-- eye of the law a corporation was a corporation that was all there was to it. The common law as developed with reference corporations organized for religious or governmental purposes was applied to others organized for business purposes. Legislative committees on corporations handled petitions for charters alike from towns, churches, banks, and manufacturing companies-in New Jersey, at least, till nearly 1840. Differentiation arose only by slow degrees, as the numbers increased and general statutes were passed which applied only to specified groups of corporations. Hardly a beginning of this appeared before 1800. We are then under the necessity of drawing for ourselves the line between the corporations with business purposes and those predominantly for other ends, and the decision is not always easy.1 This lack of contemporary differentiation, as well as the paucity of the charters, makes advisable the use here of the term "business corporation" in its more inclusive sense. In colonial days, as an earlier essay has indicated, American corporations for business purposes were few and relatively unimportant. The water company of Boston (1652), not incontestably entitled to corporate rank, and Penn's Free Society of Traders in Pennsylvania (1682), chartered and chiefly owned in England, were the only seventeenth century representatives. The first of these probably did not long survive, and the second, after a very brief active career, lingered on in a comatose condition until 1723. In the eighteenth century, prior to the Revolution, there is first to be mentioned the ill-starred New London trading society, which was established only after certain of its proposed characteristics and purposes were put out of sight, and whose active career was summarily brought to an end by legislative act within a year of its establishment. Less pretentious but more enduring were the two groups of wharf proprietors, in New Haven and Boston respectively, three little water companies in Rhode Island, and a mutual fire insurance society in Philadelphia - all of which survived the Revolution. These comprise the total list of fully American, clearly corporate 1 Cf. infra, 283-285. business associations in those English colonies which developed into the United States.1 These pioneer business corporations are of historical interest. It is obvious, however, that their significance, even for their time, was but slight and local, and that they were distinctly exceptions in the business world rather than the rule. They seem, in the main, predecessors rather than prototypes of the present-day business corporation. Only the local public service corporation is well represented, and there is not a single example of the great classes of later days - banks, highway and transportation companies, manufacturing and mining companies. Other predecessors were the joint stock companies, unincorporated, which long remained the English form for such joint stock enterprise as was beyond the limits of ordinary partnerships. In the colonies these too were comparatively few and far between, possibly in part because of the act of Parliament in 1741 extending to America the operation of the Bubble Act of 1720,2 but more largely, probably, because the economic and psychological conditions did not require or favor their development. Reasons for the paucity of colonial business corporations applying in several instances equally to the slight extension of other joint stock enterprise - have been suggested in an earlier essay. Small-scale enterprise was still the order of the day, particularly in America, where difficulties hindered coöperative action, both by preventing the initial intercourse of men of affairs and by hampering the continuance of all but local relationships. Political conditions operated rather to check than to promote such intercourse, especially between men in different colonies. The independence of temper characteristic of the American colonists was an adverse factor. The technique of using the elements of large-scale enterprise - machinery, power, labor - was still undeveloped, and with a large virgin area to subdue in the most elementary fashion the colonists could 1 Essay I, 22-25, 41-45, 87-90, and Appendix A of this Essay. hardly make large strides in technical progress. Nor were large supplies of capital or labor seeking employment. Moreover, even in the mother country the corporate form was yet applied to a very limited extent to business enterprises, and the most prominent examples of English business corporations were the privileged and monopolistic companies for foreign trade, against which no small prejudice existed. Restraints imposed by the crown and its representatives, upon the rise of manufactures and banking as well as upon direct grants of corporate powers, while not of large importance in this connection, also deserve passing mention. During the Revolution few corporations of any sort were chartered in the "united states," and but one was created for any business purpose prior to the treaty of Versailles (Sept. 3, 1783). For this fact explanation need hardly be offered. The state legislatures were busied with war measures and the times were too unsettled for new business ventures. Till the great question of independence or submission should be decided, corporate privileges for business purposes were naturally neither offered nor sought. After the conclusion of peace the situation was