Accounting, Organizations and Society 37 (2012) 342–360

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Accounting, Organizations and Society

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The Dutch East-India Company and accounting for social capital

at the dawn of modern capitalism 1602–1623
Jeffrey Robertson, Warwick Funnell ⇑
School of Accounting and Finance, University of Wollongong, Australia

a r t i c l e i n f o a b s t r a c t

Capitalism’s profound effect on society has encouraged economic and accounting historians
to hypothesise about the importance of double entry bookkeeping to its development.
According to Sombart the continual reinvestment of the profits earned depended on the
existence of a capitalist form of double-entry bookkeeping that would allow investors and
managers to measure the return on investments as a means of making rational business deci-
sions. More recently, with particular reference to the English East-India Company Bryer has
argued that the adoption of the capitalist form of double-entry bookkeeping was essential to
resolving the social conflict between investing capitalist classes that arose with the rise of
industrial capitalism in England in the late 17th and 18th centuries by providing the means
to calculate the rate of return on socialised capital. This paper widens the historical context of
these debates to The Netherlands in the early 17th century by examining accounting
practices of the Dutch East-India Company, the epitome of modern capitalism in motives,
organization and funding. It establishes that, although the 17th century Dutch were pre-
eminent in Europe in their knowledge of the capitalist form of double-entry bookkeeping,
at no time during the period covered by the first charter (1602–1623) of the Dutch East-India
Company, or thereafter, did the domestic operations of the Company use this form of book-
keeping across all chambers. This meant that the investors did not have the necessary infor-
mation that would have allowed them to calculate the return on their investments. Indeed,
the Company’s investors neither expected nor demanded information to calculate the return
on their investments and, hence, double-entry bookkeeping was not a necessary condition
for Dutch capitalism in the manner suggested by Sombart, Weber and Bryer. Instead, the
form which capitalism developed in The Netherlands recognised the social and economic
impact of its unique geography which produced a society characterised by a monetary
economy, a long tradition of joint ownership, and a free market for assets and capital rights.
Ó 2012 Elsevier Ltd. All rights reserved.

Introduction contributions of accounting practices to the transition to

The process by which much of Europe was transformed
from a feudal economy to a modern capitalist economy
has exercised scholars’ minds since Marx published the first
volume of Capital: a critique of political economy (Das Kapital:
Kritik der politischen Ökonomie) in 1867. In particular, the
writings of Werner Sombart and Max Weber have engen-
dered vigorous, sustained debate among economic and
accounting historians, notably their views on the
⇑ Corresponding author.
E-mail address: W.N.Funnell@kent.ac.uk (W. Funnell).
capitalism (Chiapello, 2007, pp. 264–276; Carnegie &
Napier, 1996, pp. 7–8, 15, 29–31; Funnell, 2001, pp. 55–
78; Hopwood, 2000, p. 763; Oldroyd, 1999, pp. 85–86; Toms,
2010; Winjum, 1971, 1972; Yamey, 1949, 1959). Whereas
Marx’s principal interest was ‘industrial capitalism’1 which
1
The earliest known reference to ‘capitalism’ (capitalisme) appears in Louis
Blanc’s Organisation du Travail (1850, p. 161). He declared ‘‘what I call
capitalism, is the ownership of capital by some, to the exclusion of others’’ (avec
ce que j’appellerai le capitalisme, c’est-à-dire l’appropriation du capital par les uns,
à l’exclusion de autres). Infrequently used thereafter, the term was afforded fresh
impetus by Marx and Engels (Braudel, 1992, p. 237; Hamilton, 1991, p. 273).

0361-3682/$ - see front matter Ó 2012 Elsevier Ltd. All rights reserved.
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 J. Robertson, W. Funnell / Accounting, Organizations and Society 37 (2012) 342–360
was mainly a post 18th century phenomenon defined by
investment in the means of production, the concern of Som-
bart and Weber was commercial capitalism which marked
the appearance of modern capitalism during the 16th and
17th centuries (Bryer, 2000b, pp. 336, 342; de Roover, 1942,
pp. 38–39; Sée, 1928/2004, pp. 39, 47–48). Commercial capi-
talism is distinguished from feudal capitalism by the latter’s
emphasis on investment in land, whereas commercial capital
was more mobile and, therefore, more readily able to pursue
opportunities for profit (ten Have, 1976, p. 6). Sombart pos-
ited that the modern capitalist mentality associated with
commercial capitalism depended on both the prior existence
of double-entry bookkeeping to measure profit and the desire
(spirit) to use this technology to make rational business deci-
sions (Sombart, 1916/1953, p. 38). Weber, in contrast, re-
garded double-entry bookkeeping not as an essential
requirement for the development of modern capitalism but
as mainly a technology that facilitated rational capitalist ac-
tion which ‘‘rests on the expectation of profit by the utiliza-
tion of peaceful opportunities for exchange’’ (Weber, 1956,
p. 17). A rational capitalist business entity determines its ‘‘in-
come yielding power by calculation according to the methods
of modern bookkeeping and the striking of a balance’’ (Weber,
1927/1981, p. 275).2
More recently the transition debate has been revitalised
by Bryer (2000a, 2000b) whose contributions, mainly in
Accounting, Organizations and Society, have been described
by Toms (2010, p. 219) as ‘‘an important next step in the
Sombart–Weber debate’’. Bryer (2000a, p. 144) has argued
that ‘‘the mere existence of accounts kept by DEB (double
entry bookkeeping) provides no basis for identifying the
authentically capitalist mentality’’, and hence the appear-
ance of the capitalist business. Instead, and most impor-
tantly, it is ‘‘only evidence of the capitalist mentality if it
produces the return on capital employed . . .’’ (Bryer quoted
in Toms, 2010, p. 209). Relying principally on evidence
from the history of the English East-India Company (EEIC)
during the first half of the 17th century, Bryer further wid-
ened the transition debate when he concluded that the
EEIC ‘‘and others (particularly the merchants of northern
Europe) eventually introduced double-entry bookkeeping3
to foster the socialization of their capital’’ (Bryer, 1993, p.
2
Both Yamey (1959, pp. 534–546) and Winjum (1971, pp. 333–350) also
firmly rejected the idea that a capitalistic form of double-entry bookkeep-
ing was a necessary antecedent to the genesis of the capitalistic firm
(Carnegie & Napier, 1996, pp. 7–8, 15, 29–31; Chiapello, 2007, pp. 264–276;
Funnell, 2001; Hopwood, 2000, p. 763; Oldroyd, 1999, pp. 85–86; Winjum,
1972, p. 231; Yamey, 1949, pp. 99–100, 113).
3
For the purposes of this paper, the terms ‘modern’, ‘scientific’,
‘systematic’ ‘capital-revenue’, and ‘capitalist’ double-entry bookkeeping
are treated as synonyms. In addition to the basic requirement of a pair of
opposing entries for every transaction posted to the accounting records,
capitalist double-entry bookkeeping must be limited to the firm’s transac-
tions and must include a record of all the business’ assets, liabilities,
revenues, expenditure, and its capital sum. It must also recognise periodic
revaluations of assets, especially inventory, and charge depreciation. Such a
bookkeeping system permits the internal calculation of interim net profit
and shows the state of the firm’s capital at a particular date, both of which
are necessary to calculate the rate of return on invested capital (Bryer,
1993, pp. 113–114; 2000b, pp. 330, 368–369; Carruthers & Espeland, 1991,
p. 46; Gras, 1942, pp. 27–31; 1947, pp. 90–100, 103–104; Lemarchand,
1994, p. 122; Nussbaum, 1937, p. 162; Sée, 1928/2004, p. 10; Weber, 1981,
pp. 7, 275; Winjum, 1971, pp. 334–335; Yamey, 1949, pp. 99).
343
136; 2000b, p. 344). While Toms (2010, p. 206) accepts
Bryer’s broader thesis he disagrees with his more ‘‘narrow’’
argument that rate of return calculations occurred quite
early and their use as a specific form of profitability calcula-
tion was the accounting signature of modern capitalism. In-
stead, Toms (2010, p. 206) argues that ‘‘fully ROCE
calculations make a much later appearance than suggested
in . . . (Bryer’s) previous empirical surveys’’. Bryer (2000b,
p. 379) had previously acknowledged the need for ‘‘more
theoretical and empirical research . . . before a plausible the-
ory becomes convincing history’’. Moreover, he noted that
‘‘(w)e must base the social history of accounting on a thor-
ough study of the large amount of archival material that lies
untouched by historians of accounting’’ (Bryer, 2000b, p.
379). Toms (2010, p. 206) has also suggested that an over
reliance in these debates on the experience of England in
the 17th century had implications for the resilience of any
related conclusions.
This paper responds to the call by Bryer and Toms for
more empirical evidence concerning the development of
capitalism in Europe with a detailed study of the Dutch
East India Company (Vereenigde Oost-Indische Compagnie,
hereafter referred to as the VOC) in the early 17th century.
Examination of the VOC, regarded as the first public lim-
ited liability joint stock company and, together with the
EEIC, considered the epitome of capitalist enterprise
(Bryer, 2000a, p. 140; Gepken-Jager at al., 2005, p. 43;
Nussbaum, 1937, p. 162; Sée, 1928/2004, pp. 22, 49, 52,
81, 121; Steensgard, 1973, p. 127; van Dillen, 1958, pp.
27, 40), complements Bryer’s study of the EEIC by broaden-
ing the historical context for the debate about the impor-
tance of double-entry bookkeeping in the transition to
capitalism. More importantly, the new evidence intro-
duced here from the archives of the VOC held at The Hague
challenges the essential, critical importance given by Bryer
to capitalist double-entry bookkeeping. The paper estab-
lishes that, unlike the EEIC, the method of bookkeeping
used by the VOC to account for its capital was not a capi-
talist form of double-entry bookkeeping which would have
allowed investors to determine the return on their
investments.
This study confirms and extends the findings of Funnell
and Robertson (2011) who identified the influence of Ger-
man bookkeeping texts and northern German Hanseatic
business practices on Dutch accounting in the 16th cen-
tury, that is well before the VOC was even conceived. They
found that during this time agents’ (factors’) bookkeeping
and the practices of Hanseatic businesses, which had long
been the Netherlands’ most important trading partners (de
Groote, 1961, p. 147; de Roover, 1963, p. 114), were the
dominant influences on the organisation and administra-
tive practices of Netherlands’ businesses. Hanseatic
accounting developed over the pre-ceding centuries pri-
marily from the need to enable a settlement between part-
ners at the conclusion of a business venture. Hanseatic
businesses did not have a common capital but instead
were loose associations of businessmen in which no part-
ner could exercise formal control over the actions of other
partners (de Roover, 1974, pp. 171, 175; Posthumus, 1953,
pp. 9–10; Stieda, in Mickwitz, 1938, p. 189). Accordingly,
Funnell and Robertson conclude that for Hanseatic busi-
344 J. Robertson, W. Funnell / Accounting, Organizations and Society 37 (2012) 342–360
nesses a capitalistic form of double-entry bookkeeping, in
which a capital account is central, was neither possible
nor desirable and any notion of accounting for an entity
as a whole by means of a centralised accounting system
was entirely foreign to both the 16th century north Ger-
mans and the Dutch (ten Have, 1976, p. 9). These aspects
of Dutch business history are now shown in this paper to
have maintained their influence on the system of book-
keeping used by the VOC from its earliest days and
throughout its long and profitable existence, despite the
sophistication of Dutch capitalism and the importance of
social capital as the means to finance the operations of
the VOC.
