the trouble with stockjobbers: the south sea bubble, the

The Trouble with Stockjobbers: the South Sea Bubble,the Press and the Legislative Regulation of the Markets

Benedict Sheehy*

Abstract

The South Sea Bubble Act of 1721 is often taken as the firstsecurities legislation. Further it is understood to be a responseto a stock market scandal. In fact, the Act was enacted prior tothe scandal and indeed the likely cause of the collapse of thestock bubble itself. This article reviews the historical context,including the finance ofgovernmentofthe era, the developmentof the South Sea Company and its bubble, the legislation, burstand subsequent effects. It places securities legislation in itshistorical context as part of a broader movement in corporatelaw, shifting liabilities and priorities among the members ofthe corporation and society at large.

* Benedict Sheehy B Th, MA, LLB, MA, LLM is a Senior Lecturer, Law, atRMIT University, Melbourne, Victoria, Australia. The author dedicatesthis piece to James and Cornelia Sheehy who encouraged and supportedan interest in learning and in history.

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BENEDICT SHEEHY

1. Introduction

(2006-8)

For the northern peoples, the southern seas and southernlocales have a long held mystique. It is something similarto a western view of the orient-an unknown place in whichthe possibilities are restrained only by the limits of one'simagination. Such differences, real or imagined, continueto this day in which much more information is at hand, informs including photos, video, and travel, unimaginable threehundred years ago. Eighteenth century England was an eraof great innovation and great expectation. Having changedthe form of its government radically in the previous century'sGlorious Revolution of 1688, won various wars, and begunwhat was to become its global empire, England had at least abasis for great hopes. It was an era too of discovering landspreviously beyond the bounds· of western knowledge. Froman economic point of view, as well, the era was one of growthand innovation. While certainly considerable expenditureshad been incurred in the various wars and conquests, theretoo had grown considerable wealth among the aristocracyand the merchant class. It was in this atmosphere that thefirst frenzied speculative stock bubble occurred-the SouthSea Bubble.

Company law in the eighteenth century was practicallynon-existent. Nothing more than a few general doctrinesapplied, and nothing more than what would be understoodtoday as partnership law. Companies of this era were whatwould be understood in common parlance of today asI company'-ie a group of people together keeping company.The notion of corporation was of a corporation sole-iean office. There was no notion of separate personhood, norlimited liability, nor notions of directors duties. As will benoted further on in this paper, the government response tocompany scandal was retrospective. Accordingly, notions ofstock in any modern sense are out of the question althoughthe notions of dividend and residue would occasion as wouldbe expected in partnership law. Finally, while there was an

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established market for securities,l it was not well organisedand no securities laws existed.

2. High Finance in Eighteenth Century England

England's war with Spain left it with considerable debt.But England had undergone a financial revolution in theprevious century for a variety of reasons.2 First, as a result ofthe Glorious Revolution, control over the country's financeswas given to Parliament. Prior to such transfer, public debtwas coerced lending, with uncertain prospects of repayment.This transfer of power from monarch to parliament, however,allowed England's status as a borrower to rise considerably.3Parliament's control over national debt permitted it to seeknew types of funding not previously available. Previously thedoctrines of Crown immunity precluded creditors from suingthe crown for the repayment of loans. The powers used bythe Exchequer to stop all payments to creditors commenced in1672.4 The reformed powers of parliament increased creditors'confidence in repayment by the government. The Corporationof London, various Merchants Associations and the EastIndia Company were used as sources of finance.5 Further,innovation in finance from The Netherlands and France wasintroduced, particularly with the introduction of short andlong bills.6 Finally, the founding of the Bank of England, and

1 See Paul Redmond, Companies and Securities Law: Commentary andMaterials (4th ed, 2005) 36; C G A Clay, Economic Expansion and SocialChange: England, 1500-1700, Volume II (1984) 276 notes that commercialactivity of trading occurred in coffee houses along Exchange Alley.

