The joint-stock company and the stock market were thus born within just a few years of each other. No sooner had the first publicly owned corporation come into existence with the firstever initial public offering of shares, than a secondary market sprang up to allow these shares to be bought and sold. It proved to be a remarkably liquid market. Turnover in VOC shares was high: by 1607 fully one third of the Company's stock had been transferred from the original owners. Moreover, because the Company's books were opened rather infrequently - purchases were formally registered monthly or quarterly - a lively forward market in VOC shares soon developed, which allowed sales for future delivery. To begin with, such transactions were done in informal open-air markets, on the Warmoesstraat or next to the Oude Kerk. But so lively was the market for VOC stock that in 1608 it was decided to build a covered Beurs on the Rokin, not far from the town hall. With its quadrangle, its colonnades and its clock tower, this first stock exchange in the world looked for all the world like a medieval Oxford college. But what went on there between noon and two o'clock each workday was recognizably revolutionary. One contemporary captured the atmosphere on the trading floor as a typical session drew to a close: 'Handshakes are followed by shouting, insults, impudence, pushing and shoving.' Bulls (liefhebbers) did battle with bears (contremines). The anxious speculator 'chews his nails, pulls his fingers, closes his eyes, takes four paces and four times talks to himself, raises his hand to his cheek as if he has a toothache and all this accompanied by a mysterious coughing'.
Nor was it coincidental that this same period saw the foundation (in 1609) of the Amsterdam Exchange Bank, since a stock market cannot readily function without an effective monetary system. Once Dutch bankers started to accept VOC shares as collateral for loans, the link between the stock market and the supply of credit began to be forged. The next step was for banks to lend money so that shares might be purchased with credit. Company, bourse and bank provided the triangular foundation for a new kind of economy.
For a time it seemed as if the VOC's critics, led by the disgruntled ex-director le Maire, might exploit this new market to put pressure on the Company's directors. A concerted effort to drive down the price of VOC shares by short selling on the nascent futures market was checked by the 1611 dividend payment, ruining le Maire and his associates.2 2 Further cash dividends were paid in 1612, 1613 and 1618 . The Company's critics (the 'dissenting investors' or Doleanten) remained dissatisfied, however. In a tract entitled The Necessary Discourse (Nootwendich Discours), published in 1622, an anonymous author lamented the lack of transparency which characterized the 'self-serving governance of certain of the directors', who were ensuring that 'all remained darkness': 'The account book, we can only surmise, must have been rubbed with bacon and fed to the dogs.' Directorships should be for fixed terms, the dissenters argued, and all major shareholders should have the right to appoint a director.
The campaign for a reform of what would now be called the VOC's corporate governance duly bore fruit. In December 1622, when the Company's charter was renewed, it was substantially modified. Directors would no longer be appointed for life but could serve for only three years at a time. The 'chief participants' (shareholders with as much equity as directors) were henceforth entitled to nominate 'Nine Men' from among themselves, whom the Seventeen Lords were obliged to consult on 'great and important matters', and who would be entitled to oversee the annual accounting of the six chambers and to nominate, jointly with the Seventeen Lords, future candidates for directorships. In addition, in March 1623, it was agreed that the Nine Men would be entitled to attend (but not to vote at) the meetings of the Seventeen Lords and to scrutinize the annual purchasing accounts. The chief participants were also empowered to appoint auditors (rekeningopnemers) to check the accounts submitted to the States-General. Shareholders were further mollified by the decision, in 1632, to set a standard 12.5 per cent dividend, twice the rate at which the Company was able to borrow money.*
[NB: * Technically, the removal of uncertainty about future dividends gave the shares the character of preference shares or even bonds.]
The result of this policy was that virtually all of the Company's net profits thereafter were distributed to the shareholders. Shareholders were also effectively guaranteed against dilution of their equity. Amazingly, the capital base remained essentially unchanged throughout the VOC's existence. When capital expenditures
were called for, the VOC raised money not by issuing new shares but by issuing debt in the form of bonds. Indeed, so good was the Company's credit by the 1670s that it was able to act as an intermediary for a two-million-guilder loan by the States of Holland and Zeeland.
None of these arrangements would have been sustainable, of course, if the VOC had not become profitable in the mid seventeenth century. This was in substantial measure the achievement of Jan Pieterszoon Coen, a bellicose young man who had no illusions about the relationship between commerce and coercion. As Coen himself put it: 'We cannot make war without trade, nor trade without war.' He was ruthless in his treatment of competitors, executing British East India Company officials at Amboyna and effectively wiping out the indigenous Bandanese. A natural-born empire builder, Coen seized control of the small Javanese port of Jakarta in May 1619, renamed it Batavia and, aged just 30, duly became the first governor-general of the Dutch East Indies. He and his successor, Antonie van Diemen, systematically expanded Dutch power in the region, driving the British from the Banda Islands, the Spaniards from Ternate and Tidore, and the Portuguese from Malacca. By 1657 the Dutch controlled most of Ceylon (Sri Lanka); the following decade saw further expansion along the Malabar coast on the subcontinent and into the island of Celebes (Sulawesi). There were also thriving Dutch bases on the Coromandel coast. Fire-power and foreign trade sailed side by side on ships like the Batavia - a splendid replica of which can be seen today at Lelystad on the coast of
Holland.
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