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³ Wilson. England’s Apprenticeship. p. 172. Regulated companies can be thought of most easily as licensing institutions. Merchants, on payment of an entry fee, were admitted to the company but thereafter traded on their own account. There was no joint ownership of stockGoogle Scholar.

⁴ Davis. England’s Overseas Trade, p. 43: and Wilson. England’s Apprenticeship, p. 173Google Scholar.

⁵ Smith, Adam, Wealth of Nations (Homewood. IL. 1963). book 5. chap. 1. part 3. p. 255Google Scholar.

⁶ Ibid., p. 265.

⁷ Coornaert, E. L. J., “European Economic Institutions and the New World: The Chartered Companies,” in Cambridge Economic History of Europe (Cambridge, 1967), vol. 4, p. 262Google Scholar.

⁸ Davies, Keith, The Royal African Company (Oxford, 1957). p. 165Google Scholar.

⁹ Wilson, England’s Apprenticeship, p. 176Google Scholar.

¹⁰ Chaudhuri, K. N., The Trading World of Asia and the English East India Company, 1660–1760 (New York, 1978):CrossRefGoogle Scholar and Willan, Thomas Stuart, The Early History of the Russia Company (Manchester, 1956)Google Scholar.

¹¹ Caves, Richard, Multinational Enterprise and Economic Analysis (New York, 1982), p. 70Google Scholar.

¹² Coornaert, “European Economic Institutions,” vol. 4Google Scholar.

¹³ As a corollary, there has been no questioning of the types of situations in which agency problems are likely to arise. It is unclear whether economic historians thought that all multilocational trading companies faced an agency problem of the same magnitude or whether the magnitude (and the ability to control the agency problem) was related to the particular reasons for each company’s existence. In this article we are taking, as given, the hierarchical structure of the Hudson’s Bay Company, which implies a principal/agent relationship between the factories and the head office. The extent to which this was the most beneficial organizational structure is discussed in Carlos, Ann M. and Nicholas, Stephen. “Giants of An Earlier Capitalism: The Early Chartered Companies as an Analogue of the Modern Multinational,” Business History Review, 26 (Autumn 1988)Google Scholar.

¹⁴ This section relies on Arrow, Kenneth, “The Economics of Agency,” in Pratt, John and Zeckhauser, Richard, eds., Principals and Agents: The Structure of Business (Boston, 1984), pp. 27–51;Google ScholarStrong, Neil and Waterson, Michael, “Principals, Agents and Information,” in Clarke, Roger and McGuinness, Tony, eds., The Economics of the Firm (Oxford, 1987), pp. 18–61;Google ScholarJensen, Michael and Meckling, William, “Theory of the Firm: Managerial Behavior. Agency Costs and Ownership Structure,” Journal of Financial Economics, 3 (11 1978), pp. 305–11:CrossRefGoogle ScholarRoss, Stephen, “The Economic Theory of Agency: The Principal’s Problem,” American Economic Review, 63 (05 1973), pp. 134–49;Google ScholarWilliamson, Oliver. The Economic Institutions of Capitalism (New York, 1985), chaps. 2, 3, 7, 8;Google Scholar and Fama, Eugene and Jensen, Michael, “Separation of Ownership and Control,” Journal of Law and Economics, 25 (06 1983), pp. 301–26CrossRefGoogle Scholar.

¹⁵ Carlos and Nicholas, “Giants of An Earlier Capitalism.” gave a description of the physical organization of the long-distance tradesGoogle Scholar.

¹⁶ Willan, The Early History of the Russia Company, p. 37Google Scholar.

¹⁷ Glamann, Kristof, Dutch Asiatic Trade 1620–1740 (The Hague. 1981), p. 147CrossRefGoogle Scholar.

¹⁸ Chaudhuri, The Trading World of Asia, p. 208Google Scholar.

¹⁹ Davies, The Royal African Company, p. 255Google Scholar.

²⁰ MacKay, Douglas, The Honourable Company (Toronto, 1949), p. 67Google Scholar.

²¹ Rich, Edwin Ernest, ed., Minutes of the Hudson’s Bay Company, 1671–74 (London, 1942), vol. 5, p. 101Google Scholar.

²² Ibid., pp. 101, 112, emphasis is added.