The advanced capitalist nature of the Dutch economy as
early as 1648 was noted by Marx who observed that ‘‘the
total capital of the (Dutch) Republic was probably more
important than that of all the rest of Europe put together’’
(quoted in de Vries and van der Woude (1997, p. 8)). Bren-
ner (2001, p. 231) has also affirmed the uniqueness of the
late 16th century Dutch economy by noting that it ‘‘differ-
entiated itself from the leading economies that preceded it
(Flanders, Brabant, the city-states of northern Italy) in its
capitalist modernity, manifested most tellingly in its ad-
vanced, capital-intensive agricultural sector’’. Although
the 17th century Dutch are widely believed by historians
to have been also at the forefront of the development of
modern business techniques which included sophisticated
accounting practices (Nussbaum, 1937, p. 161; Sombart,
1913/1967, pp. 128, 144) evidence of the VOC’s organisa-
tion and financial administration surprisingly has not been
considered in any detail in previous studies of the role of
accounting in Europe’s transition from feudalism to capi-
talism. The independent late 16th century Dutch East-India
companies that were combined to form the United Dutch
East-India Company (VOC) in 1602 were described by
Steensgaard (1973, p. 127) as ‘‘true capital associations, di-
vested of political interests, and probably the first organi-
sations of that kind in the European expansion in Asia’’.
Authorities such as Sée (1928/2004, pp. 22, 81) also con-
cluded that the VOC was ‘‘a real corporation of the modern
type’’, that is a public company.4 This study focuses on the
period 1602–1623, with reference to some important
changes before 1647, during which were established the
VOC’s organisational structure and bookkeeping practices
that endured for its entire, very profitable, existence of
nearly 200 years.
In contrast to the EEIC, evidence from the VOC’s ar-
chives does not indicate that the VOC’s organisation and
financial administration were associated with the adoption
4
In the context of this paper, a public company is one that has no
restrictions on membership. English joint stock companies such as the mid
16th century Company of Merchant Adventurers for the Discovery of Lands
Unknown and the early 17th century EEIC, retained the restrictive rules for
participation of regulated companies (Riemersma, 1950, pp. 33–35;
Robertson, 1839, p. 392; Sée, 1928/2004, pp. 43–44; Walker, 1931, pp.
98–100). The earliest occurrence known to the authors in which the general
public were invited to participate in an English company’s shares was in
1608 (Robertson, 1839, p. 148). Some doubt exists about this date because
Walker (1931, p. 102) states that the first such occurrence was a public
auction of EEIC shares in 1615.
of a particular form of bookkeeping. Despite the VOC ful-
filling all other criteria for a capitalist business entity, most
especially freely marketable, unrestricted share ownership,
and the pre-eminence of the Dutch in the use of and writ-
ing about double-entry bookkeeping (Stevin, 1604), the
VOC persisted with a Hanseatic form of venture accounting
for its domestic (Netherlands) accounts. This form of
accounting did not incorporate an integral capital account
or the means of periodically calculating net profit. In addi-
tion, the evidence provided here reveals that, unlike the
EEIC, the VOC’s general investors, known as participants,
did not require an accounting of the company’s manage-
ment that would have allowed the rate of return earned
on their investment to be calculated as required by social
theories of capitalism. Instead, they had much less sophis-
ticated, more limited, expectations of the VOC’s account-
ing, demanding only that it would allow management’s
probity or stewardship to be assessed. This was dramati-
cally confirmed by a protracted conflict between the VOC’s
general members and its directors (bewinthebbers)5 that
erupted after 1620 when the bewinthebbers refused to pro-
vide a set of accounts to the participants for the first
21 years of the VOC’s operations as required by its first char-
ter. The participants’ determination that the bewinthebbers
would provide a general accounting was explicitly not moti-
vated by the need for information to determine return on
capital invested.
The first section which follows provides an overview
of Sombart, Weber and Bryer’s theories about the rela-
tionship between capitalism and double-entry or capital-
ist bookkeeping with particular and extensive reference
to Bryer’s more recent, influential contributions. Archival
and other evidence is then used to examine influences on
the organisational structure and bookkeeping practices of
Dutch businesses and the formation of the VOC. This evi-
dence establishes that rather than these being most
immediately responses to social conflict between estab-
lished and emerging investing capitalist classes, such as
that which characterised the rise of the EEIC, they recog-
nised instead the influence of the harsh natural landscape
which had prompted the development of innovative
political and economic institutions in The Netherlands,
considered as ‘‘the land of capitalism par excellence’’
(Sombart, 1913/1967, p. 144). Especially influential for
the VOC were the principles and practices developed by
the mediaeval Dutch water-boards, the communal local
authorities established to manage the risk of tidal surges
and floods.
5
The term ‘bewinthebber’ does not translate easily from the Dutch.
Although it has connotations of government administrator, agent, manager
and director, early company bewinthebbers were the firm’s active or public
partners who organised the business, ensured that the requisite capital was
invested, and generally managed the business. Meilink-Roelofsz. (1976, p.
205) uses the term as a synonym for manager, which was the sense in
which it was used in the VOC. Le grand dictionaire, Francois–Flamen (d’Arsy,
1651) gives the same meaning, as does Sewell’s A new dictionary English and
Dutch (1691). Hexham’s A copious English and Nederduytch dictionarie
(1648) added ‘director’ to the list of synonyms but Lichtenauer (1956, p.
161) pointed out that until the early 18th century ‘directeuren’ (directors)
referred specifically to those who financed the fitting out of a warship.
 J. Robertson, W. Funnell / Accounting, Organizations and Society 37 (2012) 342–360
Social capital, the capitalist firm and bookkeeping
Werner Sombart, whose thinking was heavily influ-
enced by Marx (Chiapello, 2007, pp. 12–14; Funnell,
2001, pp. 64–65, 69–70; Sombart, 1937, p. 1953), sought
to explain Europe’s transition from pre-capitalism to
modern capitalism (Braudel, 1992, pp. 237–239; Most,
1972, p. 722; Sée, 1928/2004, p. 11; Sombart, 1937, p.
196; Weber, 1956, pp. 21–22). For this purpose he defined
capitalism as a
particular economic system, recognizable as an organi-
zation of trade, consisting invariably of two collaborat-
ing sections of population, the owners of the means of
production, who also manage them, and propertyless
workers, bound to the markets which they serve; which
displays the two dominant principles of wealth creation
and economic rationalism (Sombart quoted in Most
(1972, p. 722)).
According to Sombart the principal aim of capitalism
was the deliberate increase of an initial stock of wealth,
which was made possible by the rational pursuit of profit
(Most, 1972, pp. 722–724; Sombart, 1916/1953, p. 38).
Capitalism could not exist without the continual, rational
pursuit and, critically, the calculation of profit. This calcu-
lative mentality, he argued, was the essential difference
between a modern capitalist economy and preceding
economies.
The purpose of economic activity under capitalism is
acquisition, and more specifically acquisition in terms
of money. The idea of increasing the sum of money on
hand is the exact opposite of the idea of earning a live-
lihood which dominated all precapitalist systems, par-
ticularly the feudal-handicraft economy (Sombart, in
Seligman and Johnson (1937, p. 196)).
Profit per se was not the ultimate objective of modern
capitalism, merely the means by which an initial stock of
money (wealth) was expanded by the rational reinvest-
ment of profit (Sombart, 1919/1979, p. 246). This process,
Sombart emphasised, depended on the prior existence of
a capitalist (systematic) form of double-entry bookkeep-
ing that would allow both investors and managers to
measure the return on capital invested, thereby enabling
them to make rational business and investment decisions.
The real purpose of double-entry records was to make
manifest the abstract concept of capitalism. Therefore, a
capitalist form of double-entry bookkeeping was essential
for capitalism’s development. Indeed, ‘‘(o)ne cannot imag-
ine what capitalism would be without double-entry book-
keeping: the two phenomena are connected as intimately
as form and content’’ (Sombart, 1916/1953, p. 38).6 Fol-
lowing Sombart, Robertson (1933/1959, p. 54) also directly
linked capitalism and double-entry bookkeeping, asserting
6
For Sombart these records made manifest the abstract concept of
capitalism. He believed profit was something which particularly suited the
alleged nature of Jews (Sombart, 1911/2001). See Funnell (2001) for an
account of how Sombart’s extreme anti-Semitism influenced his funda-
mental thesis about capitalism and double-entry bookkeeping.
345
that capital was the ‘‘wealth set aside for gain . . . (which
was) comprehended by means of double-entry book-
keeping’’.
Unlike Sombart, Weber assumed that the spirit of capi-
talism was a consequence of the ‘Protestant ethic’ that pro-
moted hard work and thriftiness (Cohen, 1980, p. 1340). He
proposed that rational capitalist action ‘‘rests on the expec-
tation of profit by the utilization of peaceful opportunities
for exchange’’ (Weber, 1956, p. 17; 1927/1981, p. 275).
Weber initially suggested that rational calculation was
incidental to capitalism’s development, at the same time
refusing to accord a central role for a capitalist form of
double-entry bookkeeping (Weber, 1956, pp. 18, 21–22,
64). Subsequently, he did concede the importance of ra-
tional calculation, although stressing that this requirement
for rational action was not disturbed if the calculation
which prompted the action was not entirely accurate or
merely an estimate. Imprecision, he at first believed, af-
fected only the degree of rationality not the fundamental
requirement that business decisions were the consequence
of rational consideration. ‘‘The important fact is always
that a calculation of capital in terms of money is made,
whether by modern bookkeeping methods or in any other
way, however primitive and crude’’ (Weber, 1956, p. 18).
Later, however, Weber (1968, pp. 91–92; 1981, p. 275)
was forced to acknowledge that rational capitalist action
rested on a capitalist form of double-entry bookkeeping
that incorporated a capital account (Toms, 2010, p. 205)
which is
represented by the greatest possible degree of ‘calcula-
bility’, the most complete calculability of all chance of
profit and loss already realised or anticipated in the
future. No other method of calculation, however
devised, can replace the formally rational functioning
of capital accounting (Weber, quoted in Tribe (2006,
pp. 29–30)).
Bryer harnessed Weber’s notion of a calculative mental-
ity to an interpretation of Marx’s explanation of class con-
flict as the catalyst that initiated commercial capitalism to
propose that class conflict in trade and agriculture, a calcu-
lative mentality, and the use of modern accounting, that is
double-entry bookkeeping, together constituted the ‘‘nec-
essary and sufficient causes of full capitalism’’ (Bryer,
2000a, pp. 131, 135–136). Inherent in the notion of class
conflict in commerce is a free, collective, that is social, cap-
ital that divorced ownership and management of the cap-
ital sum and established a professional management
corps who were ‘‘accountable to social capital . . . for the
realised rate of return on capital employed’’ (Bryer, 1999,
p. 687; 2000a, p. 142). ‘Capital employed’ could refer to
either accounting or economic capital but the context in
which Bryer uses the term indicates he intends accounting
capital, that is, the joint sum (stock) invested by sharehold-
ers plus accumulated retained earnings, rather than eco-
nomic capital. Economic capital, which encompasses
accounting capital and all other forms of financing ad-
vanced to the business, is not evident in Bryer’s discussion
of the EEIC’s capital. In the manner that Bryer uses the term
‘returns’ it represents a proportional remittance of periodic
net profit identified by double-entry bookkeeping.
346 J. Robertson, W. Funnell / Accounting, Organizations and Society 37 (2012) 342–360
Consequently, it is related to accounting profits (direct rev-
enues less expenditures) rather than economic profit
which includes a wider range of implied costs (Bryer,
2000a, pp. 136–140, 151; 2000b, pp. 328, 331–332, 337,
342, 344, 346–349, 368).
Social capital, according to Bryer (1999, p. 687; 2000a,
pp. 141–143; 2000b, p. 368), induced investors to adopt
a calculative mentality based on the rate of return earned
on capital employed. This ratio is said to constitute the
very core of capitalism because ‘‘the rate of return mental-
ity combines with the mentality of maximizing surplus la-
bour within production, to produce the modern capitalist
mentality, that pursues the maximum rate of return on
capital employed in production’’ (Bryer, 2000a, p. 159).
