the impact of investing
TRANSCRIPT
THE IMPACT OF INVESTING: A retrospective view on the
impact of investment into the Dutch East India Company on
South Africa and the development of finance
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SSD Conference, StellenboschColin Habberton
10 September 2015
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Introduction
“Nescire autem quid antequam natus sis acciderit, id est semper esse
puerum.”
Cicero“To be ignorant of what occurred before you were born is to remain
always a child”
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Research Objectives• Compare the corporate structure and
governance of the VOC to modern corporations to understand differences and similarities.
• Assess the impact of the establishment and operation of the VOC on the development of finance.
• Describe the impact of the VOC, as a multi-national corporation, on the history of South Africa from an environmental and social perspective.
• Interpret the findings using the United Nations Principles of Responsible Investment as a conceptual framework to explore the connections to investment practice in the early 21st Century.
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Research Question
What was the impact of investing in the VOC?
Research methodology• Exploratory study through a literature
review of academic research and archival sources
• The VOC is the unit of analysis• Looking into South Africa as a case
study• Outcomes assessed against a
normative framework called the United Nations’ Principles for Responsible Investing (UNPRI)6
Literature Review – Key Sources
History of the VOC• Gelderblom, O., & Jonker, J. 2004. Completing a Financial Revolution: The
Finance of the Dutch East India Trade and the Rise of the Amsterdam Capital Market, 1595-1612. The Journal of Economic History. 64, 641-672.
• Gelderblom, O,. De Jong A., and Jonker,J. 2013. The Formative Years of the Modern Corporation: The Dutch East India Company VOC, 1602–1623. The Journal of Economic History. 73.04:1050-1076.
• TANAP. 2015. Towards a New Age of Partnership Website [Online] Available: http://www.tanap.net/ Accessed: 5 August 2015
The Principles of Responsible Investing• UNEPFI. 2014. About UNEP FI [Online] Available:
http://www.unepfi.org/about/index.html Accessed: 15 July 2014.• UNPRI. 2015. UNPRI Website [Online] Available: http://www.unpri.org/
Accessed: 11 August 2015.VOC as a Corporation• Hansmann, H. & Kraakman, R. 2000. The End of History for Corporate Law.
Harvard Law School John M. Olin Center for Law, Economics and Business Discussion Paper Series. Paper 280.
• Lucassen, J. 2004. A Multinational and its Labor Force: The Dutch East India Company, 1595-1795. International Labor and Working Class History. 12.
• Vink, M. P. 2007. Freedom and slavery: the Dutch Republic, the VOC World, and the debate over the 'World's Oldest Trade': feature. South African Historical Journal. 59:19-46.
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Literature Review – Key Sources
VOC and its impact on finance
• Kyriazis, N., & Metaxas, T. 2011. Path dependence, change and the emergence of the first joint-
stock companies. Business History. 53:363-374.• Nijman, J. 1994. The VOC and the expansion of the world-system 1602–1799.Political
Geography, 13(3):211-227.• Robertson, J., & Funnell, W. 2012. The Dutch East-India Company and accounting for social capital
at the dawn of modern capitalism 1602-1623. Accounting, Organizations and Society. 37:342-360.
• Stringham, E. 2003. The extralegal development of securities trading in seventeenth-century
Amsterdam. Quarterly Review of Economics and Finance. 43:321-344.
VOC in South Africa
• Dangor, S. E. 2003. The establishment and consolidation of Islam in South Africa: from the Dutch
colonisation of the Cape to the present. Historia. 48:203-220.
• Devenish, G. 2005. South Africa from pre-colonial times to democracy: a constitutional and
jurisprudential odyssey. South African Law. 547-571.• Guelke, L. 2003. The tragedy of privatisation : some environmental consequences of the Dutch
invasion of Khoikhoi South Africa. South African Geographical Journal = Suid-Afrikaanse
Geografiese Tydskrif. 85:90-98. • Scott, G., & Hewett, M. 2008. Pioneers in ethnopharmacology: The Dutch East India Company
(VOC) at the Cape from 1650 to 1800. Journal of Ethnopharmacology. 115:339-360.