materially altered.' There was time to turn attention to internal problems; there was no occasion for waiting upon the opinion of the English crown or proprietaries, or their representatives, or Parliament - what was desired might at least be attempted; there was fair prospect of continued peace and opportunity for continuous independent development. Moreover, the need for business enterprises of stability and considerable scale was plainly evident to the newly united states. Means of communication were imperatively demanded, as well by political as by economic considerations; banks were seen to be of prime importance; manufactures soon came to be thought of, by 1 Cf. Weeden, Econ. and Social Hist. of New England, ii, 853, commenting on industrial developments of 1783-89: "Wars that do not actually impoverish their peoples promote organized industries. The necessity of the movement stimulates new inventions and new arrangements of labor. But beyond all this, people sink their individualism for a time, overcome local isolation, and bend together in new work. All this promotes enterprise in the largest sense." many, as almost equally important. For many enterprises of these types it was inevitable that incorporation, with the privilege of limited liability and the conditions of more stable organization, should be sought. There were several favoring circumstances. Capital, accumulated during the war by many members of the community, was available for investment; fortunes in property other than real estate were undoubtedly larger than before the war. The disbanding of the army set free a labor supply, and throngs of immigrants rapidly added largely to it. The war had done much to bring into mutual acquaintance men of business acumen and property, had forced some experience in cöoperative activity, and had necessitated the exercise of ingenuity in a thousand directions. With the coming of peace these developed resources sought employment in other fields. Moreover, the day was one of bold experimentation, enthusiastic exploitation of new methods, eager exploration of new paths, confident undertaking of new enterprises. One gigantic speculation had been notably successful the achieving of independence. Political precedents had been broken and new political expedients were being tried. Economic "speculations," new economic devices, likewise came naturally to the fore, and legislatures were willing to permit them and to encourage them as well. Furthermore, the English tradition that corporate powers were to be granted only in rare instances, never deeply intrenched here, was opposed by a strong and growing prejudice in favor of equality — a prejudice which led almost at once to the enactment of general incorporation acts for ecclesiastical, educational, and literary corporations.1 Partiality in according such powers was to be expected of the English crown, but it was a serious charge to lay at the door of democratic legislatures after a Declaration of Independence which asserted so vigorously the natural equality of rights and privileges. Not least important, the physical ease of securing charters was far greater in the new states than in England, and, considering the royal right of review, greater than in the colonies. Legislatures were not overworked and did business 1 See infra, 16-19. free of charge and with reasonable promptness, whereas both the cost and the delays incident to securing royal charters always tended to discourage application for them. Finally, the practice in creating corporations for non-business purposes, though it did not lead promptly to granting freedom of incorporation to business corporations, undoubtedly smoothed the way for special acts incorporating business associations. Together these factors brought about a considerable extension of corporate enterprise in the field of business before the end of the eighteenth century, notably after the critical period of disunion and constitution making had passed. Prior to 1801 over three hundred charters were granted for business corporations, ninety per cent of them after 1789. Judged by twentieth century standards these seem few indeed, but neither in the colonies nor in the mother country was there precedent for such a development; and these American charters reflect a noteworthy experiment in business organization and in public policy toward business enterprise. In this essay we have principally to examine the course of this development from 1783 to 1800, in different states and in different classes of corporations; the vicissitudes through which the new corporations had to pass; the contributions which they made; the causes of their success or failure; the attitude of the public, and the emergence of public policies toward them. As a preliminary, however, it is necessary to consider briefly the source from which corporate powers were derived in the new political system, the extent to which it was divided or shared, and the methods by which these powers were obtained by those who sought them. The power of granting corporate privileges, long recognized as an attribute of sovereignty, was assumed by the state governments as the British control was thrown off, and the granting of charters became a function of the law-making body. This was obviously the natural procedure: precedents in parliamentary acts of incorporation and in charters granted by colonial assemblies, while absolutely few in number, were numerous |