The rate of return on capital is the most effective means
to hold management accountable for both their adminis-
tration of the capital sum and an equitable, satisfactory
distribution of profit. Therefore, the rate of return on cap-
ital employed ‘‘the dominant economic ethic’’ (Bryer,
2000b, p. 327). A capitalist form of double-entry bookkeep-
ing is considered the best means of providing the informa-
tion required to calculate this rate of return, and thereby
fix management’s accountability to investors because only
‘‘double-entry bookkeeping can be characterized as an
algorithm for the automatic and continuous production
of the means for calculating the rate of return on capital’’
(Bryer, 1993, pp. 114). Thus, ‘‘the new merchants who
socialise their capital should evince the rate of return men-
tality in their accounts by the full application of DEB’’
(Bryer, 2000a, p. 151, emphasis added).
In the case of England, Bryer’s main focus, the transition
from feudalism to capitalism is said to have incorporated
three stages which began in the late 15th century with
agricultural enclosures and the emergence of free waged
labour (Bryer, 2000b, p. 329; 2004, p. 6; 2005, p. 29;
2006, p. 370). Whereas bonded labour could be physically
compelled to deliver a surplus to the landowner, free or
waged labour necessitated the economic means to admin-
ister the return produced. Economic management, in turn,
relied on financial accounting and, more particularly, cal-
culation of periodic feudal surplus or net revenue, a pri-
mary indicator of a developing capitalistic mentality. To
become a capitalist, a feudal lord ‘‘needs only to transform
his workers into wage workers and produce for profit in-
stead of for revenue’’ (Marx quoted in Bryer (1994, p.
211)). Notwithstanding that profit is the general form of
surplus under capitalism (Marx, in Bryer (1994, p. 209)),
16th century farmers possessed only an embryonic calcu-
lative mentality that took account of net surplus, not peri-
odic net profit in relation to capital employed (Bryer,
2000b, p. 328; 2005, p. 29). As profit is the general form
of surplus under capitalism (Marx, in Bryer (1994, p.
209)), such farmers were considered semi-capitalist (for-
mally capitalist). In contrast to full capitalism, semi-capi-
talist entrepreneurs are defined as ‘capitalistic’ rather
than ‘capitalist’, and their collective investments as ‘socia-
lised’ rather than ‘social’ (Bryer, 2000a, p. 137). Only when
surpluses from trade flowed back into agriculture and
farmers administered their estates by calculating the rate
of return on the capital employed did they become capital-
ist (Bryer, 2005, p. 30).
In the next stage along the path towards full capitalism,
feudal merchants ‘‘became capitalistic, signatured by their
use of double-entry bookkeeping (DEB) to calculate the
feudal rate of return on capital, when they socialised their
capital . . .’’ (Bryer, 2000b, p. 328) by investing in partner-
ships and joint stock companies (Bryer, 2000a, p. 137).
Investments were considered temporary, liquidated as
soon as the venture was complete. Capitalistic business
associations of the 17th century were typified by English
long-distance commercial ventures, such as the early Eng-
lish East India Company. Merchants who invested in such
undertakings are considered capitalistic because they pur-
sued the feudal rate of return, that is feudal surplus (reve-
nue less expenditure or net operational cash flow)
expressed as a factor of the initial capital invested by indi-
vidual venturers (Bryer, 2006, p. 370). As these entrepre-
neurs did not rely on profit in the modern sense of the
term, they did not need a fully developed capitalist form
of double-entry bookkeeping to satisfy their calculative
mentality. Accordingly, ‘‘DEB was irrelevant to the calcula-
tive mentality of feudal merchants as there was no social
pressure on them to calculate the rate of return on capital’’
(Bryer, 2000b, p. 340). Profit was conceived as a consum-
able surplus necessary to ‘‘maintain their lifestyles, not to
maximize the rate of return on their capitals’’ (Bryer,
2000a, p. 151).
Full capitalism which evolved from semi-capitalist
(capitalistic) relations and calculative mentalities during
the late 16th and early 17th centuries (Bryer, 2004, p. 6)
was characterised by a free collective capital that was
not restricted to a particular social class, was freely trans-
ferable and could be used for any legitimate business pur-
pose. Most importantly, free capital had the ability to
readily respond in a free market to the rate of return
earned on capital. Under full capitalism the capital sum is
regarded as a permanent7 totality that has no direct associ-
ation with individual investors, which allowed investors’ lia-
bility for the company’s debts to be limited to the unpaid
portion of the subscribed capital (Bryer, 2000a, p. 137;
2000b, p. 368). Capital’s anonymity was critical for the
development of full capitalism for it meant that capital
had to be manifested in the accounting records as a coherent
monetary sum. Furthermore, it required that returns to
investors (distributions or dividends) were proportional to
the sum invested and that they were made in cash rather
than kind. Consequently, equitable distributions appor-
tioned from profit became the dominant economic ethic
and the modern capitalist’s calculative mentality demanded
the optimal rate of return on capital employed (Bryer, 1994,
p. 209; 2000a, pp. 136–137, 142–143, 159).
In contrast to semi-capitalism where the roles of man-
agement and owner were combined, management with
full capitalism are employees accountable to the collective
body of investors. Management are expected to discharge
7
Permanent meant that, rather than capital being liquidated on the
occurrence of a certain future event, the capital sum’s integrity was
maintained until such time as investors deemed it expedient to liquidate it.
Given a policy of capital maintenance, dividends must be paid from profits,
and management is accountable to investors for the value of the capital
invested.
 J. Robertson, W. Funnell / Accounting, Organizations and Society 37 (2012) 342–360
this obligation by producing periodic financial reports that
set out the return earned during the period and the state of
the capital at a particular date. Importantly, according to
Bryer (2000a, pp. 142–143; 2000b, p. 368) the principal
objective of such corporate financial accounting is not to
provide investors with decision-useful information but to
hold management accountable for the rate of return on
capital employed and for an equitable, satisfactory distri-
bution of profit: ‘‘an equal return for equal capital’’ (Bryer,
2000a, p. 159). Thus, ‘‘double-entry bookkeeping emerged
as capital became socialised in response to a collective de-
mand from investors for the frequent calculation of the
rate of return on capital as the basis for sharing profits’’
(Bryer, 1993, p. 115). This perceived proximity between
the development of capitalism and double-entry book-
keeping induced Bryer to conclude that ‘‘the history of
socialised capital underlies the emergence and spread of
double-entry bookkeeping, the introduction of the joint
stock company, and the emergence of modern financial
reporting’’ (Bryer, 1994, p. 210; 1999, p. 688; 2000a, pp.
132, 135–136). Accordingly, the history of accounting be-
tween the 13th and 17th centuries provides a reliable sur-
rogate for the history of the development of capitalism
while the history of the EEIC exemplifies this relationship
(Bryer, 2000b, p. 344).
From its inception in 1600 until its ‘bourgeois revolu-
tion’ in 1657, the EEIC was organised as a joint stock com-
pany with a regulated, terminating capital that could be
withdrawn in kind. Consequently, it was semi-capitalist
and its investors calculated the feudal rate of return on in-
vested capital (Bryer, 2000a, p. 151; 2000b, p. 345). Not
until social conflict in 1657 transformed the EEIC into a
fully capitalist entity did it adopt a free capital and resolve
that dividends henceforth be based on profit and paid in
cash. These changes established the principle of capital
maintenance within the EEIC, abolished the company’s
feudal management, and resulted in limited liability for
its investors. To properly administer these changes and
the social tensions that they engendered as a new class
of investors challenged the dominance of a privileged
group of merchants who had run the EEIC for their own
benefit, the EEIC also adopted a capitalist form of dou-
ble-entry bookkeeping (Bryer, 2000a, p. 151; 2000b, pp.
328, 368; 2006, p. 370).
Unlike the more immediate temporal and historical tra-
jectory of social conflict identified by Bryer with the EEIC,
in the case of the VOC these influences were not immedi-
ately antecedent to its formation or most influential in its
choice of accounting and management practices. Instead,
the following section will establish that the country’s geog-
raphy was overwhelmingly the greatest influence on the
form and management of the VOC through the social, polit-
ical, personal and economic responses that this had de-
manded of the Dutch and which were refined over
centuries. These conditions, together with the Dutch revolt
against the Spanish empire in 1581, had fashioned a un-
ique national identity which was unconsciously yet syner-
gistically conducive to the values, goals and practices of
the ‘‘first modern nation state based on capitalism rather
than feudalism’’ (Riley & Ashworth, 1975, p. 40).
347
Influence of the Dutch landscape on society and
business
The Netherlands most striking feature is its general lack
of elevation. Twenty-five percent of the country lies below
sea level, while a further 40% is at, or slightly above, sea le-
vel (Kaijser, 2002, pp. 521–522; Lambert, 1971, p. 1; Riley
& Ashworth, 1975, pp. 12–15; Rowen, 1972, p. 1; TeBrake,
2002, p. 475; van Dam, 2002, p. 500). In the absence of con-
tinuous, extensive water control measures, two thirds of
The Netherlands would be submerged at high tide. Accord-
ingly, extreme necessity preoccupied the region’s inhabit-
ants with protecting what little land there was from tidal
surges and flood, and induced them to reclaim as much
land as possible from seashore, riverbeds and marshes
(Dolfing & Snellen, 1999, pp. 3, 8; Israel, 1995, p. 9; Smits
& Wiggers, 1959, p. 9; TeBrake, 2002, pp. 475, 483; van
Iterson, 1997b, p. 53). In the absence of a strong feudal
presence in much of northern Netherlands, life under such
precarious circumstances was only possible because, as
early as the 13th century, the Dutch organised themselves
into effective and cooperative autonomous local authori-
ties known as water-boards (waterheemraadschappen).
Dutch water-boards derived their authority from the
principle that every village was a judicial entity in its
own right, with its own law court, laws (keuren, literally
‘choices’), programme of construction, budgets, mainte-
nance, and inspections (schouw or audit). Organised and
managed on the general principle that individuals must
contribute a proportionate share of the costs of any bene-
fits received, these institutions infused Dutch society with
the notion that, to avoid one group unfairly dominating an-
other, social relationships must be organised proportion-
ally. It also resulted in an emphasis on local concerns and
the need for co-ordinated, planned action which engen-
dered the democratic principle that water management
had to be delivered by local officials who were directly
accountable to those whom they represented (Israel,
1995, pp. 9–10; Kaijser, 2002, pp. 522–529, 547; Lambert,
1971, p. 114; TeBrake, 2002, pp. 493, 497; van de Ven,
1994, pp. 9, 48–49, 69, 96–100; van der Linden, 1981, pp.
58–65).
The concept of stakeholder rights, an essential part of
modern corporate governance, was another innovative so-
cial institution developed as a result of the Dutch experi-
ence with water-boards. Water-boards had to take
cognisance of not only the interests of the local landowners
and residents but also the well-being of those who lived
upstream and downstream, and those of urban folk whose
interests might conflict with those of rural dwellers. Thus
was born the notion that social institutions were account-
able to a wider stakeholder group (Dolfing & Snellen, 1999,
p. 9; TeBrake, 2002, pp. 490, 497). Their experience in
resolving water-related conflicts between different groups
allowed the Dutch to develop an approach to managing so-
cial conflict that is best described as ‘pragmatic consensus’.
Pragmatic consensus, or ‘verzuiling’, refers to a process in
which communal action depended not on a simple major-
ity vote but on a common consent achieved by negotiation
and cooperation (Kaijser, 2002, p. 547; Lijphart, 1968, pp.
348 J. Robertson, W. Funnell / Accounting, Organizations and Society 37 (2012) 342–360
122–138; TeBrake, 2002, p. 493). Politically, the water-
boards were relatively autonomous, democratic institu-
tions located within a federal structure that operated as a
network of interconnected cells, rather than a hierarchy
(Dolfing & Snellen, 1999, pp. 35–36; Sorge & van Iterson,
1995, p. 197; TeBrake, 2002, pp. 490, 497; van Dam,
2002, p. 503).
