WHEN LIMITED LIABILITY WAS (STILL) AN ISSUE –
CONFLICTING MOBILIZATIONS IN NINETEENTH CENTURY ENGLAND.
Marie-Laure Djelic, ESSEC Business School
djelic@essec.fr
ESSEC Business School
Management Department
Avenue B. Hirsch, BP50105
95021 Cergy-Pontoise Cedex
FRANCE
1
Abstract
The corporation is a constitutive element of modern capitalism. In its contemporary form, the
corporation comes with a striking legal feature – ownership is associated with limited liability.
Today, we tend to take for granted both the principle of limited liability and its association with
the corporate form. This was not always the case, though. In the 19th century still, the principle
of limited liability generated heated discussions and was a locus of intense “contentious
politics”. In this paper, we focus on the social movement dynamics that crystallized around the
principle of limited liability in 19th century England. Interestingly, the debates that were raging
then and there did not only have an economic focus. They also had significant social, political
and even ethical dimensions. In the end, this episode of contentious politics proved highly
consequential. It ultimately found its resolution in the formal institutionalization of limited
liability as a constitutive legal feature of incorporation. This was a striking turning point in the
history of capitalism, with profound implications for our contemporary understanding of
responsibility in economic life.
2
INTRODUCTION
The corporation is a constitutive element of contemporary capitalism. It can be hailed, on the
one hand, as the historical motor of economic development and a structuring device of global
wealth production (Chandler 1977, 1990). It can also be presented and vilipended as the source
of all contemporary ills and evils – a power hungry bureaucratic monster (Perrow 2005), a
profoundly psychopathic artificial individual (Bakan 2004) or a sprawling global octopus taking
capitalist appropriation to new frontiers. In any case, the corporation has become one of those
institutions that we, on the whole, tend to take for granted.
In its modern legal form, the corporation has three striking defining features. First, the
corporation has legal personality and is treated in legal terms as a fictional individual. As such,
the corporation has a legal existence independent of its members. It exists, potentially, in
perpetuity, and at least well beyond the life span of its original members. As legal persona, the
corporation can contract, own property, sue and be sued in its own name. Secondly, the modern
corporation comes with the translation of ownership into the holding of shares and, as a
consequence, it leads to the de facto decoupling of ownership and management (Berle and
Means 1932). In its modern form, corporate ownership tends to be broadly dispersed and
shares are (relatively) easily transferable and marketable. Thirdly, the modern corporate share
ownership is associated with the principle of limited liability. Shareholders, in other words,
cannot be made liable for the debts and other liabilities of the corporation beyond the value of
their share holdings in that corporation.
The focus, in this paper, is on this third feature – the principle of limited liability. While benign in
appearance, this principle has been and remains, I propose, a major defining feature of
contemporary capitalism with highly consequential implications. Today, we tend to take for
granted both limited liability and its association with the corporate form. The ineluctable nature,
in appearance, of contemporary institutions should not blind us, though, to their more
contingent and fragile side. All institutions are historical and social constructs. The end result
may be quite consensual while the process leading to institutional stabilization will often be
complex, contested and conflictual. Before it became an undisputed and taken-for-granted
feature of contemporary capitalism, the limited liability principle had been generating heated
discussions. It was questioned and contested and was a major locus of “contentious politics”
(Tilly and Tarrow 2006). We explore, in this paper, the social movement dynamics that
crystallized around the principle of limited liability in 19th century England. This paper lays out
rhetorical debates and conflicts but it also identifies key mobilization tactics and the ways in
which different actors strategized in order to push forward a particular position that either
3
served their interests and/or conformed to their deep ideological convictions. Interestingly, we
realize that the “contentious politics” we explore here were not only motivated by or focused
around economic issues. They also had significant social, political and even ethical dimensions.
Not only were business and investor communities involved. Many other actors mobilized in one
direction or another in those highly charged debates – policy makers and politicians, a budding
group of policy thinkers, intellectuals and journalists as well as civil society at least in the form
of various “pressure groups”.
In the first section of this paper, I lay out the theoretical case for the historical deconstruction of
institutions through the lens of social movement dynamics. Then, I identify, in the second
section, some important elements of context as I explore key marker moments in the partly
disjointed histories of the Corporation and of the principle of Limited Liability. In the third
section, I follow the politics of contention and the social movement dynamics that crystallized in
19th century England around the notion of limited liability. The fourth section brings out the
mechanisms through which the debates were progressively “resolved” – contentious politics
around that issue dying out in the process. From this exploration, I draw a number of lessons, if
not conclusions. Firstly, we probably should remind ourselves more often that limited liability is
not a “natural” feature of capitalism but a fixture that imposed itself through time in a partly
accidental manner. Secondly, the coupling between incorporation and limited liability itself is
shown to be historical and in no way “natural”. Thirdly, contentious politics will sometimes end
through the clear triumph of one side. Arguably, this is what happened in this case.
Understanding the mechanisms through which contentious politics are resolved is an interesting
theoretical challenge in itself. It also represents, I propose, a welcome bridge between social
movement theory and institutional theory. A social movement that triumphs is bound to
“dissolve” as it were into a process of institutionalization – to the point where what initially was
a “burning cause” becomes ultimately a “taken for granted” routine. Fourthly, I propose that
such crystallization is always reversible. The deconstruction, through a social movement
dynamics lens, of a potent institution renders it more contingent and more fragile, allowing us to
think of change and alternatives. Some of the current limits of contemporary capitalism, which
have become strikingly visible and consequential in the context of the world crisis, can certainly
be connected to the limited liability principle. It is surprising, in fact, that as of now, little yet has
emerged with respect to a revival of contentious politics around the notion and principle of
limited liability. This might still come, though, and this would then show that even as institutions
appear highly entrenched, they are never completely insulated from controversies, debates,
contestation and the revival of social movements.
4
INSTITUTIONS AND SOCIAL MOVEMENTS – A FRUITFUL PARADOX
In the 1970s, the revival of institutionalist perspectives in different social science disciplines –
otherwise known as the trend towards neo-institutionalism – had initially come together with a
focus on the constraining, robust and resilient character of institutions.
“Institutions endure. As a reaction against methodological individualism, technological
determinism and behavioralist models…the resurgence of institutionalist analysis in
recent years has forcefully reminded social scientists of the significance of this relative
permanence of a distinctly social sort” (Clemens and Cook 1999: 441).
Structures and behaviours were depicted as being deeply embedded and constrained if not fully
determined. Institutional persistence and its structural and behavioural impact were core
preoccupations and this across different variants of the neo-institutionalist argument (Powell
and DiMaggio 1991, Djelic and Quack 2003, Streeck and Thelen 2005, Greenwood et al. 2008).
Since the 1990s, calls for a radical reorientation have been heard loud and clear. The time had
come to turn theoretical efforts towards the problematization of institutional change,
institutional emergence and institutional demise (Oliver 1992, Greenwood and Hinings 1996,
Clemens and Cook 1999, Thelen 1999, Djelic and Quack 2003, Campbell 2004, Greif 2006). In the
process, the ontological status of institutions had to be altered as it were – rather than being
predominantly used as independent variables, they were to be considered instead as dependent
variables. Scholars moved away from a preoccupation with the impact of powerful static
constructs – institutions generally treated as givens, stable blackboxes. Instead, they turned to
explore the dynamic processes through which institutions crystallized, stabilized or else were
being challenged or transformed.
This reorientation towards institutional change and dynamics came about in different ways. A
number of studies pointed to the role of external shocks and profound ruptures. Those external
shocks were generally associated with a process of institutional diffusion – and most likely
translation – that could be envisioned as a powerful change mechanism (Westney 1987,
Czarniawska and Sevon 1996, Djelic 1998, Jacoby 2000). Others pointed to the spontaneous
emergence of contradictions through time in any kind of institutional situation, including
without the stimulus associated with an external shock. The multiplicity of institutional legacies
that were “laying around”, as it were, created many opportunities for conflict and competition
but also for bricolage, reconfiguration, layering or conversion (Padgett 2001, Crouch and Farrell
2004, Thelen 2003, Greif 2006, Schneiberg 2007). More recent work has underscored the role of
ideas and ideologies behind institutional dynamics (Campbell 2004, Czarniawska and Sevon
2005, Djelic 2006, Plehwe and Walpen 2007, Meyer et al. 2009). Time is also identified as an
5
important mechanism – in the sense that institutional dynamics will often result from an
aggregation of stages that come to have a cumulative effect (Stark 1992, Johnson 2001, Djelic
and Quack 2003, Thelen and Streeck 2005, Munir 2005). The notion of agency was also
mobilized, naturally (DiMaggio 1988). Many contributions, since this early article by Paul
DiMaggio, have attempted to tease out the “mindful deviations” associated with institutional
entrepreneurship (Garud and Karnoe 2001, Maguire et al. 2004, Greenwood and Suddaby 2006,
Levy and Scully 2007, Garud et al. 2007, for a review see Hardy and Maguire 2008). The path to
institutional dynamics that goes through agency – and particularly through the notion of
“institutional entrepreneurship” is a risky one though. It is risky because we might too easily fall
back upon models of (quasi) rational strategizing and decision-making (Greenwood et al.
2008:31). For the sake of simplicity, we could easily forget that agency, from an institutional
perspective, is always deeply embedded – of a “soft” kind (Meyer 1996). This path is risky also
because we can easily overstate the possibility for heroic agency. In fact, the emergence of new
institutional practices or their transformation often “result from spatially dispersed,
heterogeneous activity” (Lounsbury and Crumley 2007). Institutional entrepreneurship is rarely
of the heroic kind. Instead, it is often a collective process that implies and involves multiple
actors with different kinds of resources and different patterns of embeddedness (Kleiner 2003,
Botzem and Quack 2006, Djelic and Ainamo 2005, Munir and Phillips 2005, Lounsbury and
Crumley 2007).
A more interesting way to go, it seems, in order to reconcile institutional dynamics with agency
is through the notion of “institutional work”. This notion is “not intended to move us back to an
understanding of actors as independent, autonomous agents capable of fully realizing their
interests through strategic action” (Lawrence and Suddaby 2006: 219). Rather, “institutional
work” implies institutionalization and de-institutionalization as combination and aggregation of
situated practices that closely interact with “existing social and technological structures in
unintended and unexpected ways” (Lawrence and Suddaby 2006:219). This notion of
“institutional work” is compatible with the growing interest, amongst institutionalists, for social
movements and their role when it comes to institutional dynamics – emergence, change or
demise (Bartley 2007, King and Soule 2007, Schneiberg and Lounsbury 2008).
