The East India Company - Organization Structure, Control and Governance

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Procter & Gamble, American Express, Johnson & Johnson, Merck, Philip Morris, General Electric, Nordstrom, Ford, Governance

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Understanding the organization structure, control systems and governance in theEast India Company.

A company survived for more than 250 years! Sounds amazing given the track record of modern day companies. To the best of my knowledge very few companies have managed to survive for more than hundred years. Some of these companies are: Procter & Gamble(1837-); Philip Morris (1847-);American Express (1850-); Johnson & Johnson (1886-); Merck (1891-); General Electric(1892-); Nordstrom (1901-); 3M (1902-) and Ford (1903-). The company we are referring to is The East India Company (EIC) (1600-1858).

What is the secret behind EIC's survival for more than two centuries? More than anything else, I believe the company's governance and control systems made it survive for such a long time. The EIC had a range of regulations which defined and governed the duties of the company's executives as well as administrative functionaries. These regulations framed in both the Court Minutes and in "Laws or Standing Orders" provided full details of the exact duties to be carried out by the Governor, his deputy, the treasurer, the secretary, the auditors and the accounts¹.

They laid down the modus operandi of the Court of Committees² and the General Court³ and specified the responsibilities of the clerks in charge of the shipyards, naval stores, the iron works, the slaughter-house and the warehouses in London⁴.The EIC also laid down regulations regarding the duties of its factors⁵ and terms of employment.

Organization Structure and Control Systems

There is no denying the fact that the EIC faced control and coordination problems as enforcing the regulations in the Indies from London was not easy, more so in those days. However, the very fact that the company survived for more than two hundred years in enough to undermine the seriousness of the problem.

The main problem before the EIC was to establish a method whereby correct policy decisions could be taken. Another important issue was the delegation of power and authority to its servants in the Indies and the task of communication and control. Decision-making was at two levels: a superior body in London, the Court of Directors and a subordinate one in Asia, the president and his Council in each of the company's separate trading regions. (Refer Fig I)

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1] K.N.Chaudhuri, The English East India Company: The Study of an Early Joint Stock Company, 1600-1640, Frank Cass & Co Ltd, London, 1965.
2] The Court of Directors managed the day-to-day affairs of the company. It consisted of the Governor,Deputy Governor and twenty-four directors (Committees) elected by the General Court. The Governor and the Deputy Governor were assisted by accounts, clerks and cashiers who worked through seven committees specializing in accounting, buying, correspondence, shipping, finance, warehousing and private trade. The Court of Directors also had the responsibility of supervising the overseas network of resident “factors” who managed the local trading posts, or factories. The Court of Directors made all the policy decisions (which had to be ratified by the General Court) and directed all operations.
3] The General Court included all the shareholders of the company with voting rights. Thus investors whose primary motive was profits and dividends dominated the General Court. With a strength of several hundreds, the General Court met infrequently and was hardly involved in day-to-day management of business.
4] K.N.Chaudhuri, The English East India Company: The Study of an Early Joint Stock Company, 1600-1640, Frank Cass & Co Ltd, London, 1965.
5] Once a person was selected to the EIC he had to go to the East as a ‘writer'or ‘apprentice.'A writer was considered for promotion to the post of factor only after serving for five years