Principal Agent Relations and the Slow Collapse of the Royal African Company: A Noisy View
Matthew Norton
University of Oregon
When an enterprise goes as magnificently awry as did the Royal African Company of England (RAC), it
seems reasonable to ask, what were they thinking? The clue that the collapse of the RAC is anything more than a
story of mismanagement, malfeasance, and failed monopoly is that the stockholders and managers of the company
understood why they were losing money most years, and yet were unable or unwilling to change course. The
company drove itself into commercial oblivion as though on rails, and in a social-structural sense, it was.
The problem of principal-agent relations rightly looms large in the literature on early modern trading
companies (Erikson and Bearman 2006; Adams 1996), and I will propose that, unsurprisingly, principal-agent
relations provides a powerful analytical framework for understanding the decline of the RAC. The normal strategy
for thinking about principal-agent relations in early modern trading companies depends on the theoretical
construction of, to borrow Levi Martin’s terminology, a quiet analytical world. This quiet world is created by
clearing away all but the relationships and network ties of central interest. The analyst identifies the key
relationships within the company to be explained, pruning the rest or defining them as exogenous to the main
structure of principal-agent relations. Furthermore, the ties in the network are defined in the most general, abstract,
and simple way. This technique is analytically powerful, has the potential for great parsimony, and is built for the
construction of generalizable arguments. I have no quarrel with it. It does have limits; those limits are revealed
through an analysis of the fall of the RAC; that analysis suggests the benefits of an alternative, noisy view of
principal-agent relations.
For this analysis of the downfall of the RAC I will depart from the quiet view of principal-agent relations in
two ways.1 First, while the quiet view entails pruning the organizational structure quite close to the relationships of
interest, I will place the RAC in a more extensive structure of principal-agent relations extending from sovereign to
those upon whose enslavement the company thought to prosper. Second, building on the thin definition of
principal-agent relations that is typical, I will develop a “thicker” analysis. By this I mean to invoke the Geertzian
sense of thick description: sociological analysis that attends to the meaningful, emotional, and interactional character
of social relations. Briefly stated, my argument is that the RAC’s demise – and really the company’s trajectory brings
nothing to mind so much as Beckett’s birth astride of a grave – is best understood: 1) in terms of its agency relations
with the king that were marvelously structured to meet the interests of the sovereign and perhaps the realm but
impossibly structured in terms of the commercial gains promised the RAC as agent; and 2) the entwined semiotic
and logistical demands imposed by its royal monopoly. I am also interested in developing a third observation about
principal-agent relations based on the content of the ties between the company managers and its agents in West
Africa, though I have not yet figured out how to integrate it with points one and two, or if it even ought to be
integrated. Those relationships were, 3) characterized by the dis-orientation of the company’s West African agents
from the institutional, organizational, commercial, and symbolic relations that constitute a company as an efficacious
social object. The agents of the RAC certainly were not good stewards of the interests of their corporate principals,
but neither did they have many opportunities for malfeasance. The characteristic forms of principal-agent relations
between the London management of the RAC and its West African servants were miscommunication, confusion,
and malingering. The case of the RAC suggests that the traditional continuum for assessing agency relations
running from good stewardship to malfeasance is too narrow to capture incompetence, confusion, and the lack of
motivation as challenges to principals’ control over their agents. I propose that orientation is a more suitable
framework, though one that nudges us in the direction of a thick understanding of ties defined by meaning.
The Company of Royal Adventurers Trading to Africa preceded the RAC. It too was a failure, but a far less
impressive one. The insolvent Royal Adventurers sold their African forts and goods, and relinquished their royal
monopoly to the new Royal African Company in 1672. The charter of the RAC established it as a joint-stock
company with a commercial monopoly over a 5,000 mile stretch of the West African coast. The company’s
monopoly included a number of distinct trading regions (Davies XX) with different commodities on offer. The
RAC is notorious as the first institutional incarnation of the large-scale English slave trade. In addition to slaves the
The data sources for these arguments include the RAC records in the T70 series in the British National Archives. The arguments
about the content of ties rely on a three volume compendium of letters from the West African outposts of the company edited by
Mary Law. This so-called Rawlinson corpus is of great value because it contains actual copies of letters, while the letters found in T70
are abstracts that cut out many of the details necessary for a study of meaning struggles.
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different regions of West Africa to which it traded provided gold, ivory, and redwood (a kind of dye). The central
feature of the commercial environment facing the RAC, of course, was the emergence of sugar as the dominant
commodity of the imperial commodity. By the time the RAC was founded, Barbados had been in the sugar
business for thirty years, though Jamaica was still in the early phases of its sugar transformation. The sugar trade
depended on an infrastructure of mass enslavement and the Middle Passage, and thus, during its time as a going
concern, on the RAC. West Africa hosted numerous European traders in the later 17th and early 18th centuries,
from a variety of countries. In 1672 when the RAC received the royal monopoly for trade to West Africa, the
Dutch West India company was the preeminent European commercial power, but its position was only strong
relative to the operations of its rivals. No European country was able to dominate the West African trade during
the period in question, ensuring vigorous competition even for a firm that was able to effectively enforce its national
monopoly. Few were so able. The RAC was plagued from the beginning by “interlopers” on its trade. While the
direct impact of the interlopers on the profitability of the RAC is hard to estimate, it is clear that they posed a
significant symbolic challenge to the company. The interlopers provided direct evidence for the feasibility of free
trade to the gathering foes of monopolies created by royal prerogative in general, and of the RAC’s monopoly over
the slave trade in particular.