THE CORPORATION AND LIMITED LIABILITY – A (PARTLY) DISJOINTED HISTORY
6
There is no “natural” connection between the history of the corporation and that of the legal
principle of limited liability. For many decades and even centuries, both histories have run their
course in parallel with only accidental and limited encounters. In fact, the episode of contentious
politics we explore below, in 19th century England, can be seen as a turning point in that respect.
A partly unintended consequence of those debates and of their ultimate resolution was indeed
the institutionalization of a tight connection between incorporation and limited liability. From
that point on, it would become difficult to disentangle the two notions – the corporation and
limited liability. Their histories became tightly intertwined and the combined construct – the
limited liability private corporation – has become such a successful and powerful institution
during the twentieth century that it seems difficult for us today to envision a world without it.
The Corporation
Medieval jurists had defined the corporation (in Latin universitas) as being both at the same time
a collective abstraction (and hence a legal persona) and the sum or reunion of its individual
members (Canning 1996: 172-3). This corporation doctrine was initially applied to the Church,
to guilds, to cities, to the University (in the “narrow” sense of the term) and possibly even to the
(national) Kingdom or the State itself (Ekelund et al. 1996, Greif, Milgrom and Weingast 1994,
Canning 1996).
As Kingdoms, princes and states came of age in Europe and increased in power, they
progressively managed to impose a monopoly on the use of the corporation vehicle. From that
point on, the history of the corporation became closely associated with national politics and the
Prince (Willinston 1888). Incorporation became a regal privilege that the Prince would bestow
on given groups of private individuals, in general as they engaged in projects that served the
interests of the Kingdom – and of the King – and hence “public interest”. The first corporate
charters of that kind were granted for the purposes of overseas trading. In England, the Russia
Company was incorporated through royal charter in 1555 as the ”marchants adventurers of
England, for the discovery of lands, territories, iles, dominions, and seigniories unknowen”
(Willan 1953, 1956). Soon, other states and Kingdoms followed suit, getting inspiration from
this early innovation. Starting in the 1560s, France set up chartered companies with a focus on
different regions of Africa and then on Canada. The Compagnie des Indes Orientales was
chartered later on, in 1664 (Bonassieux 1892). Holland, in 1602, incorporated its Dutch East
India Company or Vereenigde Oost-Indische Compagnie-VOC (Gaastra 2003). More or less at the
same time, England granted a royal charter to its own English East India Company. Charters that
were granted by states and Kings were associated with a number of privileges. Many of those
corporations were granted different kinds of monopolies and some form of privileged treatment
7
with respect to taxes and duties. As legal persona, they could act in law as a single body. In 1623,
the Dutch Voc was granted the privilege of perpetual existence. This innovation was then soon
followed in other parts of Europe and the free transferability of shares generally came along.
In the 17th and 18th centuries, we see the progressive extension of domains where corporate
charters could be granted – mining of metals valuable in war, banks, insurance, infrastructure or
even manufacturing projects (Hickson and Turner 2005). In certain countries, and particularly
in England, this came together with the partial delegation of the monopoly to grant corporate
charters – particularly after the English revolutions in the 17th century. Charters could be
granted directly by the King or, by power of delegation, through the authority of Parliament. In
both cases, the costs associated remained high. In principle, petitioners still had to convince the
authorities that their project served the public interest. Still, there were early on debates and
controversies around the corporation and its justification. There was vocal opposition to some
of the privileges of those corporations – that were seen to be directly associated with royal fiat
and a certain form of absolutism (Hickson and Turner 2005). There was also real debate as to
the nature of the services those corporations rendered. Were they indeed serving the ”general”
or ”public” interest ? What if monopolistic corporations were nothing more than the ”byproducts of cash-strapped monarchs selling privileges to the highest bidders” (Taylor 2006: 4)?
Amongst the most vocal and violent critics of the corporation as an institution at that time, we
find no less than Adam Smith (Smith 1776). His criticism of the English East India Company was
particularly scathing but the “father of modern capitalism” denounced the size, nature and
privileges associated with corporations in general. He argued that corporations tended to reduce
and distort competition, to encourage speculation and malversation, to allow raw power and
oppression and to significantly weaken, at that, all form of responsibility.
The directors of such companies, however, being the managers rather of other people's
money than of their own, it cannot well be expected that they should watch over it with
the same anxious vigilance with which the partners in a private copartnery frequently
watch over their own… Negligence and profusion, therefore, must always prevail, more
or less, in the management of the affairs of such a company (Smith Wealth of Nations
(1999[1776]), Book V, chapter1, p.741).
Limited Liability
Historically and traditionally, economic activity in Europe has de facto been associated with the
principle of unlimited liability. In fact, the more trade intensified in medieval Europe, the more
the principle of unlimited liability became predominant in merchant practice as a means to
secure trading and exchanges and to ensure the maintenance of commercial obligations (Guerra
Medici 1982). Entrepreneurship and economic action engaged the full responsibility of the
8
individual and even of her kin. This concretely meant that all her (personal) assets and wealth
could potentially be at risk as a consequence of her economic undertakings. This principle of
unlimited liability found its clearest expression in the partnership form. Classic legal definitions
of partnership implied that each partner could be the fully accredited agent of the others. All
partners were also deemed fully, personally and solidarily liable. The dominance of the
unlimited liability principle lasted well towards the twentieth century in continental Europe
(Perrot 1982). In England, and more generally in common law countries, unlimited liability
remained the default under common law for a good part of the nineteenth century (Livermore
1935). Still, slowly but surely the principle of limited liability was unmistakably gaining ground.
The concept of limited liability could be found already in Roman law but as it were in a marginal
form. In Roman law, the pater familias could grant a slave or a son a peculium – a share of
property that they could use on their own. In that configuration, the pater familias remained
liable for any debts or liabilities incurred through the use of those funds but only to the extent of
the peculium and not beyond (Perrot 1982, Hillman 1997). The notion and practice of limited
liability are then found again in medieval Europe as a well-controlled tool for the expansion of
overseas trade. The high costs associated with sea trade imposed to search for funds outside
narrow kin circles. This combined with high risks to spur a legal innovation in commercial
Italian cities – the commenda (Guerra Medici 1982; Carney 1995; Carney 1998). In contrast to
partnerships (compagna), the commenda counted two groups of associates. The traveling trader
or owner of the ship had unlimited liability but the liability of his investing partners was limited
to the extent of their investment. The Napoleonic code of 1807 institutionalized this legal form
(Société en commandite in French) and contributed to its diffusion in continental Europe.
All in all, the early steps of the corporation in Europe happened more or less at the same time as
the first legal inscription of the limited liability principle. Interestingly, though, these two
developments were disconnected. Members of early corporations tended to fall under unlimited
liability. This was, for example, the case originally for most European Universities. As Adam
Smith reminds us, “the present universities of Europe were, originally, ecclesiastical
corporations founded by the authority of the Pope and instituted for the education of
churchmen” (Smith 1999[1776]: Book V, cha. 1). In those early times, corporations of such kind
were under an unlimited liability regime. An interesting and surprising historical residue of
those times is that some contemporary Universities or University colleges, particularly in
common law countries, could in fact still be to this day corporations formally associated for their
Fellows (Faculty members) with unlimited liability (Perrott 1982: 91). Only towards the end of
the 17th century did the Sovereign (the national Sovereign by that time) start to use sporadically
9
the limited liability principle as an added privilege that it would bestow on certain corporations.
In England, this started with an Act of Parliament in 1662 that granted limited liability to a small
number of corporations, including the English East India Company (Clapham, p.267).
Nevertheless, common law went on prevailing and “the liability of members of even a chartered
corporation was unlimited unless their charter specified that it was limited” (Perrott 1982: 91;
see also Livermore 1935; Hunt 1936).
On the whole, the second half of the seventeenth century in England was characterized by the
acceleration of two concurrent developments that, furthermore, became increasingly connected
– the liberalization of incorporation and the progress of the notion of limited liability. The
liberalization of incorporation seemed to increase the range of the possible. It appeared that all
kinds of domains, all kinds of activities could possibly be granted a charter. The liberalization
with respect to domains was also associated, as we saw, with the granting of additional
privileges. And there, the 1662 Act institutionalizing limited liability as a privilege that could
possibly stem from incorporation was undeniably pivotal. Arguably, this was also a key marker
in the process that brought both trends in closer connection – the progress of incorporation and
the progress of limited liability. The consequence of all this was that, by the end of the 17th
century, corporate charters and corporate status were becoming increasingly attractive.
Partnerships came to mimic incorporated companies and attempted to function as if they were
incorporated (Ireland 1984; Harris 1994). A market or traffic in charters developed where old
charters were, as it were, “recycled” – traded or sold for the development of projects that were
entirely unrelated to those which had initially obtained a charter. The trading in shares (of both
incorporated and non-incorporated companies) for short-term profit, otherwise known as
“stock-jobbing” became a real sport (Hunt 1936; Harris 1994). In short, under the eyes of a
dismayed Parliament, England was falling prey to the fever of speculation:
The pernicious art of stock-jobbing has so wholly perverted the end and design of
companies and corporations – erected for the introduction or carrying on of
manufactures… The privileges granted to the [corporations] have commonly been made
no other use of by the first procurers and subscribers but to sell again with advantage to
ignorant men drawn in by the reputation, falsely raised and artfully spread, concerning
the thriving state of their stock” (House of Commons Journal 1696: 595).
The fever would only get worse when the Sovereign got the idea to use corporate charters to
convert public debt into shares of companies (Hickson and Turner 2005). The Mississipi
Company, with the infamous John Law at its head was chartered in France in 1718 and the South
Sea Company charter was redefined for that purpose in 1719 in England (it had received a
charter in 1711 for trade with South America). The “aggressive marketing schemes” those
corporations pursued generated a bubble (Petterson and Reiffen 1990). In England, other actors
10
jumped on the bandwagon, most of which were unincorporated and the fever seemed soon to
reach the entire society.
