital. Wilson, Lighting the Town, 110; Foreman-Peck and Millward, Public and Private Ownership, chapter 2.

(66.) Rates could be reduced proportionately by the Court of Quarter Sessions (or in Scotland by the sheriff) if in the preceding year profits had exceeded the amount required to pay a 10 percent dividend and maintain a reserve fund of 10 percent of nominal capital. 10 & 11 Vict. (1847), c.15 (Gasworks Clauses), art. 35; 10 & 11 Vict. (1847) c.17 (Waterworks Clauses), art. 80.

(67.) The effectiveness of dividend caps, however, was probably limited: Foreman-Peck and Millward, Public and Private Ownership, 45–6; Wilson, Lighting the Town, 52–3, 111.

(68.) LMA, ACC2558/WM/A/1/5, West Middlesex Water Works, Minutes of General Meetings, 27 July, 2 Nov. 1819.

(69.) See chapter 8, p. 222.

(70.) 3 Will. IV (1833) c. 32, art. 79; 7 Will. IV (1837) c. 30, art. 61.

(71.) This was the Clydesdale Banking Company (1838), which offered both dividend protection and loans against paid-up capital, as did five English banks.

(72.) RBS, SAD/2, Saddleworth Banking Company, Deed of Settlement, art. 38.

(73.) 10 Vict. (1847) c. 15 (Gasworks Clauses), arts. 30–4; 10 Vict. (1847) c. 17 (Waterworks Clauses), arts. 75–9.

(74.) LMA, B/EGLC/12, Equitable Gas Light Company, Minute Book, 29 Jan. 1840.

(75.) Staffordshire County Record Office, D800/4/1, Uttoxeter Gas Light and Coke Company, Minute Book, 18 Apr. 1844.

(76.) Ibid., 22 Oct. 1840, 5 Jan. 1843, 1 Feb. 1844.

(77.) Ibid., 19 Apr. 1849.

(78.) John Duncan, SC on Joint-Stock Companies, BPP (1844) VII, pp. 164–6.

(79.) See chapter 6, p. 160.

(80.) AVIVA, North of Scotland Fire and Life Assurance Company, Contract of Copartnery (1836), art. 18; 54 Geo. III (1814) c. 101, art. 44. Another abridgement of transfer rights came with the extension of liability after transfer, which we discuss in chapter 7, pp. 194–5.

(81.) Unless stated otherwise, this section draws on Freeman, Pearson, and Taylor, “‘Doe in the City’”; and Freeman, Pearson, and Taylor, “Between Madam Bubble and Kitty Lorimer.”

(82.) These datasets overlap with but do not mirror the constitutional dataset of 514 companies that underpins the present book. Shareholder data exist for some companies whose constitutions have not survived, and other companies whose constitutions are included in our present dataset have no surviving shareholder records. Nevertheless, the works referred to in n. 81 together amount to the largest study of women shareholders hitherto undertaken for Britain in this period.

(83.) Bowen, Business of Empire, 107–8.

(84.) Acheson and Turner, “Impact of Limited Liability.” Indeed the trend continued into the 1930s, see Rutterford et al., “Gender and Investment.”

(85.) Barker, Business of Women.

(86.) See, chapter 6, pp. 158–60.

(87.) See, chapter 6, p. 163.

(88.) 10 Geo. III (1770) c. 114, 42.

(89.) On model-A and model-B constitutions, see chapter 1, pp. 11–2.

(90.) See, for example, 4 & 5 Will. IV (1834) c. 85, art. 43.

(91.) 7 & 8 Vict. (1844) c. 66, arts. 83, 103, cf. art. 104.

(92.) 59 Geo. III (1819) c. 12, art. 1; 4 & 5 Will. IV (1834) c. 76, art. 38.

(93.) 5 & 6 Will. IV (1835) c. 76, art. 48.

(94.) Thereafter, the proportion of contests steadily increased: Craig, Chronology of British Parliamentary By-Elections, 313.

(95.) Both corporations and unincorporated companies exhibit a similar trend, although it was slightly more pronounced in the case of the former.