The organisational model of the Dutch water authorities
provided the model for The Netherlands’ republican form
of government and its business institutions in the latter
half of the 16th and early 17th centuries, and still informs
the structure and administration of modern Dutch society
and business organisations (Lambert, 1971, pp. 113–114;
van der Linden, 1981, pp. 58–65; van Dijk & Punch, 1993,
pp. 169–172). The nominal head of government was a na-
tional assembly of deputies, the States-General, whose
members were appointed by the country’s seven sovereign
provinces: Holland, Zeeland, Utrecht, Groningen, Friesland,
Overijssel, and Guelders. Each province, in turn, had its
own provincial assembly, the States Provincial, made up
of delegates appointed by the towns in its jurisdiction.
Consequently, the responsibility of the representatives ap-
pointed to the States-General lay first with the town they
represented, then their province, and finally the national
government (Price, 1994, p. 233; ‘t Hart, 1989, p. 665; Tem-
ple, 1673/1972, p. 64; van Gelderen, 1992, p. 24; van Zan-
den & Prak, 2004, pp. 17–18).
In the absence of a strong feudal authority, water-boards,
which were dependent on taxes levied on fixed property to
carry out their responsibilities, undertook to maintain
meticulous records of property transactions. In this way,
these institutions played a significant role in establishing se-
cure property rights by developing property law and impos-
ing administrative order on land transfers (van Bavel, 2005,
pp. 7–9). The ability to create freehold land freed peasant
farmers from feudal bonds while the widespread practice
of leasing rural land at commercial rates after the 13th cen-
tury was a decisive factor in developing a capitalist economy
in rural Netherlands. Indeed, the
market orientation of Dutch rural society and the entre-
preneurial freedom that was made possible by volun-
tary, commercially based leases and contracts give a
distinctly modern impression . . . This medieval achieve-
ment must stand as the most distinctive feature of the
region’s economy (de Vries and van der Woude, pp.
161–162).
Peat-land clearances undertaken in central Holland
after the 13th century were another important step in
the development of medieval Dutch peasant property
rights. Furthermore, by establishing the idea that capital
assets could be jointly owned, and shares in such assets
could be freely negotiated, the peat-land clearances set in
place another element of The Netherlands’ capitalist agrar-
ian economy. Reclamation projects were formalised by an
agreement (cope) between six to eight free families who
jointly cleared a standard parcel of land. Each family in-
volved was regarded as a shareholder (aandeelhouder) in
the project, and, most importantly, enjoyed rights of own-
ership over their share of the asset that could be freely
negotiated. The surplus yield of such a parcel of land was
shared in proportion to the input each member had con-
tributed. Accordingly, the copen established a tradition of
social capital and endowed the Dutch with a profound
understanding of the principle of common ownership in
proportion to invested capital that is central to modern
capitalism. This form of association also engendered an
appreciation of the concept that abstract rights repre-
sented a negotiable asset. The ‘‘‘cope’ reclamations, in par-
ticular, . . . had considerable political and social
consequences. The present-day society of The Netherlands
has been strongly influenced by these developments. The
agreement functioned as a kind of constitution for the fu-
ture society’’ (van de Ven, 1994, p. 60).
The poor quality of the country’s soil and its lack of re-
sources compelled the Dutch to create an industrialised rur-
al economy initially based on dairying. Dairying was less
labour intensive than other types of farming, resulting in
surplus rural workers who were forced to move to the
towns. Not only did these activities create a free peasantry,
who jointly owned the property they farmed, but subse-
quent environmental degradation when the dried peat-
lands subsided was instrumental in inducing farmers to spe-
cialise and develop proto-industries, that is, ‘‘non-agricul-
tural activities . . . such as textile production, peat-digging,
fowling, chalk-burning, bleaching, brick-making, fishing
and shipping’’, which were increasingly capital-intensive
and matched the needs of wealthy urban investors (van Ba-
vel, 2010, p. 56). The consequence of rural specialisation and
other industry was that rather than producing the variety of
commodities necessary for subsistence, rural dwellers had
to resort to the market to dispose of their surplus produce
and generate the income to buy the necessities they no long-
er produced (Brenner, 2001, p. 208; van Bavel, 2003, pp.
1133, 1139–1140, 1160; 2010, p. 55).
Experience with medieval institutions such as the
water-boards also instilled in the Dutch the importance
of holding those entrusted with managing joint assets
accountable to the general population. Fiscal control re-
quired that a water-board’s constituents approve a
water-board’s annual programme of work, its budget, and
the level of tax required to fund the proposed work. In
addition, local representatives and officials were held to
account, in public forum, for the discharge of their duties.
Financial accountability acquired a more formal structure
in the late 16th and early 17th centuries when a form of
statutory financial audit was imposed on the principal
water boards (van de Ven, 1994, pp. 96–100; Dolfing &
Snellen, 1999, pp. 16–18).8 These social institutions to-
gether with the rapid urbanisation of The Netherlands were
critical elements in The Netherlands becoming a capitalist
society with a unique Dutch identity.
An unusually ‘‘precocious’’ (De Vries & van der Woude,
1997, p. 608), high rate of urbanisation in The Netherlands
from the 14th century was largely due to the commerciali-
8
Evidence of the importance that the medieval Dutch placed in
commercial financial accountability is found in a 1413 Amsterdam
keurboek (codified city ordinances) that required ship captains to properly
record transactions carried out on behalf of the joint owners of a ship and
its cargo (partenreederij), which record the Amsterdam court could, if
necessary, subpoena (Gelderblom, 2004, p. 26).
 J. Robertson, W. Funnell / Accounting, Organizations and Society 37 (2012) 342–360
sation of the countryside (de Vries & van der Woude, 1997,
p. 608; van Bavel & van Zanden, 2004, p. 506). By the 14th
century a quarter of Holland’s population was urbanised,
rising to half of the population by the early 15th century
with the ratio of urban to rural inhabitants exceeding
60% after the mid 16th century when urban areas absorbed
nearly 90% of Holland’s population growth. A corollary to
this extensive urbanisation was a substantial growth in
waged labour, monetary exchange and a competitive ur-
ban market economy (de Vries & van der Woude, 1997,
p. 706; Israel, 1995, p. 15; Kaijser, 2002, p. 530; ‘t Hart,
1989, pp. 664–665; van de Ven, 1994, pp. 93, 95). By the
17th century, the Dutch were a waged society of ‘‘(f)ar-
mers, shopkeepers, and many inland and ocean shippers,
fishermen, and craftsmen were self-employed, their in-
comes depending on the market prices of their goods and
services’’ (De Vries & van der Woude, 1997, p. 608).
A ‘classical’ transition from agrarian feudalism to capi-
talism in the manner suggested by Marx, Brenner and
Bryer, therefore, did not occur in late medieval (mid 16th
century) Netherlands. Consequently, competition for land
did not manifest itself as a struggle between peasant and
lord but between peasant and the bourgeoisie. In compar-
ison to England, Dutch competition for land was more sub-
tle, on a smaller scale and carried out by Dutch burgers
who regarded rural land acquisition as incidental to their
main occupation of urban commerce. Also in Holland, un-
like England, the struggle for dominance over the state
was decided in the late 16th century in favour of the mer-
chant class. Not only did The Netherlands’ rural economy
not experience the same sharp social divisions based on
class as were evident in England but the Dutch aristocracy
did not have the ability to force peasants to part with their
surplus by non-economic means. Brenner has noted that
what is most significant about the Dutch agrarian struc-
ture at the start of the early modern period is its sys-
tematic difference from the typical west European
feudal-peasant pattern. There had never been a
strongly-rooted lordly class capable of extracting a sur-
plus by means of extra-economic compulsion, and by
1500 the landed class received exclusively economic
rents. Equally significant, there had never been a tradi-
tional ‘patriarchal’, ‘possessing’ peasantry, with direct,
non-market access to its means of subsistence (Brenner,
1997, p. 75).
By the late 16th century, Dutch society was accustomed
to a competitive, market economy in which subsistence
production was no longer practiced in any significant
way. However, once subsistence production gave way to
agrarian specialisation the Dutch understood that contin-
ual reinvestment was vital to sustain their economic cir-
cumstances, and provide a degree of assurance for the
future (De Vries & van der Woude, 1997, pp. 160, 179).
More so than Protestant ethics, it was the appreciation that
it was critical to provide for an uncertain future that con-
firmed The Netherlands’ transition to capitalism. This men-
tality was clearly evident in the continual reinvestment
that saw the Dutch fleet expand rapidly after the 14th cen-
tury, so that by the 16th century it dominated North Sea
fishing and shipping between the Baltic and Iberia, (Brau-
349
del, 1992, p. 190; de Vries & van der Woude, 1997, pp.
296, 355–357, 364; Israel, 1990, pp. 21, 27; 1995, pp. 24,
49–52, 60–66; Tracy, 1985, p. 195; 1990, p. 12). Most
importantly, it was the continual reinvestment in the re-
gion’s merchant navy during the 15th and 16th centuries
that made it possible for the Dutch to efficiently exploit
the 17th century European market for Asian goods (De
Vries & van der Woude, 1997, pp. 388–389, 392, 396, 463).
Organisation and ownership of the Dutch East-India
Company
Between 1595, when Cornelius Houtman’s fleet re-
turned from the first successful Dutch voyage to the East
Indies (van der Chys, 1857, p. 7), and April 1602, when
the VOC was established, The Netherlands was consumed
by an intense flurry of commercial activity that saw a num-
ber of East Indian companies established. During this time,
16 fleets comprising 71 merchantmen sailed from The
Netherlands to the East Indies (for a history of these early
companies see: Bruijn, Gaastra, & Schöffer, 1979, p. 2;
Mollema, 1935, pp. 18–28; van der Chys, 1857). The States
of Holland quickly realised that the intensely competitive
nature of Dutch businessmen, especially those of The
Netherland’s two largest provinces Zeeland and Holland,
was proving detrimental to the East-India trade. Profitabil-
ity of the Dutch East-India trade would only be optimised
by encouraging independent Dutch East-India companies
(voorcompagnieën) to cooperate, rather than act as ruthless
commercial competitors (de Haan, 1977, p. 84; de Jonge,
1862, p. 137; van der Chys, 1857, pp. 87, 89). By early
1601 the concern for commercial order had been sup-
planted by anxiety for the nation’s general economic wel-
fare, which was increasingly reliant on the profits
generated by East-India commerce. Thus, the States-Gen-
eral decreed in 1601 that the voorcompagnieën be restruc-
tured as a single entity that both accommodated existing
interests and allowed access to these highly profitable
operations for all Netherlands’ residents (de Jonge, 1862,
pp. 133, 138; den Tex, 1973, pp. 301–305).
The VOC was a remarkable institution for its time.
Formed in 1602 as a public company, with strong capitalist
characteristics, it was an innovative institution. A charter
issued by the States-General on the 20th of March 1602
created the United Dutch East-India Company, conferring
on it monopoly rights9 to trade in the East Indies (NL-HaNa,
VOC, 1.04.02, file 1, VOC charter, 160210). The new company
was comprised of six largely independent chambers repre-
senting the major trading towns of Amsterdam, Delft,
Enkhuizen, Hoorn, Rotterdam, and Zeeland,11 a legacy of
the earlier East-Indian companies (NL-HaNa, VOC, 1.04.02,
file 1, Article I) which continued to enjoy a proportionate
9
At this time Holland’s businessmen generally opposed monopolies,
which they believed limited opportunities for profit. Nevertheless, the
Dutch supported the concept of a VOC monopoly on basis that existing
political communities had inviolable rights that had to be protected
(Riemersma, 1967, pp. 32, 61).
10
Documents located in the VOC archives in The Hague are referred to in
this manner.
11
The first five were located in Holland and the sixth at Middelburg in the
province of Zeeland.
350 J. Robertson, W. Funnell / Accounting, Organizations and Society 37 (2012) 342–360
share in the anticipated economic advantages from the re-
organised East India trade (den Tex, 1973, pp. 300–309;
Price, 1974, pp. 2, 27; Price, 1994, pp. 129–131, 235).