²³ An alternative way to phrase the problems arising from asymmetrical information and uncertainty is in terms of moral hazard and adverse selection. Moral hazard relates to the work effort of the agent, while adverse selection relates to informational asymmetries between counteracting parties. Thus the adverse selection problem allows the moral hazard problem to exist, which, in turn, can result in self-seeking behavior by agents and a resulting loss in profits for the firmGoogle Scholar.

²⁴ Baker, George P., Jensen, Michael C.. and Murphy, Kevin J., “Compensation and Incentives: Practice vs. Theory,” Journal of Finance, 42 (07 1988). p. 599Google Scholar.

²⁵ Buckley, Peter and Michael Casson. “A Theory of Co-operation in International Business” (University of Reading Discussion Paper in International Business, No. 102. 01 1987), pp. l–39Google Scholar.

²⁶ The Royal African Company, which was chartered in 1672, two years after the Hudson’s Bay Company, faced a serious agency problem. Monitoring was difficult and agents could easily engage in private trade. For a discussion of that company’s efforts to control its agency problem, see Carlos, Ann M., “The Royal African Company and Its Managers” (University of Western Ontario mimeo, 03 1990)Google Scholar.

²⁷ Rich, Edwin Ernest, ed., Hudson’s Bay Copy Booke of Letters. Commissions, Instructions Outward, 1688–1696 (London, 1957). vol. 20, p. xxGoogle Scholar.

²⁸ Rich, Edwin Ernest. The History of the Hudson’s Bay Company. 1670–1870 (London, 1958), vol. 1, p. 57Google Scholar.

²⁹ Ibid.. p. 55.

³⁰ Innis, Harold A.. The Fur Trade in Canada (Toronto, 1930). p. 135.Google Scholar For a more detailed discussion of the Orcadians in the Hudson’s Bay Company, see Nicks, John, “The Role of Orcadians in the Fur Trade,” in Ray, Arthur and Judd, Carol M., eds., Old Trails and New Directions: Papers of the Third North American Fur Trade Conference (Toronto, 1980);Google Scholar and Rich, , The History of the Hudson’s Bay Company, vol. 1. pp. 377–92.Google Scholar These regulations reduced the problems that can occur when small groups of individuals live together in crowded circumstances for long periods of time. The use of Orcadians may have further reduced the tensions that could have arisen.

³¹ The desire to change the work force was reinforced by the wars with France. Due to the wars men were no longer easily available in London because of press gauges, and the route north was safer than going south along the British channelGoogle Scholar.

³² Williamson, Jeffrey, “Structure of Pay in Britain. 1710–1911,” in Uselding, Paul, ed., Research in Economic History (Greenwich, CT. 1982), vol. 7, p. 48.Google Scholar appendix table 4. Salaries for the men at the Bay are found in Innis, Fur Trade in Canada, pp. 124, 125: and in Rich. ed., Hudson’s Bay Copy Booke, vol. 20Google Scholar.

³³ Rich, , The History of the Hudson’s Bay Company, vol. 1, pp. 81. 92Google Scholar.

³⁴ Rich, , ed., Hudson’s Bay Copy Booke, vol. 20, p. 103Google Scholar.

³⁵ Ibid.. p. 105. Mr. Walsh was in charge of the factory at New Severn in 1690. earning a salary of £50 per annum.

³⁶ Rich, , The History of the Hudson’s Bay Company, vol. 1, p. 55. Médard Chouart Grosseilliers and Pierre Esprit Radisson sailed to London in the 1660s and were instrumental in launching a British attempt to get furs in northern Canada. Their efforts resulted in the formation of the Hudson’s Bay CompanyGoogle Scholar.

³⁷ Rich, , ed., Minutes, 1671–74, vol. 5, p. 38Google Scholar.

³⁸ Rich, Edwin Ernest, ed., Minutes of the Hudson’s Bay Company, 1679–1684. First Part: 1679–1682 (London, 1945), vol. 8, p. 228Google Scholar.

³⁹ Rich, , The History of the Hudson’s Bay Company, vol. 1. p. 179Google Scholar.

⁴⁰ Ibid., pp. 79, 179.

⁴¹ The letters sent to the Bay listed the commodities sent out for the managers’ table, for example, “Clarett, Hock. Sack Soe and Sherry.” See Rich, , ed., Hudson’s Bay Copy Booke, vol. 20, p. 234Google Scholar.

