Many people know the Dutch East India Company as the first modern corporation. But a group of French millers formed the Société des Moulins de Bazacle, a surprisingly sophisticated and modern shareholding company, centuries before the Dutch. (It has the added distinction of not having started or participated in a series of wars in East Asia
People had been milling grain at the Bazacle, a natural ford on the Garonne river in Toulouse since at least 1071. In 1369, the mill owners who shared a perpetual lease on the river signed a profit-sharing agreement. And in 1372, after one of their number was about a decade late in repaying a debt to a merchant, what’s likely one of the oldest creditor/shareholder lawsuits of all time (pdf) led to a corporate structure that lasted centuries.
The lawsuit has had lasting impact because it was the likely reason for the creation of a structure where bailies (essentially a board of directors) were elected at an annual meeting to be able to make decisions without consulting shareholders each time, and because the suit acknowledged the company as a legal entity distinct from its shareholders. It’s that governance and shareholder protection that set the Société des Moulins de Bazacle apart from earlier Italian sea-trading and banking companies.
The share price and structure that the founding families agreed on after the lawsuit form the first data points in a fascinating six-century-long data set researchers have constructed for a new National Bureau of Economics paper. (paywall) The paper by David le Bris, William N. Goetzmann, and Sébastien Pouget chronicles the story of a remarkably consistent and sophisticated business, with active and rational stockholders, that thrived for longer than many countries have existed. Despite the fact that no one formally defined ideas like discounting to present value and risk adjustment for centuries, shareholders acted largely as asset-pricing theory would expect them to.
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