Responsibility for company policy and external relations
was given to a central supervisory body of 17 executive
directors called the Heren Zeventien. The VOC was estab-
lished as a legal entity in its own right, independent of its
members, which represented a significant shift in the orga-
nisation of business entities at this time. Investors were
deemed not to be personally liable for the company’s debts
beyond the unpaid portion of their subscribed capital sum,
which was considered a personal obligation between sub-
scriber and the company (NL-HaNA, VOC, 1.04.02, 1, Article
XLII; van Iterson, 1997a, p. 8).12 The importance of both so-
cial and economic motives in the formation of the VOC is
clear from the preamble to the founding charter which
acknowledged that
the welfare of these United Lands depends primarily on
the maritime traffic, trade and commerce conducted
since time immemorial from these lands, not only with
neighbouring kingdoms but also with countries located
further away, in Europe, Asia and Africa, which has from
time to time produced glorious profit. . .. [We] are per-
suaded that these United Lands and its good inhabitants
might greatly benefit if such ventures, trade and com-
merce was sustained and developed by being subject
to sound common control, authority, and cooperative
management.
The close association between state and commerce was
also apparent in the role played by Johan van Oldenbarne-
velt who, as Advocaat van den Lande (Advocate of Hol-
land),13 was both the orchestrator of the federated Dutch
Republic in 1586 and the driving force behind the organisa-
tion of VOC in 1602 (den Tex, 1973, pp. 1, 150; Geyl, 1980,
pp. 213–215; Parker, 1977, pp. 247–248). Van Oldenbarne-
velt introduced in the VOC’s charter a revolutionary change
to the Dutch bewinthebbers’ customary role of acting as
investment agents for those not directly involved in a busi-
ness by ensuring that the charter stipulated that every Neth-
erlands’ inhabitant was to have the opportunity to invest
even the smallest amounts on their own behalf, not through
and at the behest of an intermediary (NL-HaNA, VOC,
1.04.02, 1, Articles X and XI). The strong social basis of the
VOC’s charter was also evident in Article X which provided
that in the event of the capital being oversubscribed the allo-
cation of those who had subscribed for the greatest amounts
would be proportionally reduced to accommodate all small
subscribers (NL-HaNA, VOC, 1.04.02, 1, Articles X and XI).
An unintended consequence of Article X was a revolu-
tionary change for the role of the Dutch bewinthebber.
Whereas bewinthebbers had been entrepreneurs who acted
as investment agents for those not actively involved in a
venture, direct subscription rendered this function redun-
dant. Despite this highly significant cultural and commer-
12
Subscriptions were received from 1800 investors, contributing a total of
6,424,388 guilders (De Vries & van der Woude, 1997, p. 385).
13
Later known as the Raadspensionaris, this official was effectively the
chief minister in the post revolution republican government (Price, 1974,
pp. 2, 15; 1994, pp. 129, 235).
cial innovation, the charter failed to recognise the
implications of direct subscription and stipulated that the
bewinthebbers retain their traditional role as the company’s
directorship with dramatic consequences towards the end
of the first charter (NL-HaNA, VOC, 1.04.02, 1, Articles
XVIII–XXIII). This confused the company’s accountability
relationship because bewinthebbers, as the public face of
Dutch business, had traditionally been fully liable for debts,
whereas investors who used the services of a bewinthebber
were considered anonymous and had no such liability.
Accordingly, previously a business was held to be account-
able to its bewinthebbers but not to those who invested un-
der their auspices while the latter only had a right to
demand an accounting from the bewinthebber with whom
they had placed their funds. The disruption caused by the
changed relationship between bewinthebbers and investors
was exacerbated by the charter providing that all VOC inves-
tors, including the bewinthebbers, would enjoy limited lia-
bility for the company debts to the extent of the unpaid
portion of the capital for which they had subscribed (NL-
HaNA, VOC, 1.04.02, 1, Article XLII; van Iterson, 1997a, p. 8).
The VOC’s structure reflected the highly devolved
organisational structure of the country’s water-boards
and The Netherlands’ federal political structure (NL-HaNa,
VOC, 1.04.02, file 1, Article I). Division of the company’s
domestic operation into six relatively independent cham-
bers echoed the autonomous, self reliant nature of water-
boards. Each chamber organised its own East-India fleets,
built its own ships in its own yards, engaged the crews
and paid their wages, controlled their own commercial
operations, and provided the stocks and equipment needed
to equip their fleets (Meilink-Roelofsz, 1982, p. 173). Indi-
vidual chambers kept their own financial records accord-
ing to their preferred method of bookkeeping; there was
no central accounting system which encompassed the
activity of all chambers. In keeping with the cellular struc-
ture of the water boards, the VOC did not have an author-
itative, overriding central administration, only the Heren
Zeventien (NL-HaNa, VOC, 1.04.02, file 1, Article II) and in-
stead was held together by the company’s charter which
effectively acted as its articles of association. Archived res-
olutions of the VOC’s Heren Zeventien confirm that from the
first the VOC operated as a commercial enterprise devoted
to maximising profits (NL-HaNA, VOC, 1.04.02, 99, 100
(NL-HaNA, VOC, 1.04.02, 225, 226, 227, 228; NL-HaNa,
VOC, 1.04.02, file 1, Article II). There is no suggestion in
the evidence available that, unlike the EEIC, the early com-
pany had any colonial ambitions (de Heer, 1929, p. 284;
Heeres, 1902, p. 18; Meilink-Roelofsz., 1980, p. 20; Most-
ert, 2007, p. 11).
VOC capital rights were freely transferable in an open
market, thereby changing the nature of the investment
from a temporary monetary deposit, which could be re-
claimed when a venture was liquidated, to that of an asset
that could be bought and sold as the holder saw fit. An
organised market for this purpose was established in
Amsterdam in 1603,14 shortly after the first capital calls
14
London developed a similar market only towards the end of the 17th
century. EEIC shares do not appear to have been traded on the London
market before 1710 (Barbour, 1950, p. 76).
 J. Robertson, W. Funnell / Accounting, Organizations and Society 37 (2012) 342–360
were made for the VOC. So volatile was this market that one
third of its capital changed hands during the first 5 years of
the company’s existence (Barbour, 1950, pp. 76–79; Geld-
erblom & Jonker, 2006, p. 8). The VOC’s charter defined the
company’s capital as a terminating investment that was to
be liquidated after 10 years, at which time the invested cap-
ital, together with any surplus, was to be returned to the
investors (NL-HaNA, VOC, 1.04.02, 1, Articles VII, IX). The
first 10 year capital cycle started in 1603, 1 year after the
VOC was formed. Therefore, the first capital should have
been wound up in 1613 to be followed by a second capital
which was to be returned 10 years later in 1623, at which
time the first charter was also due to expire.
The VOC’s founders when deciding the period of the
investments had to reconcile the need to raise sufficient
capital to make the company profitable with investors’
resistance to committing funds to a highly risky venture
for an unduly long period. This dilemma was resolved by
the assumption that five round trips to the East-Indies,
which each took about 2 years, would produce the optimal
returns. Significantly, the first charter also made provision
for a general accounting after the first 10 years in 1613,
and not before, at which time the accounting records had
to be closed and the capital liquidated before another sec-
ond issue of capital. The required simultaneous termina-
tion of the capital, its return with surpluses and closing
of the account books meant that there was neither the
expectation of, nor the need for, the keeping of complex
financial records during each 10 year investment cycle to
periodically calculate net profit and determine the state
of the capital. The creation of a permanent capital for the
VOC was to engender a very different set of expectations.
The first indications that the VOC intended to make its
capital legally permanent occurred in August 1606 when
the Heren Zeventien resolved to lobby The Netherlands
States-General for permission to extend the first 10 years’
capital by combining both 10-year periods stipulated by
the first charter (NL-HaNa, VOC, 1.04.02, file 99, folios
205, 206). Notably, this would resolve a major problem
for the bewinthebbers who, despite the requirements and
intent of the first charter, had been reinvesting their trade
surpluses in the Asian operation and thereby, in effect, al-
ready treating the capital sum as permanent (De Vries &
van der Woude, 1997, pp. 388–389). Thus, the legal obliga-
tion required by the first charter to terminate the capital in
1613 presented the company with a dilemma for, contrary
to the requirements of the charter (NL-HaNA, VOC, 1.04.02,
1, Article XVII), the significant investments in Asia had left
little or no surplus that could be distributed to the partic-
ipants. Furthermore, if, as the charter stipulated, the first
10-year capital was wound up in 1613, the value of the
very significant Asian investment would be lost to those
members of the first 10-year capital who elected not to
reinvest their funds in the company’s second 10-year
capital.
After unsuccessfully petitioning the States-General in
October 1607 for permission to continue the first capital
for the duration of the first charter (NL-HaNa, VOC,
1.04.02, file 100, folio 161; van Dam, 1701/1927, p. 44),
on the 10th of November 1611 the VOC directors again
sought the necessary power to extend the life of the first
351
capital (NL-HaNa, VOC, 1.04.02, file 100, folio 161). This
time the petition was successful and a States-General res-
olution dated 13 March 1612 provided the authority to roll
the first capital over until 1623 (van Dam, 1701/1927, p.
45), without the need to provide an accounting for the first
10 years, when the company would have to provide partic-
ipants with a general accounting which would be the first
such accounting to the participants in 21 years. At the time
of the resolution by the States-General ‘‘the VOC had be-
come Europe’s first effective joint-stock company’’ (De
Vries & van der Woude, 1997, p. 385) whose original and
consistent primary motivation was increasing commercial
surpluses, driven by continual reinvestment. Not until
1647 was the permanency of the VOC’s capital effectively
confirmed when the VOC’s charter was revised and ex-
tended (Contunuatie en prolongatie) (De Vries & van der
Woude, 1997, p. 385).
Following the 1647 continuation of the 1602 charter no
further changes were made to the VOC’s constitution until
1700 (De Vries & van der Woude, 1997, p. 389), nor were
any further changes made to its accounting system to re-
flect the changed status of its capital. At no time did the
domestic operations of the VOC use a centralised, uniform
accounting system, nor, with the one brief exception of the
Zeeland chamber, did it use a capitalist form of double-en-
try bookkeeping. The bookkeeping methods used by the
two largest chambers, Amsterdam and Zeeland, differed
substantially until 1608 when the domestic accounting
system required of all chambers was standardised accord-
ing to that used by Amsterdam. These in turn differed sig-
nificantly from the accounting system implemented in
Asia15 by Jan Pieterszoon Coen in 1613–1614 which was
based on a capitalist form of double-entry bookkeeping
but never integrated with the domestic bookkeeping (Article
14 of the States-General’s instructions to Coen, dated 14/27
November 1609, in van der Chijs, 1885, pp. 9–10; Steensg-
aard, 1973, p. 138).
VOC capital accounting
The largely intact archives of the VOC’s two largest
chambers, Amsterdam and Zeeland, which collectively
held 75% of the economic power in the VOC, show that un-
til the final first capital calls were made in September
160616 Amsterdam maintained independent bookkeeping
systems for its capital and operations (NL-HaNa, VOC,
1.04.02, file 7065; NL-HaNa, VOC, 1.04.02, file 7067; NL-
HaNa, VOC, 1.04.02, file 7142; NL-HaNa, VOC, 1.04.02, file
7169). Although Amsterdam’s capital accounting complied
with the most basic dual entry principles of double-entry
bookkeeping, most significantly it followed the 16th and
early 17th century northern European bookkeeping practice
that considered capital an expendable sum that had no fur-
ther relevance once it had been utilised (and exhausted) in
funding a particular commercial venture. In essence, the
15
The Asian division is not the subject of this study.
16
Subscribed capital was to have been called up in three even amounts to
fund the first three VOC fleets. Subsequent fleets were to have been funded
from returns earned on earlier imports (NL-HaNa, VOC, 1.04.02, file 99, folio
208, van Dam, 1701/1927, p. 140).
352 J. Robertson, W. Funnell / Accounting, Organizations and Society 37 (2012) 342–360
system regarded capital and cash on hand as essentially the
same thing.