Taken as a trading concern, the history of the RAC follows the pattern of slow decline followed by
precipitous decline followed by a zombie-like shuffling through a few decades until its ultimate collapse. Davies
makes a striking comparison that captures the deep problems faced by the RAC as a trading concern in a nutshell.
He writes that “during its ‘prosperous period’ the Royal African Company was in effect borrowing money in order
to pay dividends. The total sum distributed in dividends between 1672 and 1692, £157,927, does indeed bear a
striking resemblance to the debt outstanding in the latter year, £153,413.” (Davies 1957, p. 79). It is hardly
unreasonable to wonder why they went to the trouble of trading at all! The company’s debts continued to mount
during the 1690s. In 1698 Parliament opened the West African trade to traders for the cost of a 10% duty to the
RAC for its maintenance of an African trading infrastructure, a disaster that compounded the RAC’s problems,
problems that were only to be compounded irredeemably in 1712 when its monopoly expired altogether and the
trade was opened to all.
The inability of the RAC to profit from its monopoly was a result of the structure of the principal-agent ties
in which it was entangled. Problems in the structure of the company’s relations to its agents, however, were not the
RAC’s core problem. Rather, its problems came from the structure of its role as agent to its principal, the
sovereign. Adams defines the relationship between the Dutch East India Company and the stadtholder as one of
the exogenous factors complicating VOC trading strategy (Adams 1996). Another way to understand sovereigncompany relations, however, is within the framework of principal-agent relations. In the case of the RAC this
approach helps to explain the company’s strategic choices. The RAC’s main source of trouble was not in its failed
efforts as a principal, but in the difficulties facing it as an agent. Indeed, as I will argue below, its difficulties in
regulating its agents are best understood as a side effect of the company’s agency relations with the king, suggesting
the analytical importance of taking a nested view of principal-agent relations. If we take agency relationships to be
defined by a formal or informal contract delegating certain rights to an agent who will in turn represent the interests
of the principal (Eggertsson in Adams 1996, p. 14), then the relationship between English long distance trading
monopolies and the sovereign fit the bill. The RAC’s monopoly was a right (really a bundle of rights relating to
trade and enforcement) granted to it by the sovereign. All parties clearly understood, however, that this was no
simple or venal grant, but was instead a policy tool through which the king – successfully, in the event, as I will
argue – sought to bind the company, its managers, its stockholders, its infrastructure, and its capital, to the interests
of king and realm. The monopoly was the organizing feature of the RAC’s active trading period, and much of its
activity can be understood as constrained by the interests of the principal who granted it these rights. There were
two explicit justifications given for the monopoly. The first was forts, the second slaves. The RAC inherited some
five, more or less dilapidated forts from its predecessor. Common sense in the late seventeenth century had it that
without a monopoly vested in a joint stock company, the trade would be in the hands of feckless private adventurers
who would not invest in maintaining these installations. This seems reasonable, as the experience of the RAC was
that the forts, factories, and other aspects of a permanent trading infrastructure on the African coast were ruinously
expensive. As the successes of first interlopers and after 1698 the ten per cent. men showed, they were also
unnecessary. Despite mounting evidence available to contemporaries that the forts were not essential for trade and
may have represented a disadvantage, the company between 1672 and 1698 expanded and consolidated the
infrastructure of fortifications to the detriment of its stockholders but to the benefit of the king and national
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interest. By 1672 the centrality of a regular, cheap, and voluminous flow of African captives to the sugar
plantations of the West Indies and the emerging trade model of the empire was also well understood. Expectations
for the profitability of the RAC’s monopoly over the slave trade were exaggerated, and the company soon found it
to be a stone around its neck. This was only the case, however, because the implicit contract between the sovereign
and the company, the agency relationship within the context of which the RAC received the monopoly, understood
the interests of the principal, the King, to be linked to the provision of slaves cheaply and in volume for use in the
development of the sugar plantations of the West Indies. Two problems emerged from this that help to capture the
agency trap in which the company found itself. First, the commercial response of a monopolist to losing money on
the export of a commodity would be to raise the price. What other point is there for being a monopolist? But the
terms of the relationship within which the King granted the company its monopoly defined low prices as a core
interest of the sovereign. This structure had direct political, economic, and strategic consequences, for the company
calculated that raising its prices would weaken its claims of the importance of monopoly. By the same token, the
company felt compelled to provide huge amounts of credit to the cash-starved planters of the West Indies. Slaves
were almost always sold on credit that would mature in three to six months. The company thus always had
enormous amounts of capital tied up in the West Indies. Inevitably, many of these were bad debts, and with
colonial assemblies deeply unsympathetic to creditors, the options for recovering debts were unpalatable. Needless
to say, this was a terrible business model, as were the forts maintained by the company. The company’s ruinous
commercial decisions only make sense as the actions of an agent bound to the interests of the principal. The
question of the failure of the RAC thus becomes a question of why the sovereign was so successful in binding the
company and its shareholders to the pursuit of the national interest. Indeed, if the company is understood as a
mechanism for bypassing Parliamentary restrictions on the purse and mobilizing a significant source of private
capital to nurture the emergence of the sugar trade and to maintain the political interests of the English state in
Africa, then one might rather say that the company was an enormous success.
