Corporations & Environment in Early America

Before I tell the story of commons, mills, and corporations in my Environmental History class, I like to set the scene by talking about one of America's first experiences with corporate scope-creep. Here's how I'm thinking of talking about the Charles River Bridge case in my textbook:

Although it includes additional construction and bridges, this 1842 map of Boston illustrates why the battle between the Warren and Charles River Bridge companies (top of Boston) was so contentious.

Some projects to provide public goods such as colleges or hospitals cost more than individuals can conveniently raise. Early America’s answer was the corporation. Corporations during the colonial period had been quasi-public organizations given a royal charter to do a particular job. The Virginia Company and the Massachusetts Bay Company had been royally chartered corporations. They earned profits for their shareholders, but they also had, or at least claimed to have, an important social function that transcended mere business. Without this social dimension, businesses—even very large ones—were normally organized as partnerships or sole proprietorships. State legislatures in early America continued the English tradition and chartered corporations to do particular tasks in the public interest. Colonial governments began this practice very early in our history, when the Massachusetts legislature established Harvard College in 1636 and then chartered the Harvard Corporation, America’s first corporation, in 1650.

Corporate influence on the environment begins with this first American corporation. In 1640, the Massachusetts legislature gave Harvard a license to run a ferry between Boston and Charlestown across the Charles River, to raise money to operate the college. When the State of Massachusetts granted a corporate charter to the Charles River Bridge Company in 1785, to build the first bridge across the river, the charter specified that the company had to pay Harvard £200 per year to compensate the college for the revenue the old ferry operation would lose.

The Charles River Bridge was a privately operated toll bridge. Originally conceived as a public corporation that would provide a social benefit, the bridge company was wildly successful. The corporation had been capitalized at $50,000, meaning that $50,000 had been raised to build the bridge by selling shares to investors. Once built, the bridge collected $824,798 in tolls between 1786 and 1827. Although the original plan had been to eliminate the tolls once the bridge had paid for itself, the shareholders decided to continue profiting from their monopoly.

Enriching shareholders was not what the legislature had in mind when they granted the corporation a charter to build a bridge that would monopolize river crossing. So the legislature chartered the Warren Bridge Company to build a second bridge next to the Charles River Bridge. The new charter specified that the Warren Bridge would only be allowed to collect tolls for six years or until it paid for itself, whichever came first. Then ownership would revert to the Commonwealth and the bridge would be toll-free.

The Charles River Bridge Company sued the Warren Bridge Company, claiming their 1785 charter had granted a perpetual monopoly on traffic across the river. Charles River Bridge revenues disappeared, as travelers chose to pay the lower tolls on the new bridge. The lawsuit failed in Massachusetts courts, and the plaintiffs took their complaint all the way to the U.S. Supreme Court. In spite of hiring famous orator Daniel Webster to argue their case, the Charles River Bridge Company lost. The court’s decision reflected the judges’ belief that the profits of the corporation and the interests of its shareholders were less important—and legally came second—to the right of the state to charter corporations to meet public needs. Even so, the tremendous profits taken by Charles River Bridge shareholders and their ability to push their lawsuit to the highest court signaled the beginning of a change in the way corporations viewed their role in society and the responsibilities that went with their public charters.