Some of those unincorporated companies were in the process of seeking corporate
charters, some merely claimed to be seeking charters, and some were organized for the
purely fraudulent purpose of cashing in on the bull market (Petterson and Reiffen 1990:
167).
Naturally, the bubble burst. An Act of Parliament was passed in June 1720, known as the Bubble
Act (Harris 1994). This Act expressly re-affirmed that joint stock companies could only exist if
and when they were chartered by royal or Parliamentary fiat. In the wording of this Act, “all
companies presuming to act as a corporate body…raising a capital stock not intended by their
charter… acting under any obsolete charter… forever be deemed illegal and void” (quoted in
Harris 1994). In the dominant view, the Bubble Act is presented as a reaction to the bursting of
the bubble and as a political attempt to contain associated disruptions (Shannon 1931, Amsler et
al. 1981). More recent historiography, though, shows that in fact the Directors of the South Sea
Company were quite involved in the lobbying for this Act (Patterson and Reiffen 1990). The
South Sea Company was apparently trying to protect its expected profits and saw the intense
activity around its projects as an obstacle and a source of disruption. In the words of a
contemporary observer,
the South Sea managers were resolved to have the whole game of bubbles (so
exceedingly profitable) for themselves only and the act was manifestly designed for its –
South Sea Company – service (Harris 1994: 617).
In any case, this episode significantly slowed the conjoined progress in England of the joint stock
company and of limited liability. The John Law scandal had very much the same effect in France.
DEBATES AROUND LIMITED LIABILITY IN ENGLAND
The Context
Debates around incorporation and limited liability came back to the fore in England at the
beginning of the 19th century – as the first industrial revolution was barely announcing itself. In
particular, railways and their high capital intensity soon brought back powerful vocal critics of
the Bubble Act. The key argument of those critics was that the Bubble Act was an outmoded and
stifling legal constraint blocking the industrial development of the country. The debate was
intense and the Bubble Act had also powerful champions. John Scott Eldon, then Lord Chancellor
of Great Britain, kept arguing that for an unincorporated association to claim corporate
personality was an offense at common law (Perrott 1982; Harris 1997: 689). In the early 1820s,
a speculative boom was in process and a great number of unincorporated companies were being
created – in direct disregard to the Act’s provisions (Harris 1997: 679-80). This generated
11
heated exchanges outside and inside Parliament but also intense lobbying if not manipulation. At
the end of April 1825, Peter Moore, a member of Parliament who was also a “serial” director on
many boards of unincorporated companies, proposed a bill to amend the Bubble Act. The bill
was discussed, modified and simplified and the version that passed the House of Lords at the
end of June was in fact a repeal of the Bubble Act. It would seem, at first sight, that the
champions of the Bubble Act had lost. Another interpretation, though, is that they gave up on
this particular fight because they believed that common law, in the end, would prevail in courts
(Harris 1997: 693-95).
Still, in retrospect, this moment proved to be a key turning point in the history of British
corporate law. But it would take another twenty years before a general incorporation bill was
finally passed – this time de facto turning around common law when it came to incorporation. In
1841, the President of the Board of Trade, Henry Labouchere, moved for a select committee to
explore the rising occurrence of frauds and fraudulent behaviors associated with joint stock
companies – whether incorporated or not incorporated. In 1844, this committee then chaired by
William Gladstone1, who was by then the new President of the Board of Trade, concluded that
fraudulent behavior was all the more prevalent when companies were not incorporated. Its
members suggested, as a solution, “a course of legislation calculated to make every joint stock
company respectable, whether successful or not” (Committee on JSC 1844: 162-74). The idea
was a bill for general incorporation, where registration would be automatic under certain
criteria thus bringing the state discretion over incorporation to an end. Lo and behold, this
indeed amounted to a complete reversal of common law logic. The key argument of members of
this committee was that bringing the unincorporated company within the law “would attract
towards it respectable directors and respectable managers, whence will inevitably result
respectable transactions” (Committee on JSC 1844: 162-74). The Bill introduced on the basis of
those conclusions was presented as solving two (contradictory) problems at the very same time.
On the one hand, it would satisfy those who called for a more liberal regime of incorporation. On
the other hand, it would bring all companies within the law, subjecting them to systematic
scrutiny and hence reducing opportunities for fraudulent behavior. In the end, the fact that this
bill was managing to bridge such contrasting preoccupations can certainly explain why it passed
relatively easily. The Joint Stock Companies Registration and Regulation Act of 1844 created a
Registrar of Joint Stock Companies. All partnerships having more than twenty-five members and
freely transferable shares were required (and hence de facto allowed!) to register as
corporations. Before being conferred full corporate status, though, they had to provide
In the 1980s, Margaret Thatcher often liked to claim that William Gladstone would have felt perfectly at
home with the types of politics she was implementing then in Britain.
1
12
information and appoint auditors to “receive and examine the accounts”. Regular information
and publicity demands were furthermore made on corporations (with respect to members and
their holdings). In exchange, those companies could function with all privileges incident to
corporations (Hunt 1936: 95-8). By then, though, limited liability was not on the list of
systematic privileges. The common law principle remained in place that unless otherwise
specified in their charter, corporations were operating under unlimited liability. Hence, while
the Act of 1844 “marked an epoch in the history of English company law”, this was because it
turned incorporation into a general regime (Hunt 1936: 94). The legislator had yet to go after
the well-entrenched general principle of unlimited liability.
Conflicting Arguments in the Debate on Limited Liability
And indeed, after 1844, the debate moved towards the issue of limited liability. This debate
turned out to be intense and complex (Hunt 1936: 116-7). It involved and pitted against each
other a number of very different groups. The arguments that were mobilized were in part
economic arguments. Interestingly, though, this debate also appeared to have political, social,
cultural and even ethical implications. This debate found dense expression in two pivotal
Committees appointed in the early 1850s. In both cases, the initiative came from Robert Slaney,
a Member of Parliament. Robert Slaney had had a long career as social reformer. He worked
closely with the English circles of Christian socialists and was widely known by the mid
nineteenth century for his “benevolent exertions to ameliorate the conditions of the poor”
(quoted in Hunt 1936: 118). In 1850, he moved within the House of Commons to propose the
appointment of a parliamentary committee on investments for the savings of the middle and
working classes (Select Committee on I for S 1850). In 1851, he called for (and obtained) the
creation of a committee on the law of partnership (Select Committee on the Law of Partnership
1851). As consensus did not seem to emerge, the need was felt for another round of discussion.
Hence, a Royal Commission on the Mercantile Laws and the Law of Partnership was set up in
1853, producing a report in 1854 (Royal Commission ML 1854). This intense debate was
naturally further relayed outside the limits of Parliament, in newspapers, quaterlies, pamphlets,
clubs, learned and debating societies throughout the country (Taylor 2006: 150). Throughout
this period and the diverse discussions, the case remained quite split. Radically opposed
positions could be found across the board within the same professional groups. Members of the
Royal Commission on the Mercantile Laws underscored as late as 1854 that they were
…much embarrassed by the great contrariety of opinion… Gentlemen of great experience
and talent have arrived at conclusions diametrically opposite and in supporting these
conclusions have displayed reasoning power of the highest order (Royal Commission ML
1854: 5).
13
Table 1 indeed documents this great “contrariety” and how open the case of limited liability still
was in the mid nineteenth century in Britain. Out of 74 opinions gathered from within Britain by
the Commission, 36 appeared to be rather in favor of the extension of limited liability to joint
stock companies by right while 38 were rather against.
Table 1 about here
An Unlikely Coalition in Favor of Limited Liability
We can identify essentially three groups here that were to lead the coalition in favor of limited
liability. Each of those groups had quite different reasons to champion the principle of limited
liability. Firstly, as should be expected, we find a share of the British business community – that
part of it most closely involved in the corporate boom and for a great part based in London.
Secondly, we can point to the importance of liberal politicians, policy thinkers and intellectuals
who were then gaining ground in Britain (a coalition at the time of Whigs and Peelites –
otherwise known as liberal conservatives – that would be the base for the creation of the Liberal
Party at the end of the 1860s). Thirdly, and more surprisingly, we should not forget the pivotal
role of a group of social reformers, trade union leaders and Christian socialist thinkers.
The first two groups argued more or less along the same lines, putting forward essentially an
economic rationale. The idea was that limited liability was necessary to accompany
contemporary British economic development. In the words of a contemporary Director of the
Bank of England, G. W. Norman, called as witness to the Royal Commission of 1853-4, Britain
should take
The crowning step in removing the fetters from human industry, by removing from her
code the last of those enactments which (could) impede a free development of her
industrial resources (Royal Commission ML 1854: 170).
Without limited liability, it was argued, the wealthy in that country would be deterred from
participating in registered companies – as this could potentially imply a high personal liability
burden. Hence, those risky adventures, which were so necessary for the industrial development
of the country, could come to be thwarted due to a lack of capital. The argument there built in
part upon the fact that, in the period leading up to the 1844 Act, wealthy investors were much
more systematically targeted in situations of bankruptcy under unlimited liability. The
ideological underpinnings within both groups were a mixture of liberalism and modernization
theory. Britain should strive for industrial development. Individual initiative was key but the
capital-intensive nature of many undertakings called for efficient vehicles that could pool
14
together large numbers of individual investors. The proponents of limited liability, from this
perspective, demanded the “enfranchisement of capital”, its right of association and competition
on equal terms in the name of freedom of contract (Bryer 1997: 38). The idea, in those two
groups, was that the 1844 Act had gone in the right direction. However, the argument went on,
this Act would not be really effective if it were not associated with the limitation of liability – as
an enticement to greater risk taking (Perrott 1982). Without limited liability, it was feared,
wealthy individuals – who had the most to lose – would not invest in those risky ventures (Bryer
1997: 40). Broadly speaking, the arguments that were used in this group in favor of limited
liability were quite parallel to those used to defend free trade. G. W. Norman again made this
quite clear
The permission to all men, to employ their capital and industry in that manner which
they think most suitable to their own interest, unshackled by hostile enactments on the
part of the legislature, is found on the whole to be most conducive to the general
prosperity. It is the principle upon which the doctrine of free trade is based – upon which
the strict law of apprenticeship has been abolished, the guilds and licensed companies of
former times have gradually disappeared, and been replaced by a state of things based
on open competition (Royal Commission on ML 1854: 168).
