VOC Organization

Foundation of the VOC - the Charter

F.S. Gaastra

he VOC was born in 1602 from a fusion of six small companies. Directly after the eerste schipvaart (first fleet) of 1595-1597, which had been organized by the Compagnie van Verre of Amsterdam, had demonstrated the possibilities of Asian trade, companies were set up in Amsterdam, Rotterdam and in Zeeland(3). These companies accumulated capital for one expedition at a time. Nonetheless, there was continuity in the board of directors; the merchants in charge or the bewindhebbers (directors) sponsored successive expeditions. Each time the ships returned from Asia the investors, who included not only the board but also other shareholders or participanten, got back the capital they had subscribed, naturally augmented by a share in the profit. These companies competed fiercely with each other, which put pressure on the profit margins. The dwindling returns threatened to frighten off investors and to endanger the future of the trade with Asia.

The first charter of the VOC ("Octrooi"), 1602.
(click image to enlarge)

The directors were by no means blind to this development and co-operation rapidly took place on a local level. In 1600 the Amsterdam companies amalgamated into one GeŁnieerde Amsterdamse Oostindische Compagnie (Unified Amsterdam East India Company), which was granted a monopoly on the trade from Amsterdam to Asia by the Amsterdam burgomasters. Concerted action was also taken in Zeeland. But co-operation did not extend beyond this. The people in Zeeland, for instance, had little stomach for a fusion with companies in Holland; they were afraid that Amsterdam would wield too much power in one united company. Moreover, new companies were being established in other cities - Hoorn, Enkhuizen and Delft. Therefore it seemed as if this mutual rivalry was to continue on into the seventeenth century.

The eventual unification into one company did not happen spontaneously, but was enforced by the government. The Dutch Republic was at war with the king of Spain and Portugal. The existing companies, now mainly referred to as the voorcompagnieën (pre-companies), were unable to play any role in the conflict against Spain and Portugal. One united Company could be a powerful military and economic weapon in the struggle. The States of Holland under the guidance of Johan van Oldenbarneveldt and, in their footsteps, the States General paved the way for a fusion. Eventually, after the intervention of the stadhouder, Prince Maurits, the Zeelanders were no longer able to hold themselves aloof. On 20th March 1602 the States General granted the charter by which the Generale Vereenichde Geoctroyeerde Compagnie (General United Chartered Company) was created(4). The charter (octrooi) was valid for 21 years. Rivalry was now out of the question: the charter laid down that nobody except the VOC could send ships from The Netherlands to or conduct trade in the area east of the Cape of Good Hope and west of the Straits of Magellan. This area was called the octrooigebied (trade zone).

Many of the other clauses in the charter referred to the organization of the Company, the position of the board of directors and the shareholders, and to the way in which capital could be acquired. These clauses bore the traces of the laborious negotiations which had preceded the realization of the charter. The content and elaboration of the terms will be discussed in the sections below. Before this attention will be drawn to the compromising nature of the charter and to the federal structure, which was so characteristic of the Dutch East India Company.

Chamber Hoorn

Under the charter the voorcompagnieën became departments or kamers (chambers) in the united Company. There were six of them: Amsterdam, Zeeland (which had its seat in Middelburg), Delft, Rotterdam, Hoorn and Enkhuizen. Agreement about the share of the chambers in the joint shipping and trade to Asia was reached fairly quickly. The Amsterdam Chamber was apportioned half of all operations, Zeeland a quarter and each of the four remaining smaller chambers were allocated one-sixteenth each. The Zeelanders were reassured by this system of distribution which was laid down in the charter; they had feared that, should the capital deposited by the chambers have been taken as the basis for the share in the management of the business, Amsterdam would have won more than half.

The directors of the voorcompagnieën became the directors of the chambers as a matter of course. A general board, which was to be put in charge of the general management and was to consist of representatives of the directors of the chambers, was placed above the chambers. One great problem was how the proportional relationships between the chambers, which had now been settled, were to be reflected in the general board. Because Zeeland wanted the vote on the general board to be taken according to Chamber - so that each Chamber could have as much say as any other Chamber - agreement initially miscarried. Finally the Zeelanders consented to a head count in a board which was to consist of seventeen members. In it Amsterdam would be represented by eight directors, Zeeland by four and the smaller chambers would have one each, while the seventeenth member would be appointed in turn by one of the chambers other than Amsterdam. The Amsterdammers had assumed that this board, the Heren XVII, would meet in Amsterdam, but a concession was made to the Zeelanders on this point. It was decided to introduce an eight year cycle. For six consecutive years Amsterdam was to be the meeting place and during this time this chamber would also function as the presidential Chamber; after this for two years Middelburg was to be the seat of the Heren XVII and then the presidency would fall to the Zeeland Chamber.

Now, on paper at least, it was possible to set down in the charter exactly how much influence and say each chamber would have, however, practice was to show how this complicated structure would take shape. During the seventeenth century the same administrative practices with which the directors, often as regent, were familiar in the Dutch Republic gradually developed. The relationship between the boards of directors of the chambers and the meetings of the Heren XVII, who after all consisted of delegates from these boards, was in many respects comparable to the meetings of the States of Holland and Zeeland and the cities who delegated their administrators to the sessions of the States. Before each meeting of the Heren XVII the chambers were sent an agenda by the presidential Chamber. Thereupon their delegates were given instructions for voting. When important matters which had not been included in the agenda were brought up before the Heren XVII, consultations were held.

There was yet another aspect on which the charter was a compromise. This was in the matter of capital. Because the charter was to be valid for twenty-one years, the VOC was no makeshift organization which, as had been the custom of the voorcompagnieën, had been set up just for one expedition. Nonetheless, no-one had wanted or dared to tackle the consequences of this for the regulations regarding the accumulation of capital. Even before the founding of the united Company, the voorcompagnieën had collected money to finance the outfitting of ships for Asia. These ships were now amalgamated into one fleet; this vloot van veertien schepen (fleet of fourteen ships) was thus the first that was equipped by the VOC for an expedition to Asia. Hereafter, the charter proclaimed, opportunities would be offered for the depositing of new capital, not just for one expedition, but for a term of ten years, in which period several fleets would be equipped for Asia. The shareholders or participanten would get their money back in 1612, plus the profit which had accrued up to that moment, and there would be a fresh opportunity to subscribe capital for the next ten years. Moreover, it was laid down that as soon as five per cent of the original investment had been returned to the Company immediately after the return wares brought back from Asia had been sold, there would be a distribution of dividends to the shareholders.

These stipulations made the accumulation of capital impossible. This did not tally with the aim which had featured prominently in the foundation of the VOC: the provision of a firm and solid basis for trade with Asia. Therefore this provision was more honoured in the breach than in the observance by the directors. The shareholders had to wait a very long time for a distribution of dividends and there was no restitution of capital after ten years. The original investment remained unchanged throughout the entire life of the Company. The States General, who had issued the charter, supported the directors in their non-observance of these stipulations(5).

In 1622/23 the charter was renewed for twenty-one years. After the shareholders had lodged a complaint, they were allowed a little more say, but there were no real changes accomplished. Later renewals of the charter often gave rise to political entanglements: various towns and provinces seized the opportunity to bargain for privileges, such as places for extraordinary directors in one of the chambers, in return for support of the renewal. On these occasions in wartime the States General sometimes asked for money or naval support. It was only late in the eighteenth century that any doubts arose about the methods employed by the Company and the situation in Asia was brought into the discussions held at the time of the renewal. But even then this did not amount to any real criticism: in general the Company enjoyed the support of the States General and the government strictly maintained the monopoly of the VOC. (See the webpage with a list of the charters.)

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