The Hindu Business Line : The Company, a tragedy

How the East India Company shaped the modern multinational. That's the sub-title on the cover of Nick Robins' The Corporation that Changed the World, from Orient Longman. Sounds eulogistic, as much as the back cover, which begins by saying, "This is a popular history of one of the world's most famous companies."

But "this is the first-ever book to expose the truth about the Company's social record," notes the author, in his account of `tragedy and intrigue', and also `war, famine, stock-market bubbles, and even duels between rival executives.'

The book draws on OECD data to show how the share of world GDP changed between 1600 and 1870 (in million 1990 international $): Britain's share was 1.8 per cent of the total in 1600, when China had 29.14 per cent share and India, 22.54 per cent. By 1870, however, India's share of world GDP dwindled to 12.25 per cent and that of China, to 17.23. Meanwhile Europe's economy nearly doubled, from 20 per cent to 33 per cent, while Britain's share jumped nearly five times.

A chapter titled `This imperious Company' draws parallels between EIC and contemporary corporate names such as Enron, Union Carbide and Wal-Mart. There are also interesting charts showing the Company's share price behaviour over three centuries, between 1693 and 1874.

"Pirates have an ambiguous place in English folklore, part feared and part celebrated, and the first wave of East India traders simply continued an old English tradition: trade where necessary and plunder where possible," writes Robins.

March 1695 looks like long ago, but a Parliamentary probe of the Company's accounts uncovered `a complex web of bribes'. More about corruption, you'll find in a chapter titled `The Bengal Revolution'. The Indian subcontinent was `the workshop of the world', accounting for almost a quarter of global manufacturing output in 1750 compared with less than 2 per cent from Britain; and Bengal was the richest province in the Mughal Empire. "Such was the cost advantage that in the late eighteenth century Indian cottons could be sold at a profit in Britain, at prices 50 to 60 per cent lower than those fabricated domestically."

Robins writes that from 12 per cent in 1668-70, Bengal's share of total Company imports climbed to 42 per cent, about two decades later. "By 1738-40, the proportion had climbed to 66 per cent." Meet Robert Clive, who profited enormously from the Plassey Revolution, "gaining Rs 2 lakh as a member of the Bengal Select Committee, a further Rs 2 lakh as commander-in-chief, and another Rs 16 lakh in the form of private donations from the Bengal nobility... some £22 million in 2002 values."

His rewards were no different from the bonuses earned by chief executives these days, observes Robins. "Vodafone's Christopher Gent, for example, won an extra £10 million in 2000 for securing the capture of Germany's Mannesmann, a reward that one shareholder described at the time as behaviour akin to `the robber barons of old'."

The story of East India Company is `ultimately a tragedy,' concludes the author. "The tale of an institution that generated great wealth, but also great harm, an institution that was ultimately doomed by the flaws in its corporate design." Must read.

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