The Dutch East India Company

This chapter analyzes the experience of the Dutch East India Company, the first company in which thousands of investors participated. This dispersed shareholder base gave rise to two new institutional developments: the spontaneous growth of a lively securities market and agency problems as investors soon had reason to complain about lack of strategic focus, lack of dividends, lack of accountability, self-enrichment by managers, fraud, and mismanagement. Nonetheless, after two hazardous first decades—helped by the exit that the stock market provided to investors—the company managed to stay in existence for almost two centuries although the agency problems were only partially addressed.