Agent Opportunism and the Role of Company Culture: The Hudson's Bay and Royal African Companies Compared

Concurrent with growth of long-distance trade in Britain in the seventeenth century was the use of the chartered company as the mechanism by which such trade with Africa, Asia, Russia, and North America was conducted. Indeed, these trading companies were analogs of modern multinationals with factories and agents located overseas. Because of their hierarchical structures, these companies faced potential principal/agent problems--they had to ensure that their overseas agents operated in the best interests of the company. The secondary literature is almost unanimous in its verdict that company agents were, in fact, the companies' worst enemies. Keith Davies, the historian of the Royal African Company, wrote that the company was bound to fail and did fail because "too much had to be left to the discretion of employees abroad who for the most part followed their own concerns to the detriment of the Company's" [7, p. 165]. This statement defines a principal/agent problem. E. E. Rich, the historian of the Hudson's Bay Company, in describing a letter of recall for one manager, wrote that "[Bayly] is to hand over all trade goods ... and to 'bee assistante' to Lydall [new governor] in discovering and preventing private trade. Always private trade" [21, p. 101]. Again this is a statement about managerial opportunism. That the secondary literature should focus on agent opportunism as a serious problem facing these early trading companies is easily understood when one considers the time and distances involved in communication.