⁴² Rich, , The History of the Hudson’s Bay Company, vol. 1, p. 374Google Scholar.

⁴³ Davies, Keith G., ed., Letters from Hudson Bay, 1703–1740 (London, 1965), vol. 25, p. 11. “Sale ‘by the candle’ was a system in which an ‘upset price’ was called as the candle was lit and bids were made as the candle burned. Whoever had made the highest bid when the candle guttered out was the purchaser.”Google ScholarRich, , The History of The Hudson’s Bay Company, vol. 1, p. 68Google Scholar.

⁴⁴ Rich, , ed., Minutes, 1679–84, vol. 8, pp. 11–12Google Scholar.

⁴⁵ Ibid., footnote on p. 11.

⁴⁶ Ibid., appendix A, p. 244.

⁴⁷ Rich, , ed., Minutes, 1679–84. vol. 8. appendix B. pp. 320–27. detailed the prices paid for furs at the sale held 02 3, 1679.Google Scholar See Ray, Arthur J. and Freeman, Donald, “Give us Good Measure”: An Economic Analysis of Relations Between the Indians and The Hudson’s Bay Company Before 1763 (Toronto, 1978). p. 168, table 18Google Scholar.

⁴⁸ Ray and Freeman, Good Measure, p. 115Google Scholar.

⁴⁹ Aitken, Hugh G. T., “Defensive Expansionism: The State and Economic Growth,” in Aitken, Hugh G. T., ed., The State and Economic Growth (New York, 1959), commented on the fact that Hudson’s Bay Company factors went to London to act as buying agents for the company, using the expertise gained in trade. These numbers, however, were never very largeGoogle Scholar.

⁵⁰ Rich, , The History of the Hudson’s Bay Company, vol. 1, p. 602. and vol. 2, pp. 103. 291–92Google Scholar.

⁵¹ Rich, , The History of the Hudson’s Bay Company, vol. 1, p. 64Google Scholar.

⁵² Thus, just as the very existence of the branch plants around the Bay signified a long-term commitment on the part of the company, so too did these standards. See Ray, Arthur J., The Indians and the Fur Trade (Toronto, 1974). chap. 3, for a more complete discussion of these standardsGoogle Scholar.

⁵³ Ibid., chap. 5.

⁵⁴ Rotstein, A. and Foot, D., “The Two Economies of the Hudson’s Bay Company” (University of Toronto Working Paper Series, No. 8710, July 1987)Google Scholar.

⁵⁵ Rich, , ed., Hudson’s Bay Copy Booke, vol. 20. p. 78Google Scholar.

⁵⁶ Actual quantities of overplus made can be found in the factory accounts, with some amounts being given in Rich, , ed., Hudson’s Bay Copy Booke, vol. 20, p. xliv.Google Scholar A very detailed discussion of the composition of the accounts and derivation can be found in Ray and Freeman, Good Measure, chap. 9Google Scholar.

⁵⁷ Davies, , ed., Letters from Hudson Bay, vol. 25, p. 58;Google Scholar and Rich, , The History of the Hudson’s Bay Company, vol. 1, p. 543Google Scholar.

⁵⁸ Davies, , ed., Letters from Hudson Bay, vol. 25, pp. 121–23Google Scholar.

⁵⁹ Ibid., p. 121.

⁶⁰ London Correspondence Outward-Official. Public Archives of Canada. Hudson’s Bay Company MG20A6 (Albany. 1810)Google Scholar.

⁶¹ A very good history and analysis of such a family concern can be found in McCalla, Douglas, The Upper Canada Trade. 1834–1872: A Study of the Buchanans’ Business (Toronto, 1979)Google Scholar.

⁶² Rich, , ed., Hudson’s Bay Copy Booke, vol. 20, p. 51Google Scholar.

⁶³ Ibid., p. 79; and Davies, , ed., Letters from Hudson Bay, vol. 25. p. 76Google Scholar.

⁶⁴ Brown, Jennifer, Strangers in Blood: Fur Trade Company Families in Indian Country (Vancouver, 1980)Google Scholar.

⁶⁵ Rich, , The Hisiory of the Hudson’s Bay Company, vol. 1, pp. 182, 259. 543. 546Google Scholar.