The Impact of Investing

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