why british navy rules during the age of sail

Master and Commander

The Age of Fighting Sail-The Secret Behind Royal Navy’s Success

称雄大洋的秘密--风帆时代的英国海军

Qingjiu Tao (陶庆久), PhD，Assistant Professor,

James Madison University

Email: [email protected]

Office phone: 001-5405683257

Rights reserved, Qingjiu (Tom) Tao, 10/16/2012

mailto:[email protected]

British Navy Rules—海上称雄150年

• The undeniable fact that British Navy was the most successful during the age of fighting sail，it defeated Spain，Holland and France, etc. 它先后击败西班牙，荷兰和法国等海上对手。

• over the six major naval battles from 1793 to 1805, the British had just 5749 killed or wounded compared to 16,313 killed and wounded and 22,657 prisoners of the enemy

• Why?秘密何在？

Rights reserved, Qingjiu (Tom) Tao10/16/2012

日不落帝国

Rights reserved, Qingjiu (Tom)

Tao, 10/16/2012

Secrets Behind the Success—成功的奥秘

• Technology? 技术？ • In fact , they had a marginal disadvantage。英国略逊一筹。

• Food？Beef？营养学家的解释

• Bravery？部分军事学家的解释 recruit from pubs

• Individuality？心理学家的解释

• Other Suggestions? Geography? Luck?


What about management and strategy？

管理和战略学的解释

• What was the environment?当时的环境 • King(Queen女王)-Admiralty海军部-Admirals舰队司令-

Captains舰长

• Technology led to professional officers-职业经理人

• Shareholder股东或董事长-CEO首席执行官-Divisional

Manager分公司总经理-Managers经理

• Agency Problem (Information Asymmetry信息不对称-few

ways to monitor and communicate)

• The Problem of Cowardice 怯战 and Private Wealth

Accumulation 私肥

• How to solve the problem? 如何解决这两大弊端？

Rights reserved, Qingjiu (Tom) Tao10/16/2012

A Captain's Life at Sea

舰长的海上生涯

• Why some run from fighting? The Quarter Deck

Information asymmetry and moral hazard—信息不对称导致怯战与私肥—经济人假设

The best target and the worse target 风险收益分析


Control and Incentives

控制与激励

• How a captain can get rich? 舰长的致富途径 • 1. Capture a Enemy Trade Vessel

• 2. Capture a Enemy Combat Vessel

Wage and Prize Money 工资和奖金 • High wages-3000 pounds a year for an admiral at sea高工资

(Newton gets 500 pounds a year at same time as the head of Royal Coin

Bureau-1 pound at that time equals about 100 pounds today)

• High Prize Money高奖金- some admiral amassed 300,000 pounds • For captured enemy war ships, Captain gets ¼, Admiral gets ¼, the rest goes to other people.

• This created a big pool of candidate for these positions竞争上岗,

they earn half wage when waiting for a post (In 1715, 188 captains

for 70 ships; in 1812, 1531 captains for 1017 ships).


Control and Incentives

控制与激励 • The monitoring Mechanism监管机制-无监管的工资制度只会导致？

• Fighting instructions战舰战斗编队规范-The battle Line作战时排成一条线 and Weather Gauge抢占上风口

• Form The battle line—a simple tactics that makes sense

in control/monitor

• Capture The weather gauge—fight windward of the

enemy ship, if you unanchor the ship, where will the ship

go?


The battle of

Nile—Guess

where is

Admiral

Nelson?


Battle Line Example Battle of Copenhagen


Tao, 10/16/2012

1

Weather Gauge抢占上风口


The structure of a Battleship


Tao, 10/16/2012

More- 海战条例（Articles of War）

• Article 10。 Every flag officer, captain and commander in the

fleet, who, upon signal or order of fight, or sight of any ship or ships

which it may be his duty to engage, or who, upon likelihood of

engagement, shall not make the necessary preparations for fight,

and shall not in his own person, and according to his place,

encourage the inferior officers and men to fight courageously, shall

suffer death…

• 第十条军规：不英勇奋战者，杀！

• 第十二条军规：战斗中不当撤退者，杀！ The example of John Byng

• “it has been established that their ships were not close enough to engage“

• “in this country we find it pays to shoot an admiral from time to time to

• encourage the others.“


Eyes on the ship

舰上的监管方法

• Career Path of Navy Officers军官的提升途径 • 军官的不连续提升制度

• Midshipman 侯补海军少尉, lieutenant 海军上尉, captain舰长,

admiral舰队司令

• Captain can not fire lieutenant, lieutenant is responsible for ship log.

• 舰上对舰长的小报告制度, 舰长职位有实缺时才能提拔上尉。

• What if lieutenant lies?