2 Clay, above n I, 11.3 P G M Dickson, The Financial Revolution in England: A Study in the

Development ofPublic Credit 1688-1756 (1967) ch 3.4 Clay above n I, 277.5 Ibid 269, 272.6 Ibid 279-80; see also Eric Schubert, 'Innovations, Debts, and Bubbles:

International Integration of Financial Markets in Western Europe,1688-1720' (1988) 48 The Journal of Economic History 299, 299, 300 andparticularly 304.

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BENEDICT SHEEHY (2006-8)

more companies generally, created a new source of creditpreviously unavailable.? Such companies either loanedmoney directly to the government or purchased governmentdebt at the behest of government. These transactions. havebeen described as blackmail, essentially extorted on the basisof having to maintain a monopoly concession.8

In the early eighteenth century, England's governmentfinance essentially consisted of three financial instrumentsand sources: bonds, annuities, and corporate held debt. In1720, the debt of £50 million was composed of £18.3 millionheld by corporations, privately held redeemable bonds in theamount of £16.5 million, and £15 million in irredeemable long(72 and 87 year) and short (22 year) annuities.9

3. The South Sea Cotnpany

England's economy, although fluctuating with various risesand falls in the decades leading up to the start of the eighteenthcentury, generally had a strong growth trend. IO Part of thisgrowth was generated by overseas trade which not onlyincreased wealth but also diffused that wealth more widelythan before.ll Certainly, recession and depression did occur inthe 1690's, however, the overall trend continued upward.

The Spanish War of Succession (1702-1713) came at a greatcost to England (estimated at £29 million,12 in an era when £56 million was the annual expenditure of the government).13

7 Schubert, above n 6. See also Clay above n 1, 276 fn 27 in which it isnoted that from 15 joint stock companies in 1688, the number hadincreased to 150 such companies by 1695.

8 Clay above n 1, 278.9 Peter Garber, Famous First Bubbles: The Fundamentals of Early Manias

(2000) ch 16.10 Clay above n 1, 280.11 Ibid 275.12 Dickson, above n 3, 10.13 Figure for 1690's from Clay above n 1, 267.

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This expense, in addition to the costs of its war with France,created a huge and on-going burden of debt on the country.The government of England sought and found sources offinance both in international money markets and its domesticarrangements with joint stock companies. As to the latter, itsarrangement was usually a grant of charters and monopoliesin exchange for certain requested financial favours.

As previously mentioned, Merchants Associations oftenpurchased government debt. In 1711, by an arrangement ofthe Earl of Oxford, Harley, such an association purchased aconsiderable sum of debt requiring an interest payment of£600,000 per annum. The group of merchants then soughtand received an incorporation by an Act of Parliament. It alsoreceived its monopoly in the South Seas in that same Act, TheCompany of Merchants of Great Britain Trading to the SouthSeas.

Great fortunes had been made from trade with theNew World in the previous century,14 and stories circulatedabout wealth from Mexico and Peru, firing the imagination.1s

Further, as mentioned in the introduction, the imaginationwas the only limit on the possibilities understood to exist inworlds unknown.16 Finally, there had grown a considerablepool of capital available for investment of all types includingspeculative investment.17 The extent of speculative investmentcapital may be inferred from the number of bubble companiesoffering investment opportunities in all types of project,including a successful fund raising by a joint stock company

14 Clay, above n I, 281.15 Charles MacKay, Extraordinary Popular Delusions and the Madness of

Crowds (1960). More recent scholarly accounts include John Carswell,The South Sea Bubble (1993), and from a legal perspective, LC BGower'ASouth Sea Heresy' (1952) 68 Law Quarterly Review 214, and A B DuBois,The English Business Company after the Bubble Act 1720-1800 (1938).

16 Robert Wernick 'When the Bubble Burst, all of England Wound upBroke' (1989) 20(9) Smithsonian 155 discusses Paterson's successful fundraising for an investment in Panama.

