Corporate Law Lessons from Ancient Rome

The following post comes to us from Andreas M. Fleckner, Senior Research Fellow, Max Planck Institute for Comparative and International Private Law.

How did the Romans finance capital-intensive endeavors such as the erection of temples, the pavement of roads, or the trading of goods from foreign countries? This question has fascinated generations of classical readers and scholars. It is, however, also of interest to the corporate lawyer of today, because Ancient Rome helps us better understand the functions of corporate law and its role within the broader economic, social, political, and legal setting.

What We Know About Ancient Rome

For more than 175 years, historians, economists, and lawyers have speculated or even claimed that, as early as the Roman Republic (6th to 1st century BC), businessmen formed large firms with publicly traded shares similar to modern stock corporations (since Orelli, 1835). Most recently, a longer Journal of Economic Literature article argues that there was evidence for such an “early form of shareholder company” (Malmendier, 2009).

In a new book, however, I conclude that such claims are unwarranted. [1] I consider all legal and literary sources, both in Latin and classical Greek, that have come down to us, such as the works of Polybius (2nd century BC), Cicero (1st century BC), Livy (around the time of Christ’s birth), Pliny the Elder (1st century AD), or Plutarch (2nd century AD), as well as great collections like the New Testament (1st/2nd century AD) or the Digest (6th century AD). None of these sources brings to light evidence for larger “capital associations” (my term for entities that helped finance projects which, on account of their scope, duration or risk, exceeded the capacity of single individuals), let alone associations with publicly traded shares.

The mere lack of evidence, of course, does not suffice to infer that such institutions did not exist in Ancient Rome, because the evidence for larger capital associations might be buried in the countless sources that have been destroyed. Or, to put it differently, “absence of evidence is not evidence of absence.” I therefore broaden my focus by looking for the structural features that support capital associations, and by checking my results against the general economic, social, political, and legal setting. Both make it appear highly unlikely that Ancient Rome ever witnessed something similar to the modern stock corporation. The best reason, though, for doubting the idea that larger capital associations did exist in Ancient Rome, but their sources have been lost, is the fact that there is plenty of evidence for other—smaller—business entities. The three main types were the societas, the societas publicanorum, and the peculium.

The societas was an association of persons that could be established to pursue any goal, ranging from personal affairs to purely financial relationships. Examples for businesses organized as a societas included the provision of financial services (as so-called argentarius), maritime transport (as so-called exercitor), and joint trading in oil (oleum), wine (vinum), grain (frumentum), slaves (mancipium), or clothes (sagaria). It is most remarkable that all sources, despite the diversity of the businesses conducted, have one thing in common: No societas seems to have consisted of more than a few partners, and most sources provide evidence of only two partners.

The societas publicanorum was a modification of the societas meant to carry out state contracts. Such contracts covered a range as wide as the tasks and items that the government put out to tender: the collection of taxes (vectigalia); the lease of mines and quarries for minerals such as gold (aurum), silver (argentum), or iron (ferrum); the erection or maintenance of public infrastructure like temples (templum), water pipes (aqua), or roads (via); the support of the army (exercitus), or the import of grain (frumentum). It is again very remarkable that there is hardly any evidence for a societas publicanorum consisting of a larger number of capital providers. Among the many sources that touch upon the societas publicanorum, there is only one specific reference: A group of nineteen state contractors that formed, together or separately, three associations to support the Roman armies in the Second Punic War (3rd century BC). Overall, it appears from the sources that the societas publicanorum was typically not much larger than the basic societas.

The peculium was a separate estate of slaves and other persons that were subject to the authority of a pater familias, the head of the family. The peculium had two facets: For those who were under paternal power, the grant of a peculium gave to some extent independence and autonomy. For those who exerted authority, the grant of a peculium offered the prospect of participating indirectly, and therefore at lower risks, in business ventures. If several patres familias had combined their funds and vested a common slave with the capital, they could have mitigated some of the structural disadvantages of a societas. Contrary to widespread imagination, though, the sources do not support the assumption that the peculium of common slaves was in fact used to fund larger enterprises.

What We Can Learn from Ancient Rome

Over recent years, scholars have become increasingly interested in the impact that corporate law has on corporate practice and, more generally, on business firms or the economy as such. The study of ancient sources will not directly offer answers to such questions, because the past differs too much from the present. But history will often teach us lessons that can help find answers and, equally important, history will often point us to new questions that have escaped our attention so far. My book on ancient capital associations, published in German under the title Antike Kapitalvereinigungen, offers various examples for both. In the first part of the book, I develop an epoch-spanning theory of the capital association, including its idea, its structural features, its economic, social, political, and legal preconditions, and its regulatory problems. In the second part, I apply this theory to classical antiquity, the very beginning of the capital association’s history. For instance, in order to better understand why the societas, the societas publicanorum, and the peculium remained rather small, I try to determine whether Roman law would have allowed businessmen to establish entities with the structural features that I earlier identify as crucial to the success of capital associations. I use the term “capital association” (Kapitalvereinigung) throughout the book instead of “company,” “corporation,” or “business firm” to shield my historic analysis from the modern ideas that the more common terms unconsciously entail.

One important lesson that Ancient Rome teaches us about corporate law is to not ignore its social and political setting. This lesson is one of the key insights from my study of the ancient sources, because at first glance, those sources seem to be incompatible with one another: Romans knew, as the societas, the societas publicanorum, and the peculium demonstrate, how to combine capital and share risks; they also had a basic understanding of the structural features that help further the idea of capital associations; and they were aware of the endeavors that demanded greater sums of capital, such as maritime trade or state contracts. But why then, one wonders, did the Roman businessmen refrain from establishing larger capital associations? My analysis suggests that the limiting factors are to be found rather in the social and political than in the economic and legal environment. The latter needs special emphasis: Contrary to widespread belief, Roman law probably had only limited influence on the capital associations’ size, and cannot be blamed as the main reason why Roman business entities remained small. Of course, it is true that the legal regime could have made capital associations more attractive to investors, for instance by a statutory protection of their private assets, and more appealing to businessmen, such as by shielding common assets from the investors’ and their creditors’ claims. The large number of special rules for trade and commerce (for example about the merx peculiaris, the institor, the magister navis or the societas publicanorum) shows, however, that the ancient lawyers did not fail to adapt their rules to business needs. And given the complex design of the peculium, there are no grounds to believe that certain rules, for instance about the separation of assets, were too complicated for that period. Instead, the fact that no such rules have come down to us indicates that the obstacles in the social and political environment were so huge that they stifled the economic demand for capital associations. In other words, it is unlikely that Ancient Rome would have seen larger capital associations if only the legal framework had been different. This historic insight is grist to the mill of those who feel that today’s scholarship overestimates economic and legal factors and fails to appreciate the social and political environment’s critical influence on corporate practice. While the situation today obviously differs from classical antiquity, Ancient Rome at least provides anecdotal evidence that the social and political setting can be decisive.


[1] Antike Kapitalvereinigungen: Ein Beitrag zu den konzeptionellen und historischen Grundlagen der Aktiengesellschaft, Cologne/Weimar/Vienna: Boehlau (2010), XVII + 779 p. (vol. LV of the Forschungen zum Römischen Recht, an ongoing publication series on Roman law first established in 1943).
(go back)

Both comments and trackbacks are currently closed.
  • Subscribe or Follow

  • Supported By:

  • Program on Corporate Governance Advisory Board

  • Programs Faculty & Senior Fellows