Principal Agent Relations and the Decline of the Royal African Company

Several explanations for the Royal African Company’s failure around the turn of the eighteenth century have been suggested. The paper argues that these reasons can be integrated into a more comprehensive account of the company’s failure through the introduction of a modified version of principal-agent theory. Instead of focusing on abstract, dyadic relationships, the paper proposes a model that accounts for the meaningful character of principal agent interactions and for the complex networks and multiple role identities of actors within those networks that comprised principal-agent relations within the company. On the basis of this model the failure of the company can be seen as a result of contradictions between its dual role as both agent and principal. The symbolic importance of inefficient trading practices helps to explain why the company was unable to pursue alternative strategies or otherwise benefit from its monopoly.