• Tewari, D. 2009. A detailed analysis of evolution of water rights in South Africa: an account of
three and a half centuries from 1652 AD to present. Water SA. 35:693-709.• Worden, N. 2007. New approaches to VOC history in South Africa: feature. South African Historical
Journal. 59:3-18.
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Why the UNPRI?
(Source: UNPRI, 2015)
US$60tn AuM
25% of global assets
1380+Signatories
Principles for Responsible Investing
10(Adapted: UNPRI, 2015)
What do I mean by “ESG”?
11(Source: UNPRI,
2015)
How big was the VOC in today’s terms?
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The ‘United’ Dutch-East India Company
• Established by sovereign charter in 1602
• Rights to trade by the Netherlands in East Indies
• In the footsteps of British, French and Danes
The Purpose of the ‘Compagnie’• Profit“The country trade and the profit from it are
the soul of the Company which must be looked after carefully because if the soul
decays, the entire body would be destroyed”
(Heeren XVII in Vink, 2003:13)
The VOC as a Corporation
A Multi-National Company
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‘Textbook’ corporation (Gelderblom et al)
Kraakman’s (2000) summary of characteristics: • (i) full legal personality distinct
from owners • (ii) limited liability for owners and
managers • (iii) shared ownership by investors
of capital • (iv) delegated management under
a board of directors• (v) transferable shares
The VOC as a corporation
National collaboration
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Collaboration between chambers of business
• Amsterdam, Delft, Middelburg, Enkhuizen, Rotterdam and Hoorn
• Independent of the state and the crownBoard of Directors by proportional representation
• Heeren XVII: highest level of authority, decision-making
• Consolidation of assets, appointed management
Ownership of the company via ‘shareholders’
• Capital raised from the public with limited liability
• Continuity of capital and charter• Dividend distributions (or lack thereof..)
The VOC and its Governance
The first traded shares
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The phenomenon of VOC shares• Initial capital raised:10x its British
competitors • Public offer:1,100+ European
shareholders • Minimum10 year investment: trading
ensued• Share price rose 500%+, annual
return 25% The realities of return
• Lucrative spice trade – Intra- & inter-national
• Dualistic mindset towards slavery, exploitation
• Permission for private military, jurisdiction
• “Empire in a state” (Ward, 2009)
VOC and the development of finance
The VOC share price performance
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(Source: Stringham, 2013:327)
“Windhandel”
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(Source: Rijks Museum)
“Windhandel”
22 (Source: British Museum)
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Economic• Refreshment station for VOC fleet –
agriculture• Infrastructure, urbanisation,
globalisation• Fort developed into a city spawned a
nationSocial
• Importation of labour – slaves, migrants• Incarceration of rivals from South & East
Asia• Multi-cultural diversity from mid-1650’s
Environmental• Private property, water rights – Roman-
Dutch law• Conservation and medicinal research
VOC and its impact on South Africa
Who is this Guy?
The ‘real’ Jan van Riebeeck
Remember this?
The Compagnie Flag of the 1600’s…
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Accountability• Governance structures existed but,• Aim: profit for shareholders (and
management)• Result: exploitation of people and
their places• Parallels to the investment practices
of todayResponsibility• Delivery on investor expectation
exceptional• ESG criteria considered, but
selectively applied• The company followed its core
objectives• The meaning & practice of
‘responsibility’
Conclusions & Comparisons
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Participation• Introduced structures of global
governance• Established the archetype of the
corporation• Exported systems of law, finance &
inequality• Share in profits vs. share in
consequencesTransparency• Business is more than ‘just business’• Good governance ≠ moral, ethical
outcomes• The lack of investor activism beyond
return• Integrated reporting to address ESG
issues
Conclusions & Comparisons
Final Thoughts…
Simon van der Stel: Governor & Founder
THE IMPACT OF INVESTING: A retrospective view on the
impact of investment into the Dutch East India Company on
South Africa and the development of finance
32
SSD Conference, StellenboschColin Habberton
10 September 2015