This liberal and modernizing posture was powerfully relayed within civil society through the
quite numerous, active and vocal journals and publications that were then in Britain pushing
this kind of agenda – The Economist naturally but also the Quarterly Review or the Westminster
Review for example (Loftus 2002: 107). In an interesting attempt at synthesis, the Quarterly
Review suggested that limited liability would be a powerful means to extend the market. This
would furthermore, the argument went on, solve some of the most crying social issues without
having to fall into dreadful (and dreaded) social welfare schemes.
(Limited liability) combines all the requisites and avoids nearly all the prohibitions
which mark out the legitimate path to philanthropic aid. It interferes with no individual
self-action; it saps no individual self-reliance. It prolongs childhood by no proffered
leading strings; it valetudinareses energy by no hedges or walls of deference, no fetters
of well-meant paternal restriction (Quarterly Review as quoted in Loftus 2002: 107).
The extension of the market, through the extension of limited liability, should progressively turn
the laboring classes into “tranquil and conservative citizens”, contributing in the process to
social peace and stability.
Beyond the ideological argumentation, self-interest also played a role within those two groups.
The parts of the business community that tended to be favorable to limited liability were often
those amongst the most involved in the corporate and/or speculative drives (Taylor 2006).
Limited liability would no doubt ensure that, as investors, they “might sleep more easily at night,
their rest less frequently disturbed by dreams of bankruptcy and destitution” (Reader 1982:
191). On the side of the politicians, one naturally cannot dismiss the fact that there were
15
sometimes quite incestuous connections between them and the community of corporate
investors. As in the years building up to the 1844 Act, lobbying and different forms of cooptation
(including through what we would call today bribes or corruption) were important means
through which this part of the “yes” coalition pushed their agenda (Hunt 1936: chas. V and VI;
Taylor 2006: cha. 4). Amongst the politicians, we also find an interesting combination of
principled skepticism and pragmatic agreement that something needed to be done. In 1847,
Henry Labouchere had again become President of the Board of Trade. As the two select
committees were starting to work, he made it quite clear that “his private opinion had always
been and still remained adverse to limited liability”. However, he also allowed that the
government was anxious to consider the issue seriously (Taylor 2006: 148).
The third group within the “yes” coalition started from a completely different perspective.
During the first part of the nineteenth century, quite a number of initiatives had targeted the
protection and investment of working class savings. The savings banks, the friendly societies or
the building societies (all different kinds of mutual benefit associations) were all part of this
trend (Hunt 1936: 119). Such an evolution, naturally, cannot be understood outside the context
of the first industrial revolution in Britain and associated calls for social reform (Ludlow and
Lloyd 1867). In reaction to a dark analysis of industrialization and its social ills, a broad base
movement for political and social reform had come to gain ground in Britain by the late 1830s
(Ludlow and Lloyd 1867, Loftus 2002; Taylor 2006). Chartism, as this movement came to be
known, was striving for political equality (of adult males), universal suffrage, secret ballot and a
democratization of parliamentary representation. This broad based movement served as the
foundation for the political mobilization of some vocal social reformers around limited liability.
The issue of limited liability was taken up both within and outside parliament by some key social
reformers and Christian socialists – John Stuart Mill, Nassau Senior, Richard Cobden and Robert
Slaney amongst others. As indicated above, in 1850, Robert Slaney moved within the House of
Commons to propose the appointment of a parliamentary committee on investments for the
savings of the middle and working classes (Select Committee on I for S 1850). His argument for
initiating such a committee was that the working people needed help to identify means to “safe
investments for their savings” and should be afforded “the means of forming societies to insure
themselves against coming evils frequently recurring” (House of Commons 1850: 420). He
claimed,
furthermore,
that
the
principle
of
unlimited
liability
blocked
initiative,
entrepreneurship and risk-taking within the middle and working classes. If liability were to be
limited, there was no doubt that “many local works of great benefit would be undertaken which
would return an ample profit” (House of Commons 1850: 423).
16
Of the 17 witnesses who came to testify in front of this committee, six were closely associated
with the Christian Socialist movement, two were workmen and a star witness was John Stuart
Mill. In the debates and discussion that ensued within the Committee, limited liability was first
of all presented as a tool for a broad base economic and industrial development of the country,
with a dense local base, that would benefit all but in particular the middle and working classes.
Another great obstacle to investments in all undertakings to be carried on by combined
capital is to be found in the existing law of unlimited liability of partners…. It is in
evidence before your Committee that the difficulty in question has impeded many local
projects of improvements, some of which might afford a reasonable prospect of fair
investments for the middle and working classes… (Select Committee on I for S 1850: vi).
Limited liability could become a powerful instrument, it was argued, for the building of local
communities tied together by a common project and shared interest through shared investment
(Loftus 2002: 108). A broader base for the limited liability principle would make it possible to
mobilize the savings of those classes themselves but it would also, according to John Stuart Mill
“enable the rich to lend to the poor” or in other words create opportunities for wealthy investors
to put money into undertakings that ultimately were to serve the interests of the middle and
working classes (Saville 1956). Another key argument was that limited liability would be a tool
of democratization of the national and local economy. The parallel there was striking to the
Chartist fight:
The advantages arising from self-respect, and the pride of associating themselves as such
shareholders with their more wealthy neighbors for a common purpose ought not to be
forgotten (Select Committee on I for S 1850: vi).
In the early 1850s, limited liability remained a privilege that was granted often in a quite opaque
manner by the Crown or Parliament to certain (and small numbers) of corporations. A law that
would turn limited liability into the equivalent of a common law default would, it was argued,
contribute in a very positive way to the general democratization of the economic, social and
political playing field in Britain. It would become, in the process, a powerful tool favoring social
peace and stability:
It would be desirable to remove any obstacles, which may now prevent the middle and
even the more thriving of the working classes from taking shares in such investments,
under the sanction of and conjointly with their richer neighbors; as thereby their selfrespect is upheld, their industry and diligence encouraged, and an additional motive is
given to them to preserve order and respect the laws of property (Select Committee on
LP 1851: vii).
Limited liability would make it possible to create “associations of working men working for
common profits, with certain rules” (Select Committee on I for S 1850: 48). Working and middle
classes, it was argued, when choosing investment, were “more influenced by the certainty of
safety than by the hope of great profits” (Select Committee on I for S 1850: 47). The political
17
economy of John Stuart Mill went one step further. Limited liability could even make it possible
to interest workers and employees into the capital of a firm run by their employers. Mill
suggested that capital and profit sharing schemes where workers and employees had a stake
would become an option as limited liability became broadly available. He argued further that
this was not only highly beneficial to the “operatives employed” but also “to the general interest
of social improvement” (Mill Book IV, cha. 7; Select Committee on I for S 1850: 13). A last
category of arguments, on this side of the coalition, bore upon the oft-heard criticism that
limited liability encouraged speculative behavior and fraud. Interestingly, the reasoning in this
group was completely reversed. Corporations with unlimited liability were particularly risky for
investors. As a consequence, the argument went, they would not attract prudent and reasonable
investors but rather reckless adventurers or risk takers who would either not measure risk
properly or either make crazy gambles. In contrast, some of the witnesses suggested,
corporations with limited liability would attract more level-headed investors while they would
also turn out to be less interesting to the high flyers of speculative risk. Limited liability,
furthermore, would decrease the dangerous impact of fraud, crisis or mismanagement – the
latter could indeed be completely devastating in a context of unlimited liability. All in all,
unlimited liability had
…the effect of preventing prudent and cautious persons who would be the best managers
and whose names, perhaps, would be the best guarantees for the prudence of the
speculation, from entering into it…. (In contrast), supposing a dozen individuals were to
associate together, if they could show that they were not at the mercy of any dishonest
member of the association, they could offer better security for advances of capital than
they can now (Select Committee on I for S 1850: 14 and 49).
Keeping the Mermaids of Limited Liability at Bay
Interestingly, on the other side of the debate, we find a quite parallel mix of groups and social
categories. Parts of the business community, first, tended to be quite skeptical about the
proposed limited liability revolution. Then, we find some strong opponents amongst politicians
and policy makers – mostly within the more conservative wings of the Conservative (Tory)
Party. Finally, there were also some negative reactions within the broad family of social
reformers and social(ist) critics. As was already indicated in Table 1 above, the split within the
business community followed to some degree the geographical frontier between London and the
rest of the country. In other words, businessmen outside London were more likely to be opposed
to a broad extension of limited liability. Another interesting frontier – somewhat more
surprising from our contemporary perspective – was that separating bankers from
manufacturers. Bankers as a category, it appeared, were more likely to be skeptical of limited
liability.
18
In direct continuity with Adam Smith’s early qualms about the Corporation, a key argument on
that side of the debate bore upon the governance impact of limited liability. The corporation,
Adam Smith had already warned, because it separated management from ownership, created a
string of governance issues. On the one hand, managers were in charge of other people’s money
and as such could not “well be expected that they should watch over it with the same anxious
vigilance with which the partners in a private copartnery frequently watch over their own…”
(Smith 1999[1776]: Book V, chapter 1). Not only would managers be unlikely to serve to the full
the interests of their “principals”. They were, in fact, also likely, it was argued in the 1850s, to
deploy energy to serve rather their own self-interest. Well ahead of our twentieth century
theorization of transaction cost and agency issues, quite a number of British businessmen were
warning of the risk of opportunism with guile that was associated with the corporate form.
According to the Scottish political economist, John Ramsey McCulloch, managers “not
unfrequently act in bad faith... endeavouring to advance their own interest at the expense of
their employers” (Amsler et al. 1981).
This opportunism with guile could be reinterpreted as reflecting the limited liability of managers
within a corporate scheme. The idea discussed in the 1850s of extending the principle of limited
liability to share ownership in all companies/corporations was seen as potentially creating a
second layer of opportunism with guile. Now, owners being granted limited liability would not
be so eagerly watching over and controlling managers. The personal risks to owners were
drastically reduced and so would the intensity of their involvement in control and monitoring.
This double layer of limited liability, it was argued then, would only further “negligence and
profusion”, mismanagement if not risky or fraudulent behavior (Shannon 1931; Saville 1956;
Amsler et al. 1981). William Entwhistle, a banker representing the Manchester Commercial
Association drew from this a conclusion that was shared by a number of his colleagues. He
declared himself strongly opposed
…decidedly to any and every proposal to establish a law of partnership with limited
liability for trading purposes (as the latter would be) dangerous to commercial people
generally (Royal Commission on ML 1854: 109).