17 Larry Ribstein, 'Bubble Laws' (2003) 40 Houston Law Review 77, 95.

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offering as its purpose 'a company for carrying on anundertaking of great advantage, but nobody to know whatit is.' The extent of this speculation was described by the 19th

century commentator Charles MacKay as 'madness',18 perhapsequivalent to current commentary of economic 'irrationality'.19In such atmosphere, it is hardly surprising that one findsinvestors eager for a turn at anything promising a return.

As previously mentioned, in addition to using theCorporation of London, various financiers, goldsmiths andothers,20 one of the main means for the English governmentto raise funds was through debt for equity swaps. Suchtransactions, permitted government debt holders to exchangethe government debt they were holding for shares in jointstock companies which held monopoly rights over valuabletrade.21 This method had been used successfully in Parisunder the tutelage of John Law,22 and in England with the EastIndia Company and the Bank of England.

Garber explains Law's financial scheme as follows:

To finance the company, Law took subscriptions on sharesto be paid partly in cash but mostly in government debt. Hethen converted the government's debt into long term rentes,offering the government an interest-rate reduction.The idea was to establish a solid 'fund of credit,' a certaincash inflow that, when capitalised, could be leveraged toundertake the grand commercial schemes that lay at the heartof Law's economic theory. The nature of Law's scheme wasthat finance of the operation came first; expanded commercialactivity would result naturally once the financial structurewas in place.23

18 MacKay, above n 15, 54-6.19 Richard Dale, The First Crash: Lessonsfrom the South Sea Bubble (2004) 171,

although Dale clearly means irrational in the strict economic sense.20 Clay, above n 1, 274.21 Schubert, above n 6, 302.22 Garber, above n 9, chs 13, 14. Schubert, above n 6, 302-3.23 Garber, above n 9, ch 13.

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The South Sea Company issued par value sharesshares with a set face value presumably backed up by a cashinvestment-and swapped these for government debt. Inreality, the shares were not backed up by cash and such wouldhave been well known among most investors, as trades forannuities were occurring. This meant that a debt valued at£146 could be exchanged for a combination of shares, bondsand cash equivalent to £3375.24

The actual business of the company, the supposed valueof the monopoly of trade in the South Seas, was specious.25

England's concession from the Spanish in the area was limitedto a few ships of limited tonnage and restricted loads, and themost profitable aspect of the trade was slaves not preciousmetals.26 As a result, the main asset of the company wasfinancial instruments and obligations of unpaid up shares.27

4. Bubble COlllpanies, Bubble Developlllent andBubble Burst

The South Sea Company was one of a number of 'bubble'companies. Such companies were established and grewexponentially in the overheated investment climate markingthe era of the early eighteenth century England. MacKay listseighty-six such companies' objectives, including the followingmore outlandish ones:

36. For a wheel for perpetual motion. Capital, onemillion ...

38. For insuring and increasing children's fortunes

24 Ibid ch 17.25 Ibid ch 16.26 D J C Smant, Famous First Bubbles? South Sea Bubble, Erasmus

University of Rotterdam, http://www.few.eur.nl/few/ people/ smantlm-economicsI southsea.htm#.

27 Garber, above n 9, ch 16.

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BENEDICT SHEEHY

58. For a grand American fishery ...63. For carrying on a trade in the river Oronooko

76. For extracting silver from lead .79. For making iron with pit coal 28

(2006-8)

All of these companies were bubble companies thatsuccessfully raised funds in the hot investment market ofthe early eighteenth century. The South Sea Company wasamong these companies, albeit the most important of thegroup. The South Seas Company's stocks were initially issuedat £100 per share on a par value share; however, these initialstocks were not actually paid for. In a practice common in theera, the stocks were taken up by Parliamentarians and otherinfluential people as bribes for ensuring that the concession ofthe monopoly and the granting of the corporate charter.29