(96.) A Member of the Stock Exchange, Shareholders' Key, 43. For a similar view, see Corbet, Inquiry into the Causes, 96–7.

(97.) There were 117 such companies in the first period and 89 in the second. The GM was responsible for filling casual vacancies in 47.0 percent and 37.1 percent of cases, respectively, and there was a large decline in the proportion of constitutions where no procedure was set out.

(98.) Royal Bank of Liverpool, Deed of Settlement, art. 11.

(99.) See chapter 6, pp. 150–3; chapter 8, pp. 214–9.

(100.) See above, chapter 1, pp. 11–2; chapter 3, pp. 65–6.

(101.) The graph (a) excludes companies where rights of appointment were neither reserved to directors nor allowed to shareholders; (b) includes all companies where there were any stipulated shareholder rights over the appointment of any employees, even where the directors were responsible for the appointment of junior officers; and (c) includes all companies where all rights of appointment of salaried officials were reserved to the directors.

(102.) These figures exclude companies where the entire board functioned as trustees.

(103.) Shareholder franchises are fully discussed in chapter 6.

(104.) NAS, GB 1/105/1, Rutherglen Gas Light Company, Rules and Regulations, 1841, art. 11.

(105.) GCA, RU 4/6/128/1, Rutherglen Gas Light Company, Minute Book, 25 Aug., 26 Sept., 27 Sept., 8 Nov., 8 Dec. 1842, 5 June 1843.

(106.) NAS, GD 354/1/13, Insurance Company of Scotland, Contract of Copartnery, art. 22. Shareholder numbers from NAS, GD 354/1/2, Insurance Company of Scotland, Sederunt Book, 15 June 1830.

(107.) NAS, GD 354/1/3, Insurance Company of Scotland, Sederunt Book, 16 June 1834.

(108.) 46 Geo. III (1806) c. 119, art. 21.

(109.) LMA, ACC2558/WM/A/1/1, West Middlesex Waterworks Company, Minute Book, 12 Aug., 8 Oct., 12 Dec. 1806.

(110.) For more on Dodd's involvement with other companies, see James Taylor, Creating Capitalism, 94–7.

(111.) LMA, ACC2558/WM/A/1/1, West Middlesex Waterworks Company, Minute Book, 6 Nov. 1810.

(112.) For another example, see LMA, B/EGLC/12, Equitable Gas Light Company, Minute Book, 4 Mar. 1840.

(113.) Watt, Theory and Practice of Joint-Stock Banking, 5–6.

(114.) 6 & 7 Will. IV (1836) c. 111.

(115.) LTSB, A/53/1/a/2.0, Hampshire Banking Company, Deed of Settlement, art. 83.

(116.) 7 Geo. IV (1826) c. 30, art. 92.

(117.) Only one corporation in our sample required a larger majority: the Peninsular and Oriental Steam Navigation Company. It is notable that this company was established by deed of settlement and incorporated by charter. NMM, P&O/51/17/1, Peninsular and Oriental Steam Navigation Company, Deed of Settlement, 25 Jan. 1841, art. 46. The company's royal charter of incorporation was dated 1840 (patent rolls, 4 Vict., part 16, no. 16).

(118.) Examples include Blaenavon Iron and Coal Company, Deed of Settlement, art. 58; BCA, MS 232/2, Patent Shaft and Axle Tree Company, Deed of Settlement, art. 42.

(119.) English and Scottish Law Fire and Life Assurance and Loan Association, Deed of Settlement, arts. 89, 92, 102. The usual quorum was twenty shareholders; for constitutional amendments it was forty.

(120.) Robin Pearson, Insuring the Industrial Revolution, 338.

(121.) We explore these issues more fully in chapter 7.

(122.) Child v. Hudson's Bay Co. (1723), 2 P Wms 207; Williston, “Law of Business Corporations,” 122–3.

(123.) Williston, “Law of Business Corporations,” 123.

(124.) John Malcolm Ludlow, SC on Investments for Savings of Middle and Working Classes, BPP (1850) XIX, p. 6.