Another dimension of the argument was the great imbalance the extension of limited liability
would create in many industries and markets. This would make it all the more difficult for
traditional partnerships or non corporate firms to thrive or even survive in a context where
corporations would be even more likely to drain capital (Taylor 2006). The Royal Commission
report of 1854 summarized it plainly:
19
The benefit to be acquired by the managing or limited partners will be at the expense of a
more than countervailing amount of injury to traders bearing the burden of unlimited
liability, who will have to enter into competition with those who enjoy the protection to
be given in the proposed law (Royal Commission on ML 1854: 6).
The project to extend limited liability finally also played in a different direction within the
British business community. Unlimited liability associated with corporate risk tended to put,
potentially, a heavy burden on richer investors. The latter could become liable to the full extent
of their personal worth in a situation of bankruptcy. In that context, creditors in general and
banks in particular could feel relatively protected. After all, they would always be able to go after
the more wealthy corporate investors. If limited liability were to be extended and became the
new default principle for corporate investing, this would be dangerous to creditors. The limited
liability of investors could in fact be reinterpreted as a way to transfer some – if not most – of the
risks to creditors. This certainly explained why bankers on the whole were reluctant to accept
the broad extension of limited liability. In the eyes of bankers, the problem was certainly
compounded by the fact that discussions around the extension of limited liability always
stopped at the border of the banking and insurance industries. There still was broad agreement
in that period that limited liability in those industries would not be a good idea (Saville 1956:
426-27; Taylor 2006).
Many conservative politicians were, in parallel, also quite opposed to the progress of limited
liability within the British context. One of the arguments that could be found in that group was
that there was no shortage of capital in the British economy. Industrialization was progressing
apace if not in fact too fast sometimes. The introduction of limited liability could be justified in
countries like France where capital remained dormant and investment sluggish. In Britain,
opening the floodgates further was not necessary. In fact, it might even be detrimental as it was
bound to generate, in a situation of pre-existing capital abundance, speculation and overheating
(Saville 1956). In the words of Lord Curriehill, a lawyer and Supreme Court Judge of Scotland
and one of the eight members of the Royal Commission on Mercantile Laws
(t)here is in this country an abundant, and indeed an exuberant, supply of capital for the
demands of commerce – as is demonstrated by the low rate of interest and the high price of
the public funds (Royal Commission on ML 1854: 19).
The Banker Thomas Baring, heir to the Barings dynasty, strongly argued along the same line.
According to him, while limited liability could be seen as appropriate in poor countries such as
France, “in this country they surely had enough of capital and no want of enterprise.”
Competition, he went on was already too fierce and should not be further encouraged (Bryer
1997: 41). It is interesting to note that this Thomas Baring was a first cousin of Henry
20
Labouchere, President of the Board of Trade from 1847 to 1852. Labouchere’s mother was a
daughter of the old Francis Baring, founder of the dynasty and Labouchere’s wife (and cousin)
was also from the Baring family. If this was not enough, Labouchere’s private secretary while he
was at the Board of Trade was himself called Thomas Baring. He was the great grandchild of
Francis and nephew of the testifying Banker Thomas Baring. It is certainly difficult to envision
more incestuous relationships between (conservative) business groups and politicians!
Another argument against the broad extension of limited liability was that this ultimately
seemed to run in direct contradiction to common law. Such an argument was still potent
amongst conservative politicians, legal scholars and practitioners of different sorts. Unlimited
liability, it was argued, was founded on the “natural justice” of individual responsibility. “He,
who feels the benefit should also feel the burden” (Royal Commission on ML 1854: 15). This
“natural justice”, it was further argued was embodied in common law. The legal precedents,
though, of 1825 and 1844 arguably weakened the claim that common law was the ultimate
referent. The combination of the repeal of the Bubble Act in 1825 and of the passing of a general
incorporation Act in 1844 had all but entirely put common law upside down when it came to
incorporation. Corporate status used to be an exception under common law, a rare privilege
granted in spite of common law by the Sovereign. The recent legal developments essentially
meant that incorporation had gone from this marginal status to becoming a de facto general rule
– a new common law. Certainly this evolution weakened the argument that common law was, on
principle, inviolable!
A third line of argument proved quite interesting and in fact probably connected to the
discussion around the essence of common law. The idea was that British traders and merchants
had built their place and reputation in the world on a broad principled morality that reflected a
deep-seated sense of responsibility (Saville 1956). In other words, British wealth and prosperity
rested on the global reputation individual traders and merchants had fought hard to acquire and
stabilize. This reputation had been built through a combination of sense of responsibility and
personal morality that had then generated trust. This sense of responsibility was much more
than a simple “technical”, commercial competence. It was pictured as an essential character trait,
reflecting a deeply embedded collective and national ethic. John McCulloch expressed this quite
strongly:
In the scheme laid down by Providence for the government of the world, there is no shifting
or narrowing of responsibilities, every man being personally answerable to the utmost
extent for all his actions. But the advocates of limited responsibility proclaim in their
superior wisdom that the scheme of Providence may be advantageously modified, and that
debts and obligations may be contracted which the debtors though they have the means,
shall not be bound to discharge (McCulloch 1859: 321).
21
Thomas Baring, the Banker, reinforced this claim by proposing that there was no way of
preventing fraud “unless the man with the money should be responsible for the character of the
business” (Bryer 1997: 41). This kind of argument associated limited liability with speculation,
risk-taking, absence of ethics and fraud in a manner that Adam Smith would probably have
endorsed:
This total exemption from trouble and from risk, beyond a limited sum, encourages many
people to become adventurers in joint-stock companies, who would, upon no account,
hazard their fortunes in any private copartnery (Smith 1999: Book V, cha. 1).
In contrast, the ethic of the British merchant was embodied in common law, in the principle of
unlimited liability. Naturally, whether or not the image projected here of British pre-Victorian
and early Victorian traders and merchants could easily be reconciled with the perceptions of
“others” throughout the world is beyond the point here. What we are interested in is the
projected self-perception. From that perspective, a move towards the broad extension of limited
liability was not only challenging common law. It was in fact questioning a projected identity.
The issue was not only economic; it was also ethical and cultural. The debate was, unmistakably,
a debate between “two profoundly conflicting worldviews” (Bryer 1997: 38).
And indeed it was. The broad introduction and extension of limited liability amounted to a deep
cultural and ethical revolution. A number of social reformers, pamphleteers and socialist critics
argued along this line (Feltes 1974). The most famous of those is certainly Charles Dickens. In
Mutual Friends, Charles Dickens gives a vivid picture of the profound cultural transformation
affecting the country after limited liability had been coupled for good with the general law of
incorporation (Dickens 2002a[1864-65]; see also Dickens 2002b[1855-57]). Those critics of
limited liability within the social reformers/socialist groups came strikingly close in their
analysis to diehard conservatives. This new culture brought with it the seeds of irresponsibility,
greedy speculation, irrational risk taking (Feltes 2002). Pirates, adventurers and starving
ambitions would all be encouraged. For conservatives this would profoundly “interfere with and
ruin established traders” and it would disrupt the deep-seated social order they fought to
preserve. For social reformers, this would create wild expectations in the working and lower
classes that were bound to crash in the end upon hard walls – the young ambitious with wild
stars in their eyes falling back harsher on the ground they came from (Dickens 2002a[1864-65]).
In the words of McCulloch, the condition of the working classes would never be improved by
“withdrawing their attention from the businesses to which they have been bred…to fix it upon
joint-stock adventures” (McCulloch 1856: 322). Lord Curriehill, a member of the Royal
Commission built upon common law to argue against limited liability. Using Adam Smith, he
express the fear that
22
Prudent investors might reckon it too dearly bought, by surrendering the right of taking
part in the management and control of their own business to the speculative classes
enabled to acquire this privilege by merely contributing a small portion of their means and
so indulge their spirit of adventure without endangering the remainder of their fortune;
this would prove an irresistible temptation (Royal Commission on ML 1854: 48).
Many historical antecedents could be mobilized and used to buttress the claim that
incorporation – all the more as it was coupled with limited liability – would generate endless
speculative waves followed by profound and deeply disturbing economic and social crises. The
events and speculative frenzy that preceded the Bubble Act and the return to an intense period
of speculation after this Act was repealed in 1825 were, in particular, easy to mobilize for such a
claim.
MOVING TO (FORMALLY) RESOLVE THE DEBATE
The Royal Commission on Mercantile Laws published its report in early June 1854. Five of the
eight Commissioners accepted to sign the Report, which in the end recommended against
adoption of general limited liability. The three commissioners who refused to sign were George
Bramwell, an English judge from a well-known banking family, Kirkman Daniel Hodgson,
President of the Chamber of Commerce in Glasgow and James Anderson, Lord Provost of
Glasgow. In their separate opinions, all three expressed their wish to see a general extension of
limited liability. In spite of this rather negative report, activity around the limited liability issue
did not abate within Parliament. Robert Collier, a lawyer and Liberal MP, moved a resolution on
June 27 to “permit persons to contribute to the capital of partnerships on terms of sharing their
profits without incurring a liability beyond a limited amount” (House of Commons 1854: 764).
He called for deep changes in the law of partnership and suggested that “but for its violation we
should still have travelled in stage coaches and voyaged in sailing packets” (Hunt 1936: 133).
The attack against the naysayers got organized and became very intense. Richard Cobden, a
manufacturer and radical liberal MP violently challenged those who opposed limited liability.
The onus, he proposed was on them to defend their case. In his view,
There was a total absence of argument on the part of those gentlemen when their reasons
were brought to the test. They gave their opinion; that opinion might have been a prejudice,
or might have been something derived from other people. But let hon. Gentlemen weigh the
evidence and they would find on the side of those who argued for limited liability, reasons,
facts, arguments and strong principles (House of Commons 1854: ).