The speculation in the South Sea Company's stock quicklygained momentum after discussion began in Parliament aboutrefunding a larger portion of the national debt. In January of1720 Parliament created a committee to consider a refundingof the national debt by the sale of about £30 million of debtto the South Sea Company. In January 1720, prior to therefunding, the stock was trading at about £120 per share. Uponfirst reading of the legislation pursuant to the committee'srecommendation of a refunding act submitted March 21,1720, shares were being traded at £300 per share30 althoughcuriously, seventeen days later upon passage of the of the ofthe refunding act on April 7, 1720, shares dipped momentarilyto £290 per share.31 (See Figure 1)

28 MacKay, above n 15.29 Garber, above n 9, ch 16 'The Purchase of Parliament'.30 Ibid ch 17.31 MacKay, above n 15, writes 'contrary to all expectation, South Sea stock

fell when the bill received the Royal assent.'

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Figure 1

t- t. ,- t· 1;.. I- t.,MJ JvI Au, "p Oil ... DtJ.c:

hII··.. tm

1000 "---~~"""""""'""",--""""T'rIMllr:"-' ..._.. _'-",......,I-_····""Aqutt1'-'Boob~ :. Bvtfltt.Pd;

-..,.-

I t40 .''''',~'''''''"''''_''''''''"''''''i'""''''''''''''''''''''''''''''",,,",,,@@,w,@._,,,,,,,,,,,,,"",,,,.L,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,'"',,,,---.,L.---",,,,@,,,,,,,.,,,,~.....--;

fj lOt ..----.---

l-w 4QI i..........ll1ltDIi[~-........... \, ------..J~~MN!IUI'!M!It- "Y- " ..•",.""', ,,'""',"""""'"''",,"""",----1

, ..........-...--,.,.,..""",-==~~=~~~~==---"'~=-----------.-!... t· 1. ....

Jan ,.... III' Apr ...,

Source: Garber

Essentially, the stock continued its meteoric rise until Julyat which time they reached £950 per share32 and then collapsedback to close to their face value. The rise was not withoutits bumps along the way; however, the Company's directorsand promoters were never short of a story which would notonly prop up the price, but drive it to new heights. Indeed asMacKay observes:

so many sellers, and so few buyers, appeared in the Alleyon the 3rd of June, that the stock fell at once the director~

were alarmed and ordered their agents to buy It would beneedless and uninteresting to detail the various arts employedby the directors to keep up the price of stock. It will besufficient to state that it finally rose one thousand percent.33

32 See discussion of peak price as £1050 versus £950 in Garber above n 9,ch 17, fn 1.

33 MacKay, above n 15.

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r

The co lapse was just as spectacular as the great price

October, se tling in around £120 in mid-December of that sameyear. In ot er words, over the course of its bubble history, thecompany tent from about £120 through the bubble of £950down into tts ultimate level below the £100 mark in 1722. (SeeFigure 2)

Figure 2

SOUTH SEACOMPANY

1710-'722lRg S<:id•

•,..21

Source: Elliot Wave International

What aused the collapse? The answer to this question isintriguing and caught the attention of many commentators.Recently, .he discussion has focused on liquidity crises34

34 Garber, above n 9, ch 17, 'Price Collapse'.

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and on the passage of the Bubble Act.35 It has been arguedthat the South Sea Company viewed the rapidly expandingnumber of bubble companies to be a threat to its cash flowfor new subscriptions and so sought to limit the developmentof new companies and restrict or eliminate the activities ofits competitors through the Bubble Act.36 Regardless of thecollapse, the passage of the Bubble Act led to a significantrestriction of the corporate form in England37 for the next onehundred and twenty odd years until the Company Act of the1844.