Notwithstanding the strong Hanseatic, northern Euro-
pean influence in its bookkeeping, the Amsterdam cham-
ber prior to the formation of the VOC had used what it
considered to be ‘Italian bookkeeping’ based on that of its
predecessor the Amsterdam East-Indian Company, also
known as the Old Amsterdam Company (NL-HaNa, Voo-
rcompagnieën, 1.04.01, file 27, folios 12, 14; NL-HaNA,
VOC, 1.04.02, file 99, folios 13–4). However, with separate
accounting records for operations and capital, it was not an
integrated capitalist system of double-entry bookkeeping
but merely one that maintained an equivalency of oppos-
ing debit and credit entries. Reference to the Old Amster-
dam Company’s archives shows that it resolved to adopt
what was perceived as the Italian method of bookkeeping
and appoint a professional bookkeeper skilled in this
method (NL-HaNa, VOC, 1.04.02, file 27, folios 14–15). To
this end, Barent Lampe was appointed as the company’s
bookkeeper on the 4th of September 1599, a function
which he continued to exercise after 1602 in the VOC’s
Amsterdam chamber. However, irrespective of the inten-
tions of Dutch merchants and the experience and knowl-
edge of Lampe, in the introduction to his Practicque om
the leeren, first published in 1583, Petri confirmed that at
the end of the 16th century progressive Italian business
methods, including full double-entry bookkeeping which
incorporated an integrated capital account, were largely
unknown in Holland and in the region around the Ijssel
(Zuider) Sea (Petri, 1635, A2 recto).
In contrast to Amsterdam, business methods and book-
keeping in southern Netherlands, particularly Antwerp,
were more advanced. Antwerp’s status as the primary
16th century European entrepôt meant that its business
methods were strongly influenced by contemporary Italian
practices. This is apparent from Ympyn’s Nieuwe Instructie
(1543), which described Paciolian (Venetian double-entry)
bookkeeping. Significantly for the VOC, business practices
in the Zeeland city of Middelburg, seat of the VOC’s Zeeland
chamber, were strongly influenced by its proximity to An-
twerp and its close business relations with the city before
1585.17 Accordingly, it is not unexpected that the Zeeland
chamber’s bookkeeping displayed a closer affiliation with
southern European methods than was the case with
Amsterdam.
Contrary to what critics of the VOC’s bookkeeping have
claimed (Glamann, 1981, p. 245; Mansvelt, 1922, p. 13),
the Amsterdam and Zeeland chambers kept meticulous ac-
counts of capital (NL-HaNa, VOC, 1.04.02, files 7064, 7065,
7067, 13782, 13783, 13784, 13785, 13794). However,
these were never available during the first charter for the
participants to make calculations about the return on their
investments. At the time when the VOC was formed, rather
than its investors being regarded as corporate shareholders
in the modern sense of the word, they were perceived
more as a modern bank would regard its depositors. Partic-
ipants provided the funds that made the VOC’s operations
possible and were assumed to be satisfied with a reason-
17
Middelburgh acted as Antwerp’s out-port in the late 16th century.
able rate of return on their investment, given possible
earnings from alternative investment opportunities. Poten-
tially, distributions to participants were never intended to
bear any relationship to the extent of the profits actually
earned but instead, as Article XVII of the charter made
clear, related only to the accumulation of surplus funds
generated by the company’s operational activities. Thus,
distributions had a different meaning to the modern divi-
dend derived from profit earned during a financial period.
Amsterdam attracted nearly five times as many sub-
scribers compared to the next largest chamber, Zeeland.18
To facilitate administration of such a large number of inves-
tors, Amsterdam used a supplementary capital bookkeeping
system that was largely independent of the chamber’s gen-
eral (operations or trading) bookkeeping records. Hence,
there was no capital account which reflected the equity of
the investors from both their capital contributions and prof-
its, the mark of a capitalist form of double-entry bookkeep-
ing (NL-HaNa, VOC, 1.04.02, file 7142; NL-HaNa, VOC,
1.04.02, file 7169). This system of two sets of accounts,
one for capital and one for operations, was not unusual in
northern Europe at this time or in England with the EEIC’s
bookkeeping following a similar method in which a separate
pair of journals and ledgers was used for the ‘accompts
proper’ and ‘accompts current’ (East India Company, 1621/
1968, pp. 75–78). Amsterdam’s capital bookkeeping system
comprised a Subscription Register (NL-HaNa, VOC, 1.04.02,
file 7064), which every VOC chamber was obliged to open,
and a Capital Journal and a Capital Ledger. A subscriber’s en-
try in the Subscription Register established their legal obli-
gation to settle the capital sum subscribed for and acted as
the source of the bookkeeping entries kept in the Capital
Journal and Capital Ledger (NL-HaNa, VOC, 1.04.02, file
7065; NL-HaNa, VOC, 1.04.02, file 7067).
Capital subscriptions were deemed to be due in a series
of three capital calls, each of which represented the
amount estimated necessary to equip an East-Indian fleet.
When a capital call was made, and the requisite amounts
paid, the Cash Account in the Capital Ledger was debited
with the amount remitted and the relevant subscriber’s
personal account credited (NL-HaNa, VOC, 1.04.02, file
7067). With each fleet accounted for as a separate voyage
in the chamber’s General Ledger, the capital sum called
up was transferred from the Capital Account in the Capital
Ledger (NL-HaNa, VOC, 1.04.02, file 7067, folio 24) to a par-
ticular Equipage Account in the chamber’s General Ledger
(NL-HaNa, VOC, 1.04.02, file 7169, folio 104), which pro-
vided the funds to equip each fleet. At the same time, to
maintain the Capital Ledger’s equilibrium, and provide
the liquidity needed to equip the fleet, an equivalent sum
was transferred from the Capital Ledger’s Cash Account
(NL-HaNa, VOC, 1.04.02, file 7067, folio 459) to the debit
of the Cash Account in the General Ledger (NL-HaNa,
VOC, 1.04.02, file 7169, folio 99). Unlike the accounting en-
18
One thousand, one hundred and forty-three subscriptions were regis-
tered in Amsterdam (NL-HaNa, VOC, 1.04.02, file 7064). Zeeland registered
just two hundred and sixty-four subscribers (van Dillen, 1958, p. 46). While
subscription registers for the Delft, Hoorn, Rotterdam, and Enkhuizen
chambers have not survived, the number of individual subscribers in each
city would probably not have exceeded half that of Zeeland.
 J. Robertson, W. Funnell / Accounting, Organizations and Society 37 (2012) 342–360
tries for cash transfers, which were entered at the appro-
priate time, capital transfers in the Capital Ledger were
completed some time later, thereby giving the Capital Ac-
count the appearance of a memorandum rather than an
integral part of the accounting system. The Capital Ledger
was not closed when the chamber compiled a general bal-
ance, nor were outstanding capital debtors’ balances closed
to the chamber’s General Ledger balance or included in its
balance statements (NL-HaNa, VOC, 1.04.02, file 7067, fo-
lios 25, 26, 27).
Zeeland, in contrast to Amsterdam, until 1607 utilised a
fully integrated double-entry bookkeeping system for its
operations and capital contributions. The relatively smaller
number of subscribers attracted by this chamber probably
meant that it did not need a subsidiary capital journal and
ledger between 1602 and 1607. Also contrary to the prac-
tice of Amsterdam, Zeeland maintained the integrity of its
capital sum in its General Ledger and did not credit por-
tions of capital to each fleet it outfitted. Instead, Zeeland
balanced the cost of equipping a venture against any
extraordinary revenues received in respect of that fleet.
The resulting debit balance remained on the Equipage Ac-
count to reflect the fleet’s cost and was transferred to Zee-
land’s Balance Account when this chamber closed its
accounting records (NL-HaNa, VOC, 1.04.02, file 13784, fo-
lios 141–142). In this respect, too, Zeeland diverged from
the practice of its northern colleague. While Amsterdam
prepared a balance account after each fleet sailed, Zeeland
only used balance accounts as a technique to close its Gen-
eral Ledger. This was done in 1606 when a new ledger was
started (NL-HaNa, VOC, 1.04.02, file 13784, folios 141–142,
267–270) and again in 1608 when the VOC’s accounting
system was standardised (NL-HaNa, VOC, 1.04.02, file
13785, folios 182–188). Zeeland’s Balance Account in-
cluded all open capital and operations balances, including
the chamber’s trading results. Most importantly, the total
capital sum was utilised as the key to equalise the Balance
Account (NL-HaNa, VOC, 1.04.02, file 13784, folio 270; NL-
HaNa, VOC, 1.04.02, file 13785, folio 185).
Not only did Zeeland’s bookkeeping practice between
1602 and 1607 meet the best standards of the time (Goes-
sens, 1594; Mennher, 1565/1979; Petri, 1635; Stevin,
1604; Waninghen, 1629), its fully integrated bookkeeping
system incorporated the data necessary to calculate peri-
odic net profit and maintained the integrity of its capital
sum which was used to equalise its Balance Accounts. In-
deed, prior to 1608 Zeeland’s bookkeeping practices com-
pared favourably with modern double-entry bookkeeping
practice and complied with the principles of capitalist dou-
ble-entry bookkeeping. Amsterdam’s bookkeeping, on the
other hand, remained grounded in a form of Hanseatic ven-
ture accounting in which a capital account was not a nec-
essary element and profit or loss only determined on the
liquidation of an enterprise (de Roover, 1956, pp. 165–
166; 1963, p. 107; 1974, pp. 171, 175; Kellenbenz, 1979,
pp. 87–91; Mickwitz, 1938, p. 195; Posthumus, 1953, pp.
4, 9–10, 33, 73–74; Riemersma, 1967, p. 57; Stieda, in
Mickwitz, 1938, p. 189).
The VOC’s final capital call for the first 10 years, made in
September 1606, together with the VOC’s decision in Octo-
ber 1607 to set in motion the process to create a perma-
353
nent capital, galvanised the bewinthebbers’ to attempt to
standardise the company’s domestic bookkeeping but fol-
lowing the method used by Amsterdam and not that of
the more sophisticated Zeeland. Even then, the VOC did
not perceive its capital as a global sum that had to be main-
tained in the accounting system after 1607, instead treat-
ing it as an association of independent capitals that had
little relevance for its general accounting, a practice which
again was entirely consistent with northern European
bookkeeping at the time (Cock, 1643, pp. 174–175; van Ge-
zel, 1681, p. 31; Waninghen, 1629, chap. I, and tutorial
chap. XXI; Ympyn, 1547, chap. XVIII). Yet, the VOC did re-
gard its capital as an indivisible whole when later calculat-
ing and offering distributions.
The accounting system adopted by the VOC meant that
at no time during the period covered by the first charter
(1602–1623) or, indeed, thereafter, did the VOC use a dou-
ble-entry bookkeeping system that could calculate the
company’s periodic net profit or loss and yield the state
of its capital. Indeed, the VOC’s participants neither ex-
pected nor demanded information to calculate the return
on their investments. Nor, prior to 1623, did they actively
protest the company’s failure to provide them with a finan-
cial accounting. This state of affairs changed, however,
when it became clear that the bewinthebbers, as they had
done in 1612, would again refuse to provide an audited ac-
count of their stewardship at the end of the charter’s life in
1623.
Conflict: The 1623 ‘general accounting’ and the
Nootwendich Discours
Anticipating that, as a consequence of the charter being
rolled over in 1623, the bewinthebbers would again seek to
avoid providing the general members with a credible
financial accounting (as had been the case in 1613), a
group of disgruntled participants who were described by
the bewinthebbers as dolerende participanten (literally
‘those of little honour’),19 whose investment in the com-
pany exceeded two and a half million guilders (van Rees,
1868, p. 148), issued a public document, the Nootwendich
Discours (Critical Discourse), called for the bewinthebbers to
be held accountable for the previous 21 years’ of their
administration (1622, A2 recto, D1 verso; van Dillen, 1958,
pp. 139, 234; van Rees, 1868, pp. 149, 159). This remarkable
document of protest also confirmed the limited expectations
that the participants had for any information provided, but
especially their lack of interest in a set of accounts which
might reveal net profit. Rather than demanding an account-
ing that would allow them to determine profit and changes
to the company’s net wealth, the participants’ principal con-
cern was to receive ‘‘a proper accounting in the manner of a
steward’’ (Nootwendich Discours, 1622, A4 recto).