Viscount Goderich, a Peelite or Liberal Conservative, seconded Robert Collier’s motion as
consistent “with the whole course of recent commercial legislation” (House of Commons 1854:
760). The Liberal coalition within Parliament was on all fronts. Members of this coalition
claimed to have public opinion on their side; they suggested that “no journals in the country
23
except the Leeds Mercury would admit an article against limited liability” (Hunt 1936: 133). The
members of this coalition took in turn all the main arguments of the naysayers and tore them to
pieces. Richard Cobden scorned the men of business who appeared to oppose Collier’s
resolution. This was a profound mistake he proposed as
A law of limited liability could not benefit anyone if it did not benefit the capitalist. I
could not imagine anything more suicidal on the part of capitalists than to oppose this
proposition which would afford new and hitherto unthought off openings for their
capitals (House of Commons 1854: 784).
Robert Lowe, a Liberal MP, boldly championed the virtues of competition even if increased levels
of competition should lead to the disappearance of certain players.
As a free trader, I can see nothing but good in increased competition and if the result of it
should be…to drive small traders and partnerships with unlimited liability out of the field,
this could only be by cheapening production, from which the public would gain far more
than individuals would lose (Royal Commission on ML 1854: 84).
Other liberal MPs agreed. How could limited liability lead to undue competition? Competition
was always good; the more there was of it, the better. How could it be possible for a country to
be “too rich”? With all due respect to the Commissioners, Robert Collier suggested, they had
shown “(he) would not say ignorance but a total disregard of the principles of political economy”
(House of Commons 1854: 758). Robert Lowe also attacked the principled reference to common
law. While he agreed that “he who feels the benefit should also feel the burden” was true
“enough as a principle of natural justice”, he added that this was true only “in the absence of
contract”. The argument, ultimately, amounted to putting the freedom of contract first, above
and beyond common law:
There is a maxim equally true that anyone can renounce a right introduced for his
benefit, and if people are willing to contract on terms of relieving the party embarking
his capital from loss beyond a certain amount, there is nothing in natural justice to
prevent it (Royal Commission on ML 1854: 195-96).
Many criticisms also targeted the long-standing management by exception that then fell in the
hands of the Board of Trade. Either common law was the ultimate referent and there could be no
exception or it was not and then all should benefit from the same exceptions. The discretionary
power of the Board of Trade when it came to granting limited liability was increasingly depicted
as arbitrary and unfair (Hunt 1936: 123). In the end, the controls and constraints over both
incorporation and limited liability were denounced as profoundly anti-liberal, as belonging with
“the old school of political economy which David Hume and Adam Smith were among the first to
assail” (Westminster Review 1853). When remembering Smith’s scathing words on
Corporations, though, this indeed is ironic! According to Smith “to establish a joint-stock
company for any undertaking…would certainly not be reasonable” (Smith 1999: Book V, cha.1).
24
Smith, in fact, argued for highly discretionary use of the joint-stock company and limited liability
that should be reserved to those fields of “general utility” (banking, insurance, canals or water
supplies), which required a high proportion of fixed capital! (Smith 2001: Book V, cha.1).
The government in place was at a loss at what should be done. The report of the Royal
Commission could easily be interpreted as advising that nothing should be done. The
government itself was split and the debate in Parliament was raging. Over the period where
limited liability was being discussed in England, the political landscape was significantly
changing. When the Select Committees had started to work, the Conservative (Tory) government
of the Earl of Derby was still in place. With Henry Labouchere as President of the Board of Trade,
that government was clearly against an extension of limited liability. In December 1852, the
Tory government fell. The new Prime Minister, the Earl of Aberdeen, was a Peelite and his team
was definitely more receptive to a free trade and liberal agenda. Still, on the matter of limited
liability, this government was split. Edward Cardwell, who was then President of the Board of
Trade, was not convinced. He agreed that the law was not perfect but he did not see “why the
law should give to those associations (corporations) a privilege denied to private firms.” He
added that, in fact, “the whole history of joint stock companies would lead us to an opposite
conclusion” (quoted in Taylor 2006: 149). William Gladstone, then Chancellor of the Exchequer,
was also skeptical. Lord Palmerston, who was then Home Secretary, was on the other hand
clearly in favor of an extension of limited liability. So was Alexander Cockburn, then Attorney
General. In the meantime, debates within Parliament did not abate.
In January 1855, as it was ready to give in under the high level of pressure and to put forward a
Bill, the government fell following a vote of no confidence on the Crimean War. The new Prime
Minister was Lord Palmerston! Lord Stanley of Alderley took over as President of the Board of
Trade in March 1855 and Edward Pleydell-Bouverie then also became Vice-President of the
Board of Trade. Bouverie was a liberal. He was also worried that if nothing were to be done,
British investors would turn to other horizons. Legal forms associated with limited liability were
becoming more popular in the United States or in France. This could potentially become an
attractor to British investors and represented a serious risk that national capital would be
drained, at least in part, to undertakings and projects that were based in foreign lands. This
argument had been in the air for a while and lobbies in favor of limited liability had used it
repeatedly. In 1852, for example, the Circular to Bankers – a Trade journal – reprinted American
corporate laws with the following comment
The present (English) law of partnership is so great an obstacle to the security of new
investments that if the Government do not open some new course, it is highly probable
25
that the capital now so abundant in this country will be transferred to foreign parts
(Circular to Bankers 1852).
So, the Palmerston government presented two Bills in 1855. One proposed an extension of
limited liability to all corporations; the other focused on partnerships. The first Bill passed the
two Houses relatively easily. The second failed. The 1855 Limited Liability Act (18&10 Vic.
c.133) was essentially an extension of the 1844 Joint-stock Companies Act. Provided that a
Company had at least 25 shareholders and shares of no less than £10, it would be granted
limited liability on complete registration. Insurance and banking remained excluded. The
information requirements present in the 1844 Act were kept in place and those companies had
to add “Limited” or “Ltd” in their name, as added information in particular to creditors.
In August 1855, Edward Pleydell-Bouverie left the post of Vice-President of the Board of Trade.
He was replaced in this position by Robert Lowe, who as we saw had been one of the most vocal
champions, in Parliament, of the cause of limited liability. Lowe presented two new Bills. The
one that applied to partnerships again did not go through. The other one passed. The Joint-stock
Companies Act of 1856 (19&20 Vic. c.47) was a consolidating statute. It considerably simplified
the registration process. The Act extended access to limited liability to all registered companies
of seven or more members and it got rid of the £10 share qualification. Rather than having strict
legal requirements on information, this Act proposed a set of by-laws with a focus on
governance – we would call them “guidelines” – that companies could voluntarily adopt, if they
so wished. The British legislator was moving towards self-regulation and soft law! (Djelic 2010).
To justify these developments, Robert Lowe decidedly placed the debate at a philosophical level:
My object at present is not to urge the adoption of limited liability. I am arguing in
favour of human liberty - that people may be permitted to deal how and with whom
they choose without the officious interference of the state; and my opinion will not be
shaken even though very few limited companies be established. Every man has a right to
choose for himself between the two principles, and it is ill advised legislation which steps
in between him and the exercise of that right. It is right the experiment should be tried;
and, in my judgment, the principle we should adopt is this, - not to throw the slightest
obstacle in the way of limited companies being formed - because the effect of that would
be to arrest ninety-nine good schemes in order that the bad hundredth might be
prevented…We should profit by the lessons of the science of political economy : to
interfere with and abridge men’s liberty, to undertake to do for them what they can do
for themselves…is helping the fraudulent mislead them. (House of Commons 1856 : 13031).
This, naturally, is not the end of the story of limited liability in Britain. The Joint Stock
Companies Act of 1862 (25&26 Vict. c89) essentially stabilized the 1856 Act in its key features.
Debates then were to surge again after the devastating crisis of 1866 that many would interpret
as the direct consequence of the widespread diffusion of the corporate form with limited liability
26
(Taylor). In any case, the Act of 1856 is a suitable place to end our account here as this Act
arguably marks the formal institutional inscription, in British law, of the corporation with
limited liability as a general statute. In the words of Robert Lowe again
The process is this – it begins with prohibition, then becomes a privilege, and last of all a
right. Till 1825, the law prohibited the formation of joint-stock companies. From that
time to the present it has been a privilege; but now we propose to recognize it as a right.
So with limited liability. (House of Commons 1856: 129-30).
DISCUSSION AND CONCLUSION
We have shown, in this paper, how an institution we tend to take for granted – the corporation
with limited liability – is in reality a quite recent “innovation”. It took time and many complex
developments before the corporate form as such came to be an uncontroversial and relatively
widespread legal form used across many different industries. It also took time and many
unexpected turns before limited liability went from being a marginal privilege generating
distrust to becoming the undisputed and legitimate definition of responsibility in economic life.
Finally, it took time and many surprising steps before the corporate form and the principle of
limited liability came to be tightly entangled.
Focusing on limited liability, we have also shown in this paper how intense the debate was
around this notion still in the mid-19th century. Naturally, discussions delved into economic
questions and implications. Interestingly, though, the debates were broader and they also
explored societal, political and even ethical issues and implications. We chose, in this paper, to
focus on debates within Britain. Debates around limited liability were particularly rich and
intense in that country. In that respect, this is therefore a meaningful starting point. At the same
time, this study begs for a number of complementary steps. We mentioned in this paper that,
within British debates, there were regular references to developments in foreign countries –
more specifically France and the United States (Saint-Léon 1907). It would be extremely useful
to our understanding of the limited liability revolution to explore, in parallel, the debates that
were taking place in those two countries. Going a step further, we propose that the story of
limited liability is very much a transnational story (Djelic and Sahlin-Andersson 2006, Djelic and
Quack 2010). Beyond a cross-country comparison, we believe that it is necessary to identify the
transnational mechanisms and channels that connected the different national debates. The Acts
of 1856 and 1862 formally institutionalized, in Britain, the corporate and limited liability
revolution. Arguably, this in turn had an impact in many other countries – in Europe, within the
Commonwealth but also possibly beyond. An interesting challenge for us would be to dig deeper
27
into those later developments, trying to understand how they contributed to the transnational
institutionalization of the corporation with limited liability.
Through our exploration of the limited liability debates in 19th century Britain, we have also
pointed in this paper to social movement dynamics. Well into the second half of the 19th century,
debates around limited liability turned out to be extremely divisive. British society was split on
this issue and, interestingly, the split cut across many classical boundaries (such as class,
occupation, geography or political leaning). The debate was in part a modern versus ancient one
– or rather, I suggest, it was constructed as such by the coalition of those who were in favor of
limited liability. Whether from the left or from the right, those who opposed limited liability – or
more often those who were baffled or dismayed by it – were represented by those on the other
side as staunch conservatives, overly and dangerously cautious champions of the status quo,
nostalgic dreamers.