The downfall of the RAC suggests another neglected question about principal-agent relations that I will
explore in the longer paper. How and when does the specific content of ties matter? More specifically, how is
meaning negotiated, asserted and contested in principal agent relations? In the case of the relations between king
and company just described, for instance, the building of castles and forts, while a decision of dubious commercial
benefit, makes enormous sense as a semiotic endeavor through which the agents, the RAC, could signal to the
principal their commitment to his or her interests. This interest in the thick, meaningful character of principal-agent
ties should obviously go both ways: agents are constantly struggling to construct positive meanings of their actions
(whether from honest or dishonest motives) in order to convince principal’s that they are good stewards, and
principal’s are constantly struggling to interpret the meanings of the actions of their agents and to establish the
semiotic parameters against which their expectations can be measured and the worth of their agents ascertained.
This approach, by linking meaning and action, will help in analyzing linkages between the principal-agent
relationship and the concrete actions undertaken by parties to it. While principal-agent relations are routinely
understood to have the character of an information game (often characterized by strategic asymmetries), my
approach that we should also understand it as a meaning game, where dynamics of code, sign, and interpretation are
crucial to making sense of the state of play. A way to think about this that might help clarify the point is to ask
about how principals and agents know what will be counted in their relationship as defection or as good
stewardship. This is a question of negotiated meanings, but it is crucial to understanding how control works.
Defection is only real if it is meaningful, and this is a cultural rather than an informational problem. The relations
between the RAC and its West African agents, for example, were largely carried on by letter, and this
correspondence is filled with the waging of interpretive struggles over questions of stewardship and malfeasance,
and the specific actions of actors often make most sense as moves in a meaning game.
There is one final argument that I am interested in making, but I haven’t figured out how or if it can be
integrated with what is above. Based on an analysis of the thick sociality of the principal-agent relations between the
RAC and its factors in West Africa, I will argue that the normal focus on defection as the key variable to explain in
research into agency relations is too narrow. Defection and intentional malfeasance are but one of the ways that
control can fail. Control certainly failed in the relation of the RAC principals to their West African agents, but not
due to intentional malfeasance. The pattern was rather one of incompetence, petulance, confusion, and error –
characteristics that I imagine are rather common of many agents, but which have not received sufficient attention.
A more inclusive way to frame the variable of interest in this line of research is to focus on orientation rather than
defection. Drawing on the thick understanding of agency relations as meaningful, orientation focuses on whether
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principals and agents remain oriented to a common system of meanings within which the roles of each are defined,
the parameters of communication are established, and in which the perceived interests of the principals are encoded.
Malfeasant actors willfully orient themselves to another set of interests, their own, using various strategies of
deception to conceal their orientation. The hapless agents and confounded principals that emerge in the RAC West
African correspondence can also be understood as being involved in a failure of control due to the dis-orientation
of actors. Generally, this framework accommodates a wider range of failures, from the willful deception of the
malfeasant, to the actions of the merely incompetent, to failures rooted in the interaction dynamics of principals and
agents or to social-structural sources of dis-orientation. It gives a more precise definition of what “failure” in the
context of agency relations means. My argument in the longer version of the paper will analyze the sources of this
dis-orientation, and locates it in fruitless struggles over meaning and interpretation, in the link between the logistical
arrangements made by the company and the creation of a robust and robustly meaningful social-commercial system
towards which agents could orient themselves, and the particular difficulties of interpretation in the often purely
symbolic principal-agent communications necessitated by the remoteness of the company’s West African outposts.
Adams, Julia. 1996. “Principals and Agents, Colonialists and Company Men: The Decay of Colonial Control in the
Dutch East Indies.” American Sociological Review, vol. 61, no. 1, pp. 12-28.
Davies, K.G. 1957. The Royal African Company. London: Longmans, Green and Co.
Erikson, Emily and Peter Bearman. 2006. “Malfeasance and the Foundations for Global Trade: The Structure of
English Trade in the East Indies, 1601-1833.” American Journal of Sociology, vol. 112, no. 1, pp. 195-230.
Law, Robin, ed. The Local Correspondence of the Royal African Company of England, 1681-1699. Vol. 1. London: Oxford
University Press.