The participants accused the bewinthebbers of ‘‘poor and
careless administration’’ which ‘‘conformed to neither rea-
son or the common practice of merchants’’ (‘‘De quade ende
onvoorsichtige Regieringe der Bewinthebbers die noch naar
19
The Nootwendich Discours ironically adopted the terms ‘dolerende’ and
‘doleanten’ to describe the collective body of disgruntled participants (1622,
A2 recto, D1 verso).
354 J. Robertson, W. Funnell / Accounting, Organizations and Society 37 (2012) 342–360
verstant noch na stijl van kooplieden die behouden willen blij-
ven . . .’’) (Nootwendich Discours, 1622, A4 recto). Hence,
they demanded an accounting that would allay suspicions
that the bewinthebbers’ were guilty of maladministration,
fraud, and unethical practices (de Jongh, 2009, pp. 18–31;
Nootwendich Discours, 1622, A4; van Rees, 1868, pp. 147–
154). Not only did the participants demand a financial
accounting from the bewinthebbers, they also insisted that
the company’s financial records be independently audited
‘‘in the manner of merchants’’ using financial accounts ver-
ified by documentary evidence (Cort Verhael, in van Rees,
1868, pp. 164, 166). An oral presentation, which the
bewinthebbers insisted on presenting, was specifically re-
jected by the participants (Cort Verhael, in van Rees,
1868, p. 166). Probity, not profit, persisted as the core of
the participants’ concerns and their primary objective in
demanding a general financial accounting from the bewint-
hebbers. The Nootwendich Discours, and its successor, con-
firmed that the participants did not expect an accounting
that would reveal the company’s net profit and that they
had no desire to calculate the return on capital invested.
Nevertheless, the Nootwendich Discours does show that
the participants were acutely aware of the rate of return
earned from the VOC relative to that offered by other, com-
parable, investments. As one example van Rees (1868, p.
152) noted that ‘‘(a)mongst the participants’ complaints,
they frequently referred to the small return, namely
61/4% [made by the VOC], which they referred to as ‘or-
phans’ interest’, whereas the East-India Assurance Com-
pany returned 20 percent’’.
The Nootwendich Discours was highly critical of the
management of the bewinthebbers. Those who signed the
document protested that the low level of the bewintheb-
bers’ investment in the VOC’s capital meant that they were
not motivated by interim distributions or profit which
would have benefited the participants but instead relied
on the commissions they earned on the cost of equipping
VOC fleets and the value of the goods imported (NL-HaNA,
VOC, 1.04.02, file 1, Article XXIX). Not surprisingly, the
bewinthebbers were alleged to have had a strong incentive
to assemble unnecessarily large and expensive fleets and
order excessive, overly expensive goods from Asia, with lit-
tle regard for the returns that could be earned on these
transactions (Nootwendich Discours, 1622, A4 recto, B1 ver-
so, B1, recto, B4 verso, B4 recto, E3 recto). These practices,
the participants argued, had a detrimental effect on profit
by causing excess demand for Asian goods, which inflated
the cost of imported goods, and creating an oversupply of
European goods which dampened prices (Nootwendich Dis-
cours 1622, A4 recto). Besides maladministration, the
bewinthebbers were accused of profiting from their office
by supplying goods to the company at prices unrelated to
their market value, purchasing imported goods from the
company at less than market value, and delaying the com-
pany’s own sales until such time as the bewinthebbers’ own
stocks had been sold (Nootwendich Discours, 1622, B4 ver-
so, C2 verso).
Most damning of all was the accusation that the bewint-
hebbers had cynically used their knowledge of the com-
pany’s affairs to profitably speculate in VOC capital
holdings to the detriment of small general participants.
Thus, the most vulnerable members of Dutch society, such
as widows, orphans, the aged, and charities, who depended
on the income from their investments were forced to sell
their holdings when anticipated distributions failed to
materialise. Safe in the knowledge that they alone pos-
sessed that a distribution was imminent, the bewinthebbers
purchased these holdings at depressed prices and resold
them at a handsome profit once the public became aware
of the distributions (Nootwendich Discours, 1622, C2 verso).
A distribution of 371/2% in 1620, together with news of a
truce negotiated with the English, pushed the value of
VOC capital holdings up from 165% of the original value
in 1619 to 250% in 1620. When no further distributions
were made after that time, prices retreated to their 1619
level (van Rees, 1868, p. 147).
The bewinthebbers protested that they could see no
wrong in their management, claiming that they had acted
at all times with honour and performed their duties in the
best interests of the VOC and The Netherlands (Nootwend-
ich Discours, 1622, B3 recto). In response to the charge that
they treated the company as their private market place, the
bewinthebbers did not deny the allegations but instead ar-
gued that, as the VOC’s charter did not expressly forbid
such actions, they were entitled to act in the way they
did and could not be guilty of any offence (Nootwendich
Discours, 1622, B3 recto). They explained their resistance
to a general accounting as a consequence of the war with
Spain which, they claimed, created a special set of circum-
stances that made it contrary to the national interest to
disclose details about a major asset, such as the VOC,
which was involved in the conflict (Nootwendich Discours,
1622, B3 recto; van Rees, 1868, pp. 152–154). The partici-
pants were also threatened that if they persisted with their
demands they would receive no distributions for 7 years.
The participants steadfastly believed that the VOC’s
charter was a legally binding document which could be re-
lied upon in The Netherlands’ courts and, therefore, that
the bewinthebbers would be forced to comply with their
demand for a general accounting. To their dismay, the
States of Holland instructed the courts of Holland not to
acknowledge or deal with any matter relating to such
claims by the participants. Thus, the dissenting partici-
pants were denied all legal avenues of redress in Holland.
Their only recourse was a direct appeal to the States-Gen-
eral. However, at first this also was to no avail, as the States
of Holland, which effectively controlled the States-General,
instructed its delegates to oppose the participants’ peti-
tions. They were not prepared to tolerate any action which
might undermine the bewinthebbers’ authority (The States
of Holland resolutions dated the 22nd of December 1622
and the 10th of March 1623; van Rees, 1868, pp. 154–
155). In response, the disgruntled participants published
a second pamphlet, the Tweede Noot-wendiger Discours
which had the desired effect.
Despite the bewinthebbers’ power, the dissenting partic-
ipants could not be dismissed out of hand without risking
the political accord that constituted The Netherlands
Republic. Accordingly, the States-General was eventually
forced to take action to pacify the disgruntled VOC inves-
tors by summonsing the bewinthebbers and participants
to The Hague in an attempt to resolve their differences
 J. Robertson, W. Funnell / Accounting, Organizations and Society 37 (2012) 342–360
(de Jongh, 2009, p. 47). Unsurprisingly, the parties failed to
agree on a new set of provisions to govern the company
and, on the 22nd of December 1622, the States-General
unilaterally decided to roll over the 1602 charter. The
resulting document (Continuatie van het Octroy, NL-HaNA,
VOC, 1.04.02, 2) extended the 1602 charter with some per-
tinent amendments intended to address the participants’
main grievances. Further amendments that diluted the
bewinthebbers’ authority still more, and promoted the
interests of the general participants, were incorporated in
a 1623 document, the Nader Ampliatie en Interpretatie (De-
tailed Interpretation of the Continuation of the East-Indian
Charters) that was intended to expand and explain the
changes made in December 1622 (NL-HaNA, VOC,
1.04.02, 3; Contunuatie en prolongatie, NL-HaNA, VOC,
1.04.02, 4).
The 1622 extension of the 1602 charter specified that,
within 6 months on the expiry of the 1602 charter, the
bewinthebbers must provide the participants with a general
accounting of their administration for the past 21 years,
and that this must conform with the method and format
commonly used by merchants (Article I). This provision
suggests a written financial report produced from informa-
tion compiled in a capitalist form of double-entry entry
bookkeeping. Furthermore, as noted above, the bewintheb-
bers’ report had to be substantiated by appropriate docu-
mentary evidence, rather than the unsubstantiated
statement of receipts and payments which was favoured
by the bewinthebbers. Moreover, the first article of the ex-
tended charter stipulated that the bewinthebbers’ accounts
were to be audited by a committee of principal partici-
pants,20 chosen by the general participants from amongst
those who had invested at least as much in the company
as the bewinthebbers were required to do (1602 Charter,
Article XVIII; Nader Ampliatie en Interpretatie, NL-HaNA,
VOC, 1.04.02, 3, Article II).
The first article of the supplementary explanatory char-
ter (Nader Ampliatie en Interpretatie, NL-HaNA, VOC,
1.04.02, 3) issued in March 1623 overruled the bewintheb-
bers’ desire to keep the details of their investments in Asia
secret by stipulating that the audit of the first 21 years
administration was not to be limited to domestic book-
keeping records but must include relevant account books,
records, and documentary evidence of the company’s Asian
operations. Reinforcing the States-General’s intentions
concerning the quality of the accounting delivered to par-
ticipants, the extended charter directed that in future the
bewinthebbers must provide participants with a general
accounting every 10 years, and that this accounting com-
ply with the manner and form of merchants as required
for the first 21 years (Continuatie van het Octroy, NL-HaNA,
VOC, 1.04.02, 2, Article X).
20
Principal participants served on three committees. The most prominent
of these was the audit committee (rekeningscommissie), which, comprised
nine members designated the company’s auditors (rekenopnemers) and
authorised to inspect the general accounting (Bruijn, Gaastra, & Schöffer,
1987, p. 16; van Dam, 1701/1927, pp. 285–286; van Brakel, 1908, p. 146;
Valentyn, 1724, p. 204; van Rees, 1868, pp. 163–164, Article VII). This was a
highly significant innovation as it represents the first incidence of a legal
body specifically constituted to protect shareholders’ rights.
355
Another significant amendment in the 1623 extension
rescinded the bewinthebbers right to be appointed for life
and provided that they had to retire after 3 years in office.
Furthermore, retirees could not be reappointed until an-
other 3 years had elapsed since their retirement (Article
II). Article VI of this document also severely curtailed the
bewinthebbers’ ability to deal with the company by order-
ing that, except by bidding in a public auction or purchase
at a fixed price that applied to the general public, bewint-
hebbers were not permitted to directly or indirectly sell
any goods to the company or buy goods from the company
without express permission from the States-General or the
magistrates of the city where the VOC chamber was lo-
cated. The 1623 explanatory supplement to the extended
charter reiterated that all such transactions had to be open
and transparent and extended the provisions that applied
to bewinthebbers to all principal participants (Nader
Ampliatie en Interpretatie, Article III). This document also
appeared to extend the principal participants’ power by
directing that they be allowed to attend meetings of the
Heren Zeventhien, the VOC’s senior administrative organ,
and make recommendations to this body on pertinent mat-
ters. Most importantly, the 1623 supplement changed the
basis of the company’s dividend policy. Whereas Article
XVII of the original charter had stipulated that distribu-
tions (uytdeelinge) be made once 5% of the imported goods
had been realised, the extended charter required that div-
idends only be declared if the company’s debts, liabilities,
and working capital were adequately covered. The signifi-
cance of this provision is that it suggests that, once the cap-
ital was deemed to be a permanent sum, the principal of
capital maintenance was recognised as being essential for
sound financial administration.
Changes to the VOC’s charter had the legal force of gov-
ernment and should have been effective in shifting the bal-
ance of power from the bewinthebbers to the participants.
In practice, however, very little changed to upset the
bewinthebbers’ privileged position regarding the first
21 years of their administration. They refused to submit
to the new regime, insisting that the audit of their account-
ing for the period 1602–1622 be in the form of a public
hearing, and not be verified with supporting records and
documentation. After declaring that the auditors could
qualify the accounts in whatever manner they saw fit,
the bewinthebbers finally presented an oral account of their
administration for the period 1602–1623 to the States-
General on 14th of October 1628 (van Dam, 1701/1927,
pp. 290–294).
