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Agency Problems in Early Chartered Companies: The Case of the Hudson’s Bay Company

Published online by Cambridge University Press:  03 March 2009

Ann M. Carlos  and
Stephen Nicholas
Ann M. Carlos
Affiliation:
Associate Professor of Economics, University of Colorado, Boulder, CO 80903;
Stephen Nicholas
Affiliation:
Associate Professor of Economic History, University of New South Wales, Kensington, New South Wales 2033
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Abstract

The problem of controlling overseas managers confronts all multilocational firms. Historians have argued that because of the extreme time lags in communication, chartered companies were unable to control managerial behavior. We argue that not only did the Hudson’s Bay Company understand the agency problem but also put into operation strategies designed to attenuate opportunistic behavior. The company used employment contracts and control systems and established a social structure compatible with the company’s aims.

Type
Articles
Information
The Journal of Economic History , Volume 50 , Issue 4 , December 1990 , pp. 853 - 875
Copyright
Copyright © The Economic History Association 1990

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References

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13 As a corollary, there has been no questioning of the types of situations in which agency problems are likely to arise. It is unclear whether economic historians thought that all multilocational trading companies faced an agency problem of the same magnitude or whether the magnitude (and the ability to control the agency problem) was related to the particular reasons for each company’s existence. In this article we are taking, as given, the hierarchical structure of the Hudson’s Bay Company, which implies a principal/agent relationship between the factories and the head office. The extent to which this was the most beneficial organizational structure is discussed in Carlos, Ann M. and Nicholas, Stephen. “Giants of An Earlier Capitalism: The Early Chartered Companies as an Analogue of the Modern Multinational,” Business History Review, 26 (Autumn 1988)Google Scholar.

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