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Incorporation in New England: A Statistical Study, 1800–1875

Published online by Cambridge University Press:  03 February 2011

William C. Kessler
William C. Kessler
Affiliation:
Colgate University
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Extract

Defense of a historical survey of the business corporation in this country seems hardly necessary. Students of its place in the present economy, even students of the well-recorded “trust” movement of the 1890's and later decades, need this background, if only to test the hypothesis, not infrequently encountered, that the business corporation of pre-Civil War days was largely confined to the fields of banking, insurance, and public utilities.

Type
Articles
Information
The Journal of Economic History , Volume 8 , Issue 1 , May 1948 , pp. 43 - 62
Copyright
Copyright © The Economic History Association 1948

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References

1 Davis, Joseph S., Essays in the Earlier History of American Corporations (Cambridge: Harvard University Press, 1917), 2 vols.Google Scholar; Miller, William, “A Note on the History of Business Corporations in Pennsylvania, 1800–1860,” Quarterly Journal of Economics, LV (1940), 150–60CrossRefGoogle Scholar; Oscar, and Handlin, Mary F., “Origins of the American Business Corporation,” The Journal of Economic History, V (1945), 1–23Google Scholar. Also Kessler, W. C., “A Statistical Study of the New York General Incorporation Act of 1811,” Journal of Political Economy, XLVIII (1940), 877–82CrossRefGoogle Scholar.

2 I am glad to acknowledge financial aid for this purpose from the Committee on Research in Economic History of the Social Science Research Council. Arthur H. Cole, chairman, has been particularly helpful and generous with his time. G. Heberton Evans of the Johns Hopkins University has also given me valuable suggestions resulting from his experience in the field of corporation history.

3 Incorporation by special act meant that all persons desiring the advantages of the corporate form of business had to petition the legislature of a state for a private act of incorporation and, like other legislation, the ensuing bill had to undergo the regular procedure of committee hearings, approval by the committees of both houses, and ultimately passage by both branches of the legislature.

4 Public Acts of the State of Connecticut (1837), chap. 63: An Act relating to Joint Stock Corporations.

5 A supplementary reason for extending this study beyond the enactment of general incorporation laws in the 1850's and early post-Civil War years was the desire to ascertain how attractive these general statutes really proved, especially in the uncertain years of the reconstruction period.

6 Acts and Resolves of Massachusetts (1805), chap. 125.

7 Acts and Resolves of Massachusetts (1809), chap. 65.

8 J. S. Davis, American Corporations, II, 22–23.

9 The count of incorporations in Maine prior to 1820 may be somewhat inexact, since in a few cases the precise location of the proposed place of business could not be determined.

10 The Davis study previously referred to also showed Massachusetts in the leading position among the New England states, while Connecticut and New Hampshire occupied second and third place, respectively. See J. S. Davis, American Corporations, II, 22.

11 Calculated from statistics in J. S. Davis, American Corporations, II, 24, 27.

12 The boom among special act charters in 1872 is more apparent than real because of Vermont's contribution to the statistics: its legislature was in session in 1872 but not in 1871, biennial sessions having commenced in the former year.

13 $200,000 under the Act of 1837 in Connecticut; $200,000 under the Act of 1851 in Massachusetts; $500,000 under the Act of 1853 in Vermont.

14 In 1870 a committee of the Vermont legislature stated that only one bank had been formed under the general act of 1851 because there was “a general and widespread distrust of companies created under general laws.”—Majority Report of a Special Committee on General Incorporation Law for Railroads of the House, House Journal, 1870, pp. 477–80. The General Banking Act of Connecticut was attacked after its passage in 1852, and in 1855 the legislature prohibited its use after that year for much the same reasons as stated above.

15 See application of Willimantic Linen Manufacturing Company to the Connecticut legislature for a charter. Since they intended to go to Europe for their capital a special charter “would be of importance in giving them credit abroad.”—Hartford Courant, June 11, 1853.

