Compagnie des Indes: Governance and Bailout

Abstract

The French Company of the Indies (Compagnie française des Indes) has been not been well studied by historians, lawyers, or economists (Weber 1904, xxi). Part of the reason for this lacuna is that the “archives of the successive Companies, the whole of which constitutes the French Company of the Indies, have almost totally disappeared” (Weber 1904, xxvii). This is regrettable, since the story of the company, whose trading privilege was granted by Colbert in 1664 only to be suspended in 1769 after a polemical battle for survival, presents both a fascinating human saga and a window onto the intersection of business and politics in seventeenth- and eighteenth-century France (Montagne 1899, 1). One could focus on the colorful characters involved, such as Necker (Lavaquery 1933, Harris 1979, Lüthy 1961) or Dupleix (Martineau 1929), or the macroeconomic imbalances engendered by mercantilist policies (Lüthy 1960, 858). In this analysis, however, the focus is squarely on the corporate governance challenges encountered by the company, in particular the struggle by shareholders to resist the state’s control of the company. There are striking parallels between the powerlessness of the Compagnie’s shareholders and those of today’s large corporations, along with a similar ambivalence about the role government should play vis-à-vis troubled enterprises. Above all, the Compagnie’s story demonstrates the risk of weak corporate governance.