Joint-Stock Company

By the sixteenth century, the company of merchant-adventurers" had evolved into the joint-stock company or commercial corporation licensed by the Crown, where investors pooled their money to share both risks and profits in a common enterprise. Several large trading companies secured charters from the Crown granting commercial favors in foreign trade, prescribing their form of organization and enabling them to raise money by selling stock. Among these were the Muscovy Company (Russia and central Asia,) the Eastland Company (Baltic,) the Levant Company (Mediterranean,) and the East India Company.

The form of organization prescribed for these companies usually vested control in a 6-20 member council, of which the orginal or "charter" officers were named. Sometimes the charter also provided for a governor as the head of the company, chosen by the council. Membership in the company, itself, was secured through stock ownership. The smaller stockholders had little to say about general policy, but they met periodically in a general court to elect members to vacancies in the council or occasionally to express their opinion on some major issue of policy.

The typical charter granted a number of trade advantages or privileges to the company, such as: a grant of land; the right to convey title to any portions of its domains; title to any precious metals discovered within the land grant; and a monopoly over trade within the area. Charters were awarded as a matter of "privilege and grace." In law, they could be amended or revoked at the will of the grantor.

(Reference: Alfred H. Kelly and Winfred A. Harbison's The American Constitution - Its Origins and Development, Fourth Edition, W.W. Norton & Co., Inc., c1970.)

The charters also could confer upon the company extensive governing powers to establish law and order within its "domains." The charter could bestow the right to set up some local governing body, to maintain defense, to coin money, to establish courts, and to enact ordinances for local government.

Even though the company took on quasi-sovereign aspects, American colonies established by charter were actually part of a licensed corporate business enterprise sponsored by investors. The original colonists were employees of the company, expected to produce commodities for the company storehouse in return for their keep and one share of stock. Later, under the plantation system, colonists became contractors sponsored by the company with land grants and credit extended in exchange for an exclusive monopoly of their trade.