The social movement dynamics were clearly more to be felt on the side of those who were in
favor of limited liability than on the side of those who opposed it. The champions of limited
liability worked on the “theorization” of their argumentation and on the systematic crafting and
framing of an agenda and a discourse – or rather multiple, loosely coupled discourses. They also
mobilized and deployed different kinds of resources at their disposal, with a view to spreading
their agenda and discourses broadly and widely. They finally were swift and agile in leveraging
the different windows of (political) opportunity that materialized throughout the period. In
contrast, on the other side of the debate, the situation was closer to Karl Marx’ image of “an
addition of homologous magnitudes, much as potatoes in a sack of potatoes” (Marx 2002[1852]:
cha. 7).
The evidence indicates, furthermore, that the social movement around limited liability was far
from homogeneous and stable through time. It brought together an unlikely coalition – Christian
socialists and social reformers coming to argue in a parallel direction to liberal, free-trade
businessmen. Throughout the period – from the late 1840s to the early 1860s we can document
changes in the balance of power within this coalition. Clearly, the fight for limited liability was
initiated and launched by an active group of social reformers and Christian socialists. They used
the arena provided by two Select Committees to turn limited liability into an issue – set an
agenda – and to frame a coherent discourse that connected limited liability to welfare, social
reform and democratization. Progressively, though, during the 1850s, the liberals and free
traders increasingly came to impose themselves. The liberal and free trade discourse that then
got structured was not in contradiction to the social reformers’ discourse. Still, it moved the
28
focus slightly but significantly – from solidarity and collaboration to competition, from welfare
to wealth, from democratization to individualization, from the “enfranchisement of men” to the
“enfranchisement of capital”. As the 1855 Bills were being discussed in Parliament, an
anonymous pamphlet, published in the Times on June 30th, was lucidly observing this:
When E. P. Bouverie presented the limited liability Bill to the Commons, the hon. Member
threw overboard all the working class claims (Anonymous 1855).
If anything, the fact that the Bills that bore upon partnerships failed while those that proposed
an association of limited liability with joint-stock companies passed, is only further indication of
the discreet but real change in balance of power within the pro-limited liability coalition.
Hence, the debate around limited liability in 19th century Britain was unmistakably structured,
moved and pushed by social movement dynamics. These dynamics brought together different
interest groups with quite distinct agendas and discourses. Throughout the period, we do not
see any kind of internal convergence, alignment or compromise. Instead, we document a
changing balance of power through time between two main lines of argumentation that reflected
different interests and in fact profoundly distinct philosophies. For a while, particularly at the
beginning, those two lines of argumentation had appeared compatible if not fungible. As time
went on, though, the contradictions became more difficult to overcome – and one line of
argumentation ended up clearly taking over. Limited liability went from being predominantly a
solution to social welfare issues to becoming the ultimate expression of contractual freedom.
Throughout, the objective was one of democratization and enfranchisement – but with a shift
from a clear focus on “man” to a reorientation towards “capital”. By the later 1850s, the social
movement was still there and active but it had profoundly changed in nature, philosophy and
orientation.
The story we have told here shows the role and importance of mobilization in the form of social
movement in processes leading to significant institutional change. At the same time, though, this
story also shows that the ultimate objective of a social movement should be its own selfdestruction. Success for contentious politics in many situations means that the source of
contention disappears. When the agenda of a given social movement comes to be
institutionalized and hence stabilized and legitimized in a particular context, then this social
movement is likely to fade. Success leads to demise as institutionalization seems to be the end of
the process of social movement mobilization. So, while the story we tell is a social movement
story, it is also a story of institutional change – a combined process of de- and reinstitutionalization.
29
On the one hand, the institutional transformation we describe in this paper has been profound,
consequential and on the whole surprisingly rapid – in a bit less than twenty years, from 1844 to
1862, common law was all but completely put upside down when it came to the two major
issues of corporate status and limited liability. On the other hand, if we consider the overall time
line, we see that this transformation has come through several successive steps and stages that
built, through time, upon each other (Djelic and Quack 2003; Djelic and Quack 2007). We are
here particularly interested by the “institutional work” that this process unmistakably implied
(Lawrence and Suddaby 2006, Leca et al. 2009). By that we mean, following Lawrence and
Suddaby (2006:119), the “work of actors (that) may or may not achieve its desired ends and
(that) interacts with existing social and technological structures in unintended and unexpected
ways”. We find that, as much as change was a step-by-step process with a number of (in fact
many) unanticipated developments, agency was of a collective and aggregative kind, revealing a
diversity and complexity of motives, power games and interactions as well as, possibly, different
degrees of ambivalence if not resistance. Activity and actorhood have undeniably been multiand de-centred in the story we tell. There was a nexus of actors that all took steps with
consequences for others. As the story unfolded, this nexus itself got transformed. But in the end,
there is no such thing, in the story we tell, as “institutional entrepreneurship”. Or rather if we
want to keep the term “entrepreneurship”, then we have to acknowledge that entrepreneurship
can only be an a posteriori reconstruction and that it has very much of a collective dimension to
it. There is no “hero” in the story of the corporation with limited liability in Britain – only a nexus
of actors who were all embedded in multiple sets of constraints and perceived interests. Those
actors took action and made decisions that impacted upon each other – each step triggering and
bringing along the next in a surprisingly unexpected manner.
As a consequence, the path of change we document has clearly not been a linear one. It was not a
path that could have been recognized or traced a priori and deducted from some initial turning
point or critical event. Rather, it was built through time and through the succession and
aggregation of small complementary and incremental steps (Djelic and Quack 2003). The only
logic we can find in it is through a posteriori historical reconstruction and the micro-analysis of
the ways in which each step triggered the next. The end result – the institutionalization of the
corporation with limited liability – would have been difficult to predict at the beginning of the
19th century. Arguably, the kind of corporation we have today, as a more or less direct
consequence of these developments, would probably turn out to be very far from what many
actors in this story were aiming at.
30
References:
Amsler, Christine, Robin Bartlett and Craig Bolton (1981). ”Thoughts of some British
Economists on Early Limited Liability and Corporate Legislation”, History of Political
Economy, 13(4): 774-93.
Anonymous (1855), “The Law of Partnership. A Reply to the speech of the Right Hon. E.P.
Bouverie, M.P. in the House of Commons”. Report by a Manchester Man in ”The Times”,
June 30th. In Potter, Edmund (ed), Pamphlets Published at Various Periods, London : John
Chapman.
Bakan, J. (2004). The Corporation. Free Press.
Bartley, T. (2007), ”How Foundations Shape Social Movements : The Construction of an
Organizational Field and the Rise of Forest Certification”, Social Problems, 54(3): 229-55.
Berle, A. and G. Means (1932). Modern Corporation and Private Property. New York : MacMillan
Bonassieux, Pierre (1892), Les Grandes Compagnies de Commerce : Etude pour Servir à
l’Histoire
de
la
Colonisation,
Paris :
Plon,
Nourrit
et
cie,
http://ia311313.us.archive.org/0/items/cihm_00179/cihm_00179.pdf
Bryer, R. A. (1997). ”The Mercantile Laws Commission of 1854 and the Political Economy of
Limited Liability”. The Economic History Review, 50(1) : 37-56.
Campbell, John (2004), Institutional Change and Globalization, Princeton, NJ: Princeton
University Press.
Canning, Joseph (1996). A History of Medieval Political Thought. London and New York:
Routledge.
Carney, William (1995). ”Limited Liability Companies: Origins and Antecedents”, University
of Colorado Law Review, 66 : 855-880.
Carney, William (1998). “Limited Liability”. Encyclopedia of Law and Economics.
http://encyclo.findlaw.com/5620book.pdf
Chandler, A. (1977). The Visible Hand. Cambridge, MA: Belknap Press, Harvard University Press.
Chandler, A. (1990). Scale and Scope. Cambridge, MA : Harvard University Press
Circular to Bankers (1852), February 21st.
Clemens, Elizabeth and James Cook (1999), “Politics and Institutionalism: Explaining Durability
and Change”, Annual Review of Sociology, 25: 441-66
Committee on Joint Stock Companies (1844). ”Report of Select Committee to inquire into the
State of the Laws respecting Joint Stock Companies”. British Parliamentary Papers, VII.
Crouch, Colin and H. Farrell (2004), ‘Breaking the Path of Institutional Development?
Alternatives to the New Determinism’, Rationality and Society, 16(1): 5-43.
DiMaggio, Paul (1988), ‘Interest and Agency in Institutional Theory’, in Zucker, L. (ed),
Institutional Patterns and Organizations, Cambridge, MA: Ballinger, pp. 3-32.
Djelic, M. L. (1998), Exporting the American Model, Oxford University Press
Djelic, M. L. (2006), “Marketization: From intellectual agenda to global policy making,” in Djelic
and Sahlin-Andersson. (eds), Transnational Governance. Cambridge: Cambridge
University Press, pp. 53–73.
Djelic, M. L and S. Quack (eds) (2003). Globalization and Institutions: Redefining the Rules of the
Economic Game. Cheltenham, UK: Edward Elgar.
Djelic, Marie-Laure and Antti Ainamo (2005), ‘The Telecom Industry as Cultural Industry: The
Transposition of Fashion Logics into the Field of Mobile Telephony’, in Jones, Candace
and Patricia Thornton (eds), Transformations in Cultural Industries, Research in the
Sociology of Organizations Series, Burlington, MA: Elsevier, pp. 45-82
Djelic, M.L. and K. Sahlin-Andersson (eds) (2006). Transnational Governance. Cambridge, UK:
Cambridge University Press.
Djelic, M. L. and S. Quack (2007), “Overcoming Path Dependency: Path Generation in Open
Systems”, Theory and Society, 36(2): 161-86.
Djelic, M.L. and S. Quack (eds) (2010). Transnational Communities: Shaping Global Economic
Governance. Cambridge, UK: Cambridge University Press.
31
Ekelund, Robert B., Jr., Robert F. Hébert, Robert D. Tollison, Gary M. Anderson, and Audrey B.