After the 1623 supplement to the extended charter,
only the 1647 charter (Continuatie en prolongatie, NL-HaNA,
VOC, 1.04.02, 4) contained any further stipulations relating
to the financial administration issues raised by the dis-
gruntled participants in 1623 or altered the relationship
between bewinthebbers and participants. The first and sec-
ond article of the 1647 document declared that in future
bewinthebbers and principal participants would be paid a
fixed salary, which effectively transformed these officials
into paid professional employees. In addition, Article IV
of the 1647 extension stipulated that henceforth the com-
pany must supply participants with a general accounting
at four-yearly intervals in place of every 10 years, as
356 J. Robertson, W. Funnell / Accounting, Organizations and Society 37 (2012) 342–360
required by the 1623 charter. The four-yearly interval indi-
cates that participants were growing more dependent on
the information contained in these financial reports but it
did not require this report to provide information that
would allow the VOC’s members to calculate the rate of re-
turn on invested capital.
Conclusion
Transition from a feudalist to a capitalist mentality is
said to have been a consequence of a particular spirit that
sought to continually expand a stock of wealth by the ra-
tional pursuit of profits (Sombart, 1916/1953, p. 38;
1919/1979, p. 246; Weber, 1968, pp. 91–92) or the product
of social conflict generated when business was conducted
with joint capitals administered by professional managers
(Bryer, 1999, p. 687; 2000a, p. 142). Common to these tran-
sition theories is the notion of a calculative mentality fo-
cussed on the returns earned by invested capital. The
latter is considered most effectively served by a capitalist
form of double-entry bookkeeping capable of periodically
generating net profit information and revealing the state
of the entity’s capital at a particular date. Calculation of
the rate of return on invested capital is not an end in itself
but the means to allow investors to make rational deci-
sions concerning their investments and to hold profes-
sional managers accountable for their administration of
joint capitals (Birnbaum, 1953, p. 127; Bryer, 1993, pp.
121–122; 2000a, p. 151; 2000b, p. 335; Carruthers & Espe-
land, 1991, p. 46; Gras, 1947, pp. 103–104; Lemarchand,
1994, p. 122; Nussbaum, 1937, p. 61; Sombart, 1916/
1953, p. 38;Yamey, 1994, p. 380).
Evidence presented in this paper has established that
the advent of Dutch social capital was not marked by the
adoption of a capitalistic form of double-entry bookkeep-
ing nor was it a consequence of religious principles or so-
cial conflict. Instead, the roots of Netherlands’ capitalism
are grounded in the country’s long experience with social
institutions such as its medieval water-boards and with
land reclamation projects. These gave rise to the notions
of joint ownership and a free market for intangible rights
which are fundamental to the idea and practice of capital-
ism. The importance of these features of Dutch society was
magnified by The Netherlands’ long and successful com-
mercial history, its largely free and waged workforce, its
monetary economy, and a tradition of reinvesting profits
to expand commerce. A weak feudal authority compelled
the Dutch to take responsibility for their society and orga-
nise it in a manner conducive to the geographic circum-
stances of the country. Geography compelled the Dutch
to sustain themselves through export-led commerce and
industry, which consequently created a highly urbanised,
waged population and a monetarised economy that relied
on credit. By the 17th century the Dutch were endowed
with all the principles and practices of a modern capitalist
society, including modern double-entry bookkeeping,
which resulted in The Netherlands being widely regarded
as the premier capitalist nation of the age and the VOC,
which met all standards for a capitalist business entity,
the paramount 17th century Dutch commercial enterprise
(Nussbaum, 1937, pp. 158–162; Ranke, in Sombart, 1913/
1967, p. 144; 1919/1979, p. 258; Stevin, 1604; ten Have,
1933, pp. 1, 6–7).
Investors in a sophisticated economy, characterised by
commercial leases, credit, negotiable capital rights, and
specialised production, such as that which prevailed in
The Netherlands after the 13th century, must necessarily
adopt a calculative mentality to manage their financial af-
fairs. Evidence presented here suggests that rather than the
participants making financial decisions on the basis of re-
turn earned by an entity in relation to the capital it em-
ployed they instead did so with reference to what was
considered an acceptable rate of interest. Certainly, a cap-
italist form of double-entry bookkeeping, which could
yield the rate of return and capital employed, was not gen-
erally utilised in The Netherlands, or in any other European
country, before the late 18th century (Yamey, 1964, pp.
117, 124). Instead, Dutch entrepreneurs used a variety of
calculative practices to rationally administer their invest-
ments in joint capitals and other financial dealings. VOC
investors made a reasoned assessment of their invest-
ments’ current worth by reference to Amsterdam’s organ-
ised market in VOC capital rights (Gelderblom & Jonker,
2006, p. 8). In much the same way as share markets do to-
day, this market factored a range of circumstantial evi-
dence into the base price for VOC capital holdings to
establish a ruling price at which VOC capital rights were
traded. Investors were content as long as distributions re-
ceived from the VOC compared favourably with earnings
from other investments, and occurred with reasonable fre-
quency. Thus, although a calculative mentality was
undoubtedly an important element in capitalism’s devel-
opment, in the case of The Netherlands and the VOC the
evidence does not support limitation of such a mentality
to the rate of return on capital employed and, therefore,
that modern double-entry bookkeeping is a necessary con-
dition for capitalism.
When the VOC was formed in 1602 as a public com-
pany, investors could freely trade their capital rights in
an open market from the outset. Moreover, the VOC was
structured as an independent legal entity whose members
enjoyed limited liability for the company’s debts. Although
formed with a terminating capital, the VOC quickly deter-
mined to adopt a permanent capital, eventually succeeding
in this endeavour by the end of the first charter in 1623.
Further indications of the company’s increasing capitalist
nature are evident in amendments to its charter between
1623 and 1647 that gradually transformed its directors
into waged employees, the 1623 requirement that the cap-
ital be maintained by paying distributions from surplus
funds, and its resolve to pay all distributions in cash after
1644. Consequently, the VOC met the criteria for a capital-
ist business enterprise before the end of the first half of the
17th century (Most, 1972, pp. 723–724) and, thus, accord-
ing to Bryer and other social theorists of capitalism, the
VOC should have utilized a capitalist form of double-entry
bookkeeping. However, the evidence provided establishes
that, with the exception of the Zeeland chamber prior to
1608, this bookkeeping method was not used by the VOC
for its domestic accounts which was in marked contrast
to the EEIC. Nor did the company have a centralised book-
keeping system that would have made available to its
 J. Robertson, W. Funnell / Accounting, Organizations and Society 37 (2012) 342–360
managers and members the information necessary for the
calculation of the rate of return on invested capital.
While the conflict between the company’s general
members and the bewinthebbers towards the end of the
first charter resulted in profound changes to the relation-
ship between them and the company, it did not lead to a
demand that the VOC utilise a capitalist method of dou-
ble-entry bookkeeping. Nor, unlike that which Bryer found
in his examination of the EEIC, did this conflict indicate
that the company’s participants had any interest in calcu-
lating the rate of return on their invested capital. Although
a capitalist form of double-entry bookkeeping was not de-
manded by the VOC’s members to allow them to calculate
the rate of return on invested capital, this was not the re-
sult of ignorance on their part. On the contrary, evidence
from the conflict between the bewinthebbers and the par-
ticipants shows that the latter were quite astute about
bookkeeping and auditing matters and demanded an
accounting that would allow them to assess the bewintheb-
bers’ stewardship. Furthermore, the VOC’s decentralised
capital structure, which necessitated each domestic cham-
ber have its own working capital, together with the com-
pany’s decentralised accounting system, demonstrated
that the VOC’s bewinthebbers, too, did not value calculation
of the rate of return on capital invested as a primary means
of managing the company. Indeed, a capitalist mentality
supported by a capitalist form of double-entry bookkeep-
ing, as posited by Sombart, Weber, and Bryer, is not evident
in the VOC’s archived financial accounting records. Thus,
contrary to the findings of Bryer in relation to the EEIC,
in the case of the VOC capitalist double-entry bookkeeping
was not a necessary condition for it to operate as a capital-
ist enterprise or for Dutch capitalism to develop and thrive.
Nor was double-entry bookkeeping implicated in resolving
social conflict between established and emerging investors
which was the case with the EEIC.
There is substantial evidence provided here which also
supports the views expressed by Most (1972), Winjum
(1971) and Yamey (1949) who concluded that accounting
served narrow technical objectives and that double-entry
bookkeeping’s ability to reveal the data that made the cal-
culation of the rate of return possible was not significant in
the development of capitalism. In particular, the study of
the VOC supports Winjum (1971, p. 350) in that, while
Sombart was correct in positing a relationship between
the development of capitalism and double-entry book-
keeping, it was double-entry bookkeeping’s ability to re-
veal gross profit and ensure an orderly financial
administration that was most valued. Winjum’s position
was substantiated by the VOC’s bewinthebbers’ practice of
utilising gross profit on particular commodities to plan im-
ports and exports (Glamann, 1981, p. 272; Steur, 1984, p.
72).
This study of the VOC’s organisation and financial
administration and the implications that this has for de-
bates about the importance of particular accounting prac-
tices in the emergence of modern capitalism has
presented a number of possible areas for future research.
These include addressing a persistent gap in the knowl-
edge of accounting methods used in northern Europe and
in other locations at the cusp of modern capitalism in the
357
last half of the 16th and early 17th centuries. This would
also provide the means to judge whether the circum-
stances and accounting practices of the VOC in the early
17th century were unique and even exceptional. Another
focus for future research is the possible culpability of
accounting practices for the VOC’s sudden and dramatic
demise as a result of bankruptcy in 1798. The reasons for
this seemingly perplexing conclusion to the VOC’s com-
mercial hegemony have been, and continue to be, a matter
of some debate. A number of prominent historians have
suggested that the company was bankrupted because it re-
fused to increase its capital base, which left it relying heav-
ily on short-term debt secured against the future sale of
imported goods (de Vries & van der Woude, 1997, pp.
455–456; Meilink-Roelofsz., 1982, p. 184). The fourth An-
glo–Dutch War (1780–1784) upset this strategy by se-
verely limiting Asian imports, causing direct losses
estimated to be about forty-three million guilders. As a re-
sult, the company was forced to default on its debts. Of
particular interest to accounting historians, however, are
the views of Mansvelt (1922, pp. 101–111) who argued
that the VOC’s downfall was directly attributable to signif-
icant deficiencies in its accounting system which ignored
the company’s vast capital investment in Asia, relied upon
poor estimates of costs and failed to produce reliable profit
and loss accounts (Mansvelt, 1922, pp. 8, 93). Future re-
search, therefore, might seek to conclusively demonstrate
whether the company’s accounting system did play a
determining role in its decline and eventual bankruptcy.
The possible important contributions of accounting
practices to understanding the VOC’s later history are also
suggested by the problems that the VOC experienced in
gaining access to short-term funds which, as noted above,
finally dried up the early 1780s. At this time, Holland’s
chambers were deeply in debt but the situation in Zeeland
was much more liquid which meant that the chamber had
no need to seek financial assistance before 1785 (de Korte,
1983, pp. 79–83). One possible reason why Zeeland’s situ-
ation was so different was that it may have used a much
more sophisticated system of bookkeeping, as it had done
in the early years of the VOC, than that which was em-
ployed by Holland’s chambers. This would have allowed
it to manage better its finances. Although, as established
in this paper, the archival evidence of Zeeland’s general
accounting indicates that it had been forced to adopt the
Hanseatic method of bookkeeping prevalent in Holland, it
is possible that it continued internally to manage its affairs
by a more sophisticated method of accounting and that
only those accounting records that had to be shared with
other chambers or submitted to the Heren Zeventhien com-
plied with the company’s standard method of bookkeep-
ing. Further research may be able to determine whether
Zeeland did, indeed, use a dual system of bookkeeping
and, if so, whether this had any significant impact on the
chamber’s ability to remain liquid long after its fellow
chambers had succumbed to their debts.
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