The Stockholder Review Committee of the Chesapeake and Ohio Canal Company, 1828–1857: Evidence of Changes in Financial Reporting and Corporate Governance

Abstract

Canal companies were among the first enterprises to be organized in the corporate form and to require large amounts of capital. This paper examines the stockholder review committee of a 19th century corporation, the Chesapeake and Ohio Canal Company (C&O), and discusses how the C&O used this corporate governance structure to monitor and improve financial management and operations. A major strength was the concern and dedication of the stockholders to the company, while a major weakness was the political control exerted by the State of Maryland. The paper provides an historical perspective on corporate governance in the 19th century. This research contributes to the literature by providing detailed workings and practices of a stockholder review committee. The paper documents corporate governance efforts in archival sources that provide an early example of accountability required in a corporate charter and the manner in which the stockholders carried out this responsibility.

A historical perspective on nature: Insights from environmental philosophy and the construction of the Erie and Rideau Canals

“…While canals are acknowledged to have served as an important impetus to settlement, local improvements and economic growth, manufacturing, reduced transportation costs, and trade (Arnold and McCartney, 2008; Bujaki, 2010; Kistler, 1980; Russ et al, 2006; Schultz and Hollister, 2014), within the accounting history literature there is a limited focus on canals (Arnold and McCartney, 2008; Schultz and Hollister, 2014). Researchers in this area have focused primarily on canals in the United Kingdom (Arnold and McCartney, 2008; Edwards, 1985; Forrester, 1980), United States (Kistler, 1980; Russ et al, 2006, 2009; Schultz and Hollister, 2014) or Canada (Bujaki, 2010, 2014; Bujaki and McConomy, 2022).…”

“…As we describe further in the literature review, other researchers have examined early canal accounts (e.g. Bujaki, 2010, 2014; Bujaki and McConomy, 2022; Forrester, 1980; Kistler, 1980) and governance practices (Russ et al, 2006, 2009). Environmental matters related to eighteenth- and nineteenth-century canal construction have not previously been addressed in the accounting history literature.…”

Auditing in the United States: a historical perspective

“…In the post‐Revolutionary period, commercial enterprise surged. One early enterprise that George Washington instigated to support commerce from the Atlantic coast to the Ohio River Valley was the Potomac Company, incorporated in Virginia in 1784 and Maryland in 1785 (Russ and Coffman, 2002, p. 5). This corporation was to construct locks to allow navigation on the Potomac River such that passengers and freight could better navigate and utilize the river for east–west commerce.…”

“…What seems significant is that from the company's inception in 1785, its bylaws provided that three shareholders would be appointed to examine the treasurer's records. This appointment of the shareholder audit committee was made at the company's second meetings on 7 August 1786 (Russ and Coffman, 2002, p. 7).…”

“…In 1823, a new group of investors obtained charters from the states of Virginia, Maryland and Pennsylvania to start a new corporation, called the Chesapeake and Ohio Canal Company, to connect the Potomac River with the Ohio Valley. Like the former company, the Chesapeake and Ohio used the elected‐shareholder audit committee to examine the treasurer's accounts (Russ and Coffman, 2002, p. 8).…”