5. Response of the Regulators and the Public

There was considerable alarm upon the collapse of the SouthSea Company. Given the perilous state of the kingdom'sfinances prior to the development of the bubble and the reliefwhich the bubble provided, it can be imagined that there wasconsiderable consternation among the financiers as well as thegovernment upon the collapse. In one sense, the governmentprospered considerably. The value of its debt collapsed alongwith the company; however, it still left a number of formerlywell to do gentry, aristocracy and others in straightenedcircumstances. As Wernick observes:

The collapse of the South Sea stock led to a collapse of allcredit. By October it was clear that a financial crisis hadengulfed England. No one wanted paper any more. The realestate market collapsed. Unemployment, especially in theluxury trades, spread. So did bankruptcies. The governmentfell ....Everyone who had had any dealings with the South SeaCompany, and that meant almost everyone of consequence inGreat Britain, was in a rage and a financial fix. 38

35 Ibid.36 Ron Harris, Industrializing English Law: Entrepreneurship and Business

Organization 1720-1844 (2000) 68, 77-78.37 Douglas Arner, 'Development of the American Law of Corporations to

1832' (2002) 55 Southern Methodist University Law Review 23, 33.38 Wernick, above n 16.

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The public outcry was predictable. Both in the Houseof Commons and in the House of Lords, calls for extremepunishments grabbed attention. Lord Molesworth 'lookedupon the contrivers and executors of the villainous SouthSea scheme as the parricides of their country, and should besatisfied to see them tied in like manner [to Rome's parricides]in sacks, and thrown into the Thames.'39 Essentially, theproblem was viewed as a matter of corrupt individuals whowere company directors, assisted to a large degree in theirmalfeasance by stockjobbers who distributed shares andfacilitated the perpetration of a fraud on the investing public.A bill was brought in which sought to restrain the South Seadirectors from leaving England until the end of an inquiry,called for a twelve month imprisonment, disclosure of theirestates and restrictions on alienation of the estates.40

That the blame was put on the avarice of individualdirectors can be seen from the governmental response.Parliament established a Secret Committee which wascharged with investigating the causes and involvementsof the individuals associated with the South Sea Company.Ultimately, a number of former directors were implicated,their fortunes largely appropriated, and at least one wasimprisoned.41 Interestingly, there was no law allowing for thisparticular outcome. In 1703, Lord Holt CJ had asked of a jury:'[s]hall we indict a man for making a fool of another?' Still inthe circumstances of the South Sea Company's collapse, sucha pronouncement was an insufficient answer to the clamour.Accordingly, the punishments were administered on a posthoc basis, including the imprisonment just mentioned, andfines and restitution orders based on the disclosure of estates.

As to the other group of individuals deemed responsible,the stockjobbers, MacKay observes: '[r]esolutions were passedto the effect that the calamity was mainly owing to the vile

39 Quoted in MacKay, above n 15.40 MacKay, above n 15.41 Ibid.

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arts of stockjobbers, and that nothing could tend more to there-establishment of public credit than a law to prevent thisinfamous practice.'42 The occupations of stockjobbers whotrade on their own account and stockbrokers who tradedon behalf of others, which had existed at least since the lateseventeenth century in England,43 had been effectively bannedby the Bubble Act of 1720.

Interestingly, therewereno legislativechangesensuing. TheBubble Act of 1720 was the result of the South Sea Company'sefforts to sequester the benefits of bubble speculation toitself. The Bubble Act essentially prohibited the creation ofnew companies and banned some already in existence. Itprohibited 'the acting or presuming to act as a corporate body... [and] the raising or pretending to raise transferable stocks... Without legal authority, either by Act of Parliament or byany charter from the Crown.'44 The Act was not to apply tocompanies incorporated prior to 24 June 1718, and in no wayprohibited the establishment of partnerships. Money couldbe raised by companies, however, only by those companiesthemselves without intermediaries.45 The net effect of thesechanges was to limit the growth in the number of companiesand ban the occupations of stockjobber and stockbroker.

