Pioneering Modern Corporate Governance: A View from London in 1900

Abstract

Around 1900 Britain was exceptionally suited to pioneering large scale enterprises because of the precocious development of its equity markets and London's experimentation with a more eclectic range of corporate governance techniques than the world's smaller and less cosmopolitan financial centers. Information dissemination, incentives, and reputation—developed by a serendipitous mix of legal compulsions and flexible voluntarism—set the scene for the growth of large, UK-based, national and international corporations in the twentieth century.“The investment business is not with us as well developed or as well understood as it is in England.”W. H. Lyon, Capitalization (Boston, 1913), 207.

Law and Finance c. 1900

“…This served to align the directors' incentives and constituted a sort of -guarantee deposit‖ in the event a director committed fraud. For examples of how these deposits operated in England, see Hannah (2007b). 7 A detailed description of the disclosure requirements for new issues in England can be found in Wellhoff (1917, pp.…”

Managers and (Secret) Social Networks: The Influence of the Freemasonry on Firm Performance

“…By 1900, Britain was the most important financial center in the world, with the British stock market larger relative to GDP than that of the United States (Hannah 2007). Government bonds and domestic and international railways constituted most of the floating nominal capital, with commercial and industrial securities around 10% of the nominal traded capital.…”

“…Limited liability joint stock enterprises were more common in Britain than in continental Europe. Britain in 1900 had about 30,000 joint stock companies, probably as many as all the rest of Europe and about half of the number of joint stock companies as existed in the United States at the beginning of the 20th century (Hannah 2007). The London Stock Exchange had a predominant role in setting up the trade of financial securities, but also the various provincial stock exchanges allowed companies to easily access various forms of external finance.…”

The Economic Benefits of Political Connections in Late Victorian Britain

“…The historical evidence suggests that politicians did not have any particular business ability; their main function was the acquisition of the …nancial capital necessary to maintain sound business activities (see Hannah, 2007 andHarrison, 1981).…”

“…Hannah (2007) claims that the: "fraudulent promoter, Whitaker Wright, used Lord Du¤erin, the retired Governor General of Canada, and other gullible peers without business experience, as dummy directors of his London and Globe Corporation." The corporation later collapsed with unpaid claims of over £ 7 million.…”