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The Origin of the Managing Agency System in India

Published online by Cambridge University Press:  23 March 2011

Blair B. Kling
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Extract

The managing agency system has been the dominant form of business organization in India for over a century, yet no one has described the circumstances surrounding its first emergence. It is not difficult to understand why an aura of mystery enshrouds the early years of the system. Students of managing agency invariably have been economists. Although they feel obliged to make some reference to its historical origins, they neglect the sources where the evidence abounds. A typical statement from a recent official Indian study of managing agency reads:

Little is known about the early twilight zone of the history of our industrial development in which the managing agency system and the joint stock companies played a great part.

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Articles
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The Journal of Asian Studies , Volume 26 , Issue 1 , November 1966 , pp. 37 - 47
Copyright
Copyright © The Association for Asian Studies, Inc. 1966

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References

1 In essence, managing agency is the vesting of the management of a joint stock company in the hands of a firm of professional managers. In practice, the managing agent is usually responsible for the initial promotion, financing, underwriting, and organization of the joint stock company. Useful descriptions of the managing agency system are found in Lokanathan, P. S., Industrial Organization in India, London, 1935Google Scholar; Nigam, Raj K., Managing Agencies in India, Delhi, 1957Google Scholar; Basu, S. K., The Managing Agency System, Calcutta, 1958;Google Scholar and Samant, D. R. and Mulky, M. A., Organization and Finance of Industries in India, Calcutta, 1937Google Scholar.

2 Nigam, p. 2.

3 Geoffrey Tyson, Managing Agency, Calcutta, n.d., p. 5.

4 Basu, pp. 1–4, and Samant and Mulky, pp. 32–35.

5 Parry and Co. became agents for the Porto Novo Steel and Iron Co. in the late eighteen thirties. See Brown, Hilton, Parry's of Madras, Madras, 1954, p. 65Google Scholar.

6 On the decline of the managing agency system see Kidron, Michael, Foreign Investments in India, London, 1965, pp. 52–53Google Scholar. The figure of seventy percent is exclusive of insurance and banking companies in whose management agents are now forbidden to take part. Nigam, pp. 3–4.

7 Tripathi, Amales, Trade and Finance in the Bengal Presidency (1793–1833), Calcutta, 1956, passim.Google Scholar

8 Bengal Directory and General Register for 1824 and succeeding years, Calcutta, 1824, etc.

9 Sketch of the Commercial Resources of British India, London, 1837, p. 74Google Scholar.

10 His father, John Prinsep, had been a leading entrepreneur in India in the late eighteenth century and his brothers included Henry Thoby, Secretary to the Governments of India and Bengal, James, the engineer and archeologist, and George, promoter of steam shipping and the Bengal Salt Company. See H. T. Prinsep, “Four Generations in India,” India Office Library, Mss. Eur. C. 97.

11 Mittra, Kissory Chand, Memoir of Dwark_anath Tagore, Calcutta, 1870, passim.Google Scholar

12 Calcutta Monthly Journal, 1836, p. 50. One rupee was equivalent in value to two shillings.

13 Bengal Hurkaru, February 22, 1836.

14 Ibid., March 5, 1836.

15 Coal consumption was a considerable item in operating a steamer like the Forbes. In full operation its two fifty-horsepower engines consumed almost ten tons of coal per day. The entire output of Raniganj in this period was about 115 tons per day.

16 In addition to Dwarkanath, one of these few was Rustomjee Cowasjee, Parsi merchant and Secretary of the Calcutta Docking Company.

17 Bengal Hurkaru, March 5, 1836 and October 10, 1839.

18 The first limited liability act in India was not passed until 1866. The only chartered joint stock companies with limited liability in Calcutta in Tagore's period were the Bank of Bengal and the Bonded Warehouse Association.

19 Calcutta Monthly Journal, 1836, p. 543; Bengal Hurkaru, January 9, 1838 and February 2, 1844.

20 They were the Hoogly Steam Tug Co., managed by Allan, Deffell and Co., founded in December, 1844, and the Bengal Steam Tug Co., managed by an Armenian firm, Apcar and Co., founded in March, 1846. Calcutta Star, January 9, 1845 and Bengal Hurkaru, March 9, 1846.

21 Carr, Tagore had a member on the board of directors of the Calcutta Docking Company, but not enough shares to control the company. Tagore owned his own dockyard adjacent to the Docking Company which he leased to die Docking Company.

22 Bengal Hurkaru, May 19, 1848.

23 New Calcutta Directory for 1858, pt. VIII, p. 95.

24 Bengal Hurkaru, April 17, 1848.

25 Ms. “History of the Bengal Coal Company,” Andrew Yule and Company, Calcutta.

26 Bengal Hurkaru, February 2, 1844.

27 Ibid., March n, 1844.

28 For an account of R. M. Stephenson see Thorner, Daniel, Investment In Empire, Philadelphia, 1950, pp. 44–64Google Scholar.

29 Bengal Hurkaru, March 11, 1844.

30 Ibid., July 22, 1844.

31 Ibid., July 24, 1844.

32 Brame, Alfred, The India General Steam Navigation Company, Ltd., London, 1900, pp. 16ffGoogle Scholar.

33 Bengal Hurkaru, July 21 and September 10, 1847.

34 Brame, pp. 17 ff. and 97.

35 Guildhall ms. 9925, Assam Co., Calcutta Minute Book, I, 9.

36 Antrobus, H. A., A History of the Assam Company, Edinburgh, 1957, p. 39Google Scholar. This may have been the first example of an attempt by a sterling company to employ a local agency house as its managing agent—a major function of managing agents in later years.

37 Guildhall, Prideaux mss., 8797/2.

38 Calcutta Monthly Journal, May, 1839, p. 250.

39 Guildhall, Prideaux mss., 8796/2.

40 Guildhall, mss. 9925, Assam Company, Calcutta Minute Book, II, November 26, 1841.

41 Guildhall, Prideaux mss. 8802.

42 Ibid., mss. 8797/2.

43 Antrobus, p. 154.

44 Calcutta Monthly Journal, May, 1839, p. 239.

45 Ibid., July, 1841, pp. 437–38.

46 India Office Records, Despatches to India and Bengal, Bengal Separate Revenue, April 4 (1), 1848 and November 29 (6), 1848 and New Calcutta Directory for 1863, p. 120.

47 Calcutta Monthly Journal, April, 1839, pp. 37–44.

48 The small price of shares indicates that the company was intended to attract a large number of small public-spirited investors.

49 The ferry was to be a boat of iron 90 by 90 foot square pulled back and forth across the Hughli by means of two giant chains operated by a forty-horsepower steam engine fixed to the Calcutta shore. It would cross in seven minutes and carry 1100 passengers. A second steamer without chains would cross the river at another point. The small boat and engines were arranged for through Rickards, Little and Company, London correspondents of Carr, Tagore. Bengal and Agra Annual Guide and Gazetteer, 1841, Pt. Ill, p. 175 and Calcutta Monthly Journal, June, 1841, p. 369.

50 West Bengal State Archives, Marine Proceedings, August 17 (22), 1842. It was unfortunate, also, that the project was launched during the commercial slump of 1842.

51 Bengal Herald, June 24, 1843.

52 Calcutta Star, July 20, 1844.

53 Dwarkanath Tagore to Lord W. Bentinck, August 20, 1834 in Bentinck Papers, Portland Collection, Nottingham University Library, Ref. no. PW JF 2091.