Companies, however, did continue to exist and newcompanies were created as a result of the ingenuity of lawyers,but such ingenuity was essentially in breach of the spirit orintention of the law. Such companies were known as Deed ofSettlement Companies, in which the investors (acting as thesettlors of a deed of settlement known as articles of association)settled on the directors as managers of the funds to be used forthe enterprise under consideration. The investors then becamethe beneficiaries of the commercial activity.46

42 Ibid.43 Clay, above n 1, 276.44 6 Geo 1, c 18, s 20.45 W S Holdsworth, A History of English Law, Volume VIII (1925) 220 cited

in Redmond, above n 1, 37, fn 22.46 Redmond, above n 1, 37-9.

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How does one explain this peculiar response ofgovernment? The problem to be solved by the South SeaCompany was a government problem. It needed fundingfor its extended warfare with other nations. Hoppit arguesconvincingly that the whole matter was a governmentalfailure to act in the public good.47 It was well known that thefinance scheme was at least suspect and indeed, this methodof finance was openly attacked in Parliament prior to thegrant of the South Sea Company's charter48 In addition, therefunding of public debt by various schemes including sharesubscriptions was well satirised in street ballads well beforethe creation of the 1720 bubble.49 Still, at least in part becauseof the practice of bribery, the scheme was ultimately approvedby Parliament. Further, it is important to recall the lack ofinvestment opportunities as well as the recent changes infinancing options and markets discussed earlier.

Yet, despite the great outcry and generally accepted deepimpact on the economy, it is contested on good grounds that theeffect was not as widely spread or caused the deep harm to theEnglish economy often cited.50 Hoppit argues that 'the Bubbleitself has been bubbled.'51 Hoppit explains this exaggerationas a result of a moral panic among other things. He notesthat the cause for the inquiry and great public noise about thecollapse may well be because 75 per cent of the subscriberswere Parliamentarians.52 Further, in his examination of the

47 Julian Hoppit, 'The Myths of The South Sea Bubble' (2002) 12Transactions of the Royal Historical Society 141, 159.

48 MacKay notes Walpole warning that: 'If it [the South Sea scheme]failed, which he was convinced it would, the result would bring generaldiscontent and ruin upon the country.'; above n 15

49 Dianne Dugaw, "'High Change" in "Change Alley": Popular Balladsand Emergent Capitalism in the Eighteenth Century' (1998) 22(2)Eighteenth Century Life 43, 4650.

50 Hoppit, above n 47, 14151 Ibid, Abstract.52 Ibid 150.

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economic evidence, he finds little to suggest serious or longterm consequences.53

There was a response from the clergy and the media eachfor their own purposes. The clergy had benefited from thesubscriptions to various companies, some of which wereestablished for the improvement of the Church of England'sreal estate and activities. For example, one such bubblecompany had as its objects 'for encouraging the breed of horsesin England, and improving of glebe and church lands, andrepairing and rebuilding parsonage and vicarage houses.'54Undoubtedly, some were also investors themselves. Generally,it appears that the clergy took the opportunity of the collapseto condemn such activity.55

The media itself is always pleased to have a scandal toreport and it is well served by stoking the fires of discontentand publicising problems. The media response can be seenthrough a number of satires from the era and subsequent.Jonathan Swift (who himself lost funds in the bubble) wrotea satire 'the run upon the bankers' as did Thomas d'Urfye,56and Alexander Pope.57 Indeed, a whole range of ballads werecreated variously mocking, lamenting and excoriating theparticipants.58 These ballads were effectively a combinationof news and commentary.59 D'Urfey's ballad provides a fineexample:

A bubble is blown up with air,In which fine prospects do appearThe bubble breaks the prospects lost,Yet some bubble pay the cost

53 Ibid 155.54 MacKay, above n 15.55 Hoppit, above n 47, 160.56 'Hubble Bubble'57 'Epistle to Lord Bathurst'58 See Dugaw, above n 49, 43.59 Ibid 46.