Davidson (1996). Sacred Trust: The Medieval Church as an Economic Firm. New York:
Oxford University Press.
Feltes, N. N. (1974). “Community and the Limits of Liability in two mid-Victorian Novels”.
Victorian Studies, June: 355-69.
Gaastra, Femme (2002). The Dutch East India Company: Expansion and Decline. Zutphen, NL:
Walburg Pers.
Garud, Raghu and P. Karnøe (eds.) (2001). Path Dependence and Creation, Mahwah: Lawrence
Erlbaum Associates.
Garud, Raghu, Cynthia Hardy and Steve Maguire (2007), ‘Institutional Entrepreneurship as
Embedded Agency: An Introduction to the Special Issue’, Organization Studies, 28(7):
957-69
Greenwood, Royston, Christine Oliver, Kerstin Sahlin and Roy Suddaby (eds) (2008), Handbook
of Organizational Institutionalism, London, UK: Sage.
Greif, Avner (2006). Institutions and the Path to Economic Modernity: Lessons from Medieval
Trade. Cambridge: Cambridge University Press.
Greif, Avner, Paul Milgrom and Barry Weingast (1994). “Coordination, Commitment and
Enforcement: The Case of the Merchant Gild”. The Journal of Political Economy, vol. 102(4):
745-776.
Guerra Medici, Maria Teresa (1982), ”Limited Liability in Mediterranean Trade from the 12th to
the 15th Century”, in Orhnial, Tony (ed), Limited Liability and the Corporation, London and
Canberra: Croom Helm, pp. 122-36.
Harris, Ron (1994). “The Bubble Act: Its Passage and its Effects on Business Organization”. The
Journal of Economic History, 54(3): 610-27.
Harris, Ron (1997). “Political Economy, Interest Groups, Legal Institutions, and the Repeal of the
Bubble Act in 1825”, Economic History Review, L(4): 675-96.
Hickson, Charles and John Turner (2005). ”Corporations or Limited Liability Company”, in
McCusker, John, Stanley Engerman, Lewis Fischer, David Hancock and Kenneth Pomeranz
(eds), Encyclopedia of World Trade since 1450, New York : Macmillan.
Hillman, Robert (1997). ”Limited Liability in Historical Perspective”, Washington and Lee Law
Review, Spring.
House of Commons Journals (1696), XI, November 25, http://india.british-history.ac.uk/imagepageScan.aspx?pubid=258&sp=1&pg=595
House of Commons (1850), ”Savings of the Middle and Working Classes”, House of Commons
Debates, April 16th, vol. 110 : 420-26,
http://hansard.millbanksystems.com/commons/1850/apr/16/savings-of-the-middle
and-working-classes
House of Commons (1854), “Law of Partnership”, House of Commons Debates, June 27, vol.134:
752-800. http://hansard.millbanksystems.com/commons/1854/jun/27/law-of
partnership#S3V0134P0_18540627_HOC_47
House of Commons (1856), “Law of Partnerships and Joint-Stock Companies”, House of
Commons Debates, February 1st, vol.140: 110-47.
http://hansard.millbanksystems.com/commons/1856/feb/01/law-of-partnership-and-jointstock#S3V0140P0_18560201_HOC_34
Hunt, Bishop Carleton (1836). The Development of the Business Corporation in England, 1860
67. Cambridge, Mass: Harvard University Press.
Ireland, P. W. (1984). “The rise of the limited liability company”, International Journal of the
Sociology of Law, 12: 239-60.
Jacoby, Wade (2000), Imitation and Politics, Ithaca, NY: Cornell University Press.
Kleiner, Thibaut (2003), ‘Building up an asset management industry: forays of an Anglo-Saxon
logic into French business system’, in Djelic and Quack, pp. 57-82.
Lawrence, Thomas and Roy Suddaby (2006), ‘Institutions and Institutional Work’, in Clegg,
Stewart, Cynthia Hardy, Thomas Lawrence and W. Nord (eds), Handbook of Organization
Studies, 2nd edition, London, UK: Sage, pp.215-54.
32
Livermore, Shaw (1935), “Unlimited Liability in Early American Corporations”, The Journal of
Political Economy, 43(5): 674-87.
Loftus, Donna (2002). “Capital and Community: Limited Liability and Attempts to Democratize
the Market in Mid-19th Century England”. Victorian Studies, Autumn: 93-120.
Lounsbury, Michael and Ellen Crumley (2007), ‘New Practice Creation: An Institutional
Perspective on Innovation’, Organization Studies, 28(7): 993-1012.
Ludlow, J. M. and Lloyd, Jones (1867). Progress of the Working Class, 1832-67. London:
Alexander Strahan.
Marx, Karl (2008[1852]). The 18th Brumaire of Louis Napoleon Bonaparte. Rockville, MD:
Wildside Press.
McCulloch, J. Ramsay (1856). Considerations on Partnerships with Limited Liability. London.
McCulloch, J. Ramsay (1859). “Partnerships, Limited and Unlimited Liability”, Encyclopedia
Britannica, 8th ed., XVII.
Meyer, John (1996), ‘Otherhood: The Promulgation and Transmission of Ideas in the Modern
Organizational Environment’, in Czarniawska and Sevón (eds.), Translating
Organizational Change, Berlin: de Gruyter, pp. 241 – 252.
Meyer, R., K. Sahlin, M. Ventresca and P. Walgenbach (eds) (2009), Institutions and Ideology,
Research in the Sociology of Organizations, vol. 27, Bingley, UK/ Emerald Publishing
Munir, Kumal and Nelson Phillips (2005), ‘The Birth of the Kodak Moment: Institutional
Entrepreneurship and the Adoption of New Technologies’, Organization Studies, 26(11):
1665-87.
Padgett, John (2001). ‘Organizational Genesis, Identity and Control: The Transformation of
Banking in Renaissance Florence’, in Cassella, A. and J. Rauch (eds), Markets and
Networks. Russell Sage Foundation.
Patterson, Margaret and David Reiffen (1990), “The Effect of the Bubble Act on the Market for
Joint Stock Shares”, The Journal of Economic History, 50(1):163-171
Perrott, David (1982), “Changes in Attitude to Limited Liability – the European Experience”, in
Orhnial, Tony (ed), Limited Liability and the Corporation, London and Canberra: Croom
Helm, pp. 81-121.
Perrow, C. (2005), Organizing America, Princeton University Press.
Plehwe, D., B. Walpen and G. Neunhöffer (eds), Neoliberal Hegemony: A Global Critique,
Routledge.
Reader, William (1982), ”Versatility Unlimited : Reflections on the History and Nature of the
Limited Liability Company”. In Ohrial, Tony (ed), Limited Liability and the Corporation.
London and Canberra : Croom Helm, pp. 191-204.
Royal Commission ML (1854). ”First Report of the Royal Commission on the Mercantile Laws
and Amendments to the Law of Partnership", British Parliamentary Papers, XXVII.
Saint-Léon, Martin (1907). “Commandite in France”. The Economic Journal, 17(66): 284-87.
Saville, John (1956), “Sleeping Partnership and Limited Liability, 1850-56”, The Economic
History Review, 8(3): 418-33.
Schneiberg, M. (2007), ‘What’s on the Path? Path Dependence, Organizational Diversity and
the Problem of Institutional Change in the US Economy, 1900-50’, Socio-Economic
Review, 5(1): 47-80.
Schneiberg, M. and M. Lounsbury (2008), “Social Movements and Institutional Analysis”, in
Greenwood, R., C. Oliver, R. Suddaby and K. Sahlin (eds), Handbook of Organizational
Institutionalism, London: Sage, pp. 650-72.
Select Committee on I for S (1850). ”Report from the Select Committee on Investments for the
Savings of the Middle and Working Classes”, British Parliamentary Papers, 508.
Select Committee on the Law of Partnership (1851), ”Report from the Select Committee on the
Law of Partnership”, British Parliamentary Papers, 509.
Shannon, H. A. (1931). ”The Coming of General Limited Liability”, Economic History, 6: 267-91.
Smith, Adam (1999[1776]), An Inquiry into the Nature and Causes of the Wealth of Nations.
Volume I (Books I to III) and Volume II (Books IV and V). Edited by Andrew Skinner.
London: Penguin Books.
33
Stark, D. (1992). ‘Path Dependence and Privatization Strategies in East Central Europe’, East
European Politics and Societies, 6(1): 17-54.
Streeck, Wolfgang and Kathleen Thelen (eds) (2005), Beyond Continuity, Oxford, UK: Oxford
University Press.
Taylor, James (2003). “Limited Liability on Trial: The Commercial Crisis of 1866 and its
Aftermath”. Economic History Society Conference.
Taylor, James (2006), Creating Capitalism : Joint-stock Enterprise in British Politics and Culture,
Woodbridge : Boydell Press
Thelen, Kathleen (1999), ‘Historical Institutionalism in Comparative Perspectives’, Annual
Review of Political Science, 2: 369-404.
Thelen, K. (2003), “How Institutions Evolve. Insights from Comparative Historical Analysis”, in
Mahoney, James and D. Rueschemeyer (eds.), Comparative Historical Analysis in the
Social Sciences, Cambridge, UK: Cambridge University Press, pp.208-240.
Tilly, Charles and Sidney Tarrow (2006). Contentious Politics. Paradigm Publishers.
Tood, Geoffrey (1932). “Some Aspects of Joint-Stock Companies, 1844-1900”. The Economic
History Review, 4(1): 46-71.
Westney, Eleanor (1987), Imitation and Innovation, Cambridge, MA: Harvard University Press
Willan, T.S. (1953), The Muscovy Merchants of 1555, Manchester University Press
Willan, T.S. (1956), The Early History of the Russia Company, 1553-1603, Manchester University
Press.
Williston, (1888). ”History of the Law of Business Corporations before 1800”, Harvard Law
Review, II: 114.
34
Table 1 : Opinions of Witnesses before the Royal Commission on Mercantile Laws on
whether Limited Liability should be extended to Joint Stock Companies by Right
Occupation/Residence
Merchants/manufacturers
Legal Profession
Bankers
Academics/MPs
London
Rest of England
Scotland
Ireland
Total
YES
17
9
3
7
18
9
5
4
36
NO
18
6
14
0
15
11
10
2
38
Source : Royal Commission ML 1854, as compiled in Taylor (2006: 151)
35