16 It should be recalled that according to Davis 80 per cent of the early charters were for public-utility enterprises.

17 Smith, W. B. and Cole, A. H., Fluctuations in American Business, 1790–1860 (Cambridge: Harvard University Press, 1935)Google Scholar, Chart 4, Weighted Indices of Wholesale Domestic and Imported Commodity Prices in Boston: Monthly, 1792–1820, p. 15.

18 Acts and Resolves of Connecticut (1817), chap. 5. The Handlins in their article on “Origins of the American Business Corporation,” The Journal of Economic History, V (1945), 8–17Google Scholar. suggest that limited liability during the early years of the nineteenth century was not considered very important or necessary by business interests.

19 See the Hartford Courant, issues of May and June 1817, and May 1818.

20 Acts and Resolves of Massachusetts (1818), chap. 183. It should also be recalled that as early as 1805 this state made a gesture in the direction of general incorporation by enacting a turnpike act containing “general powers and duties.”

21 Number of manufacturing and mining companies incorporated: 1815, 48; 1816, 10; 1817, 6; 1818, 11; 1819, 9; 1820, 11; 1821, 7; 1822, 25; 1823, 37; 1824, 20; 1825, 38; 1826, 42.

22 See Dewey, D. R., State Banking before the Civil War (Washington, D. C.: Government Printing Office, 1910), p. 12Google Scholar; 61st Congress, 2d Session, Senate Document No. 581.

23 See W. B. Smith and A. H. Cole, Fluctuations in American Business, pp. 46, 53, and Thorp, W. L., Business Annals (New York: National Bureau of Economic Research, 1926), p. 118Google Scholar.

24 Acts and Resolves of Massachusetts (1820), chap. 266.

25 In 1827 the act of 1822 establishing liability for debts incurred during membership was modified so that a stockholder's liability ceased if creditors failed to bring action within a year after the debt was incurred.

26 W. B. Smith and A. H. Cole, Fluctuations in American Business, Chart 17, p. 60.

27 According to Thorp's Business Annals, pp. 118–20, nine of the thirteen years of the 1818–1830 period were years of depression or recession.

28 If charters issued under the pioneering general incorporation act of Connecticut are included, the proportion of manufacturing and mining companies is raised slightly to 53 per cent.

28 Acts and Resolves of Massachusetts (1830), chap. 53: An Act defining the General Powers and Duties of Manufacturing Corporations.

30 See p. 55.

31 For the series see W. B. Smith and A. H. Cole, Fluctuations in American Business, pp. 60, 73, 82.

32 It should be noted from Chart A, however, that the volume of charters issued under general acts, although still small, began to rise again in 1843.

33 Further support for this conclusion is given by the earlier rise, already commented upon, of charters granted under general acts. Since these charters, then as now, were granted independently of legislative sessions, their movement could have been more responsive to business-cycle changes.

34 Massachusetts, 1851, 1855, for manufacturing and mining; Vermont, 1851, 1853, for manufacturing and mining, but little used; and Connecticut, 1848 for telegraph companies, 1852 for banks, 1854 for plank roads.

35 W. B. Smith and A. H. Cole, Fluctuations in American Business, Chart 30, p. 94.

36 It is noteworthy that the peak also came for such corporations in 1854 rather than 1857, the “crisis” year.

37 During these years Massachusetts, Connecticut, and New Hampshire show the most rapid rate of expansion in the use of the corporation (including charters of both types) for the entire period, 1800–1875.

38 See above, p. 44.

39 See above, p. 59.

40 See the article by Cutts, Jesse M., “One Hundred and Thirty-four Years of Wholesale Prices,” Monthly Labor Review, XLI (1935), pp. 249–52Google Scholar. Also Burns, A. F. and Mitchell, W. C., Measuring Business Cycles (New York: National Bureau of Economic Research, 1946), p. 78Google Scholar.

41 General incorporation acts during this period included the following: 1866, New Hampshire, manufacturing and mining (revised in 1868), Massachusetts, manufacturing and mining; 1867, Maine, mining; 1870, Maine, manufacturing and mining; Massachusetts, manufacturing, mining and gaslight companies, followed by general incorporation laws for many other types of enterprises in every year to 1875, Vermont, manufacturing and mining; 1871, Connecticut, railroads; 1872, Vermont, railroads.