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Hubble bubble bubble hubble all is smokeBubble hubble hubble bubble all is brokeFarewell your woods your houses lands your pasturesAnd your flocksFor now you have nought but your selves in ye stocks60

Another plain explanation of the phenomenon of theSouth Sea bubble is in Ned Ward's 1720 piece I A South SeaBallad, or, Merry remarks upon Exchange-Alley Bubbles'. Itincludes the following stanza:

Five hundred millions, notes and bondsOur stocks are worth in valueBut neither lie in goods or landsOr money let me tell yeYet tho' our foreign trade is lostOf mighty wealth we vapourWhen all the riches that we boastConsist in scraps of paper61

Over time the outcry died down (as it does in all suchinstances) as new events overtake public attention and lifemoves forward. The South Sea became an object lesson, atopic of historical interest and investigation, and a model ofspeculation gone bad.62

The net result was nothing. There was no regulationintroduced subsequent to deal with the matter and laissezfaire capitalism continued. The minds of the lawyers workingwith the hands of the scriveners succeeded in carryingforward commercial actors intentions and, other than a fewprosecutions in early nineteenth century, nothing more of theBubble Act prior to its repeal in 1825 was heard.63

60 Quoted by Dugaw, above n 49/ 52.61 Quoted by Dugaw, above n 49/53.62 Hoppit describes these as 'phases/; above n 47/ 159/ 163-5.63 Redmond, above n 1/ 38.

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6. Conclusion

The Trouble with Stockjobbers

What happened in the early eighteenth century wasunremarkable, at least from the point of view of legislativehistorians. Certainly, new financial instruments were created,an economy boomed both preceded and followed by otherbooms and busts,64 and companies were established, bloomed,took in great sums of investor cash, and went bust. Thepredictable public outcry ensued, including clergy, media andgovernment, but ultimately all continued as before.

No securities regulation occurred until the early twentiethcentury with the creation of the Security and ExchangeCommission after the 1929 Wall Street collapse. Directors didwell, investors got what they could and capitalism developedpermitting the development of the great robber barons of thelate nineteenth century in the USA.

Corporate law continued to develop slowly, shiftingliability away from shareholders, pursuant to governmentpolicy,65 and transferring power to directors while at the sametime shielding them. The notions of independent personalityand corporate veil were developed and reified by the courtsover the interim.66 And government response to corporatescandal appears to be much the same now as it was then-aresponse to certain well prepared lobby groups catching theopportunity presented by the scandal.67 Individual blamecontinues to be popular and regulators continue to make

64 Colin Cooke, Corporation, Trust and Company (1950) 81.65 Ross Grantham, 'The Doctrinal Basis of the Rights of Company

Shareholders' (1998) 57 Cambridge Law Journal 554. For a broaderanalysis of shareholders' rights see Benedict Sheehy, 'Shareholders,Unicorns and Stilts: An Analysis of Shareholder Property Rights' (2006)6 Journal ofCorporate Law Studies 165.

66 Salomon v Salomon & Co Ltd [1897] AC 22; Automatic Self-cleansing FilterSyndicate Co Ltd v Cuninghame [1906] 2 Ch 34.

67 Roberta Romano, 'The Sarbanes-Oxley Act and the Making of QuackCorporate Governance' (2005) 114 Yale Law Journal 1521.

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proposals further tying individual directors both in the USAthrough Sarbanes-Oxley and in Australia through CLERP 9.

Market regulation is a highly charged politicophilosophical debate, with little to do with respect toeconomics, public good and outcry, or moral sentiment. To theextent that one can predict the future from the past (a highlydubious endeavour) the bubbles and busts of the past whichwere blamed on individuals suggest that in future blame canpredictably be visited on individuals rather than systems, andthat significant changes to company law, while loudly calledfor in the times closest to a crises, will most likely be ignoredand both corporate law and business practice will continue asthey are.

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the trouble with stockjobbers: the south sea bubble, the

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