• Lieutenant needs recommendation letter from captain for promotion.

• (if a lieutenant lies and the captain was not removed, he is done in navy）

• Master Seaman’s log 军士长也有航海日志

• Multiple lieutenants on a ship提高撒谎串供难度


Corporate Governance—公司治理

• 问题：Information asymmetry—信息不对称的代理人困境-- 风

帆战舰时期舰长们有怯战和私肥的倾向。海军部很难直接监管

• Hidden actions—moral hazard 道德风险

• 思路：Corporate Governance design 公司治理设计--代之

以间接监管和特殊的激励制度

• 方法：Control: 控制和监管- 舰队作战中排成一条线和抢占

上风口。使用海军上尉来监督舰长，并保证该监督可靠可信。严刑峻法。

Incentives: 激励机制- 工资为核心的收入制度和战利品分成的奖励制度。设立待岗名

单半价养一大批竞争者，让在职者有忧患意识。

结果：绝大部分舰长都勇敢作战，忠于职守，英国海军统治了海洋。


What we can learn from the case?

现实意义

• 组织里如果管理者无法直接监督下属或其他相关方（简称相关方）的行为，而相关方有很强的动机私下里干一些管理者不希望他们做的事（moral hazard)，比如，不努力干活，或者/且牺牲组织利益来获取自己利益，那么管理者应该做好下面几件事：

• 1.提高职位的吸引力。2.设立严格的管理规范，监管重心从监督私下行为转向监督对规范的遵守。3.开展内部竞争。4.选用合适的工资制度。5.设立间接监督机制。

• 董事会-CEO；总公司-海外分公司经理


A Quick Test 小测验

• What should you do with Privateers 私掠船的激励制度?

• Goal目标: To destroy enemy’s sea trade

摧毁敌方的海上贸易

• What should be changed in the age of iron

clad? Should there be more death penalty

or less in the regulation?在蒸汽铁甲舰的时代，死刑应该在军规中增加还是减少？

• Battle line and the assembly line Rights reserved, Qingjiu (Tom) Tao, 10/16/2012

Answer

• 1. Give the majority of the capture to the captain

and let captain decide on the distribution. 对私掠

船抢来的东西大部分归船主支配。激励他们猛劲抢，摧毁敌人的海上贸易线

• 2. Less, more direct control is possible, when

better communication (telegram), better ships

(less vulnerable to weather)

• 少了。由于直接监管变得很容易，海军不再需要间接监管+死刑吓唬。


What should we do with the CEOs?

现代公司治理制度改革

• CEO compensation database-工资不可谓不高

• Corporate Governance Revisted：Is it working？监管不可谓不严

• Failed companies and short-term orientation as

well as information asymmetry-问题何在？

• Incentive and Control: any suggestions?


The Challenge for Principals

1. Shape the behavior of agents so that they act in

accordance with goals set by principals

2. Reduce information asymmetry between agents

and principals

3. Develop mechanisms for removing agents who

do not act in accordance with goals and

principals

Confronted with agency problems, the challenge for principals is to:

Principals try to deal with these challenges through a series of governance mechanisms.


Governance Mechanisms现有治理机制

Governance mechanisms serve to limit the agency problem by aligning incentives between agents and principals and by monitoring and controlling agents.

• The Board of Directors董事会

– Elected by stockholders

– Legally accountable

– Monitors corporate strategy

decisions

– Authority to hire, fire, and

compensate

– Ensures accuracy of

audited financial statements

– Inside directors

– Outside directors

Stock-Based Compensation股票期权激励

• Pay-for-performance

• Stock options:

The right to buy company shares at a predetermined price at some point in the future

Financial Statements财务报表 • Auditors • SEC • GAAP

The Takeover Constraint外部制约 • Limits strategies that ignore shareholder

interests

• Corporate raiders—Chinese ADRS in NYSE-Muddy Waters Research


鸦片战争时的英国海军舰队

• 最初参加鸦片战争的英国舰队包括军舰16艘，运输舰28艘，武装汽船4艘，载炮540门，舰队的总人数包括海军陆战队（上岸劫掠用的）在内约12000人左右。其中主力战舰3艘，都装炮74门，排水量为1746吨，属于主力战舰吨位最小的一个等级（三级）。舰队中还有5艘护卫舰，其中2艘五级护卫舰，三艘六级护卫舰

• 通用的风帆战舰分级是：从大到小，一级到六级。一到三级为主力战舰（ships of the line，也有译为战列舰的），至少要有80到120门炮(英国人老是放74门炮），800-900

个伙计。护卫舰一搬是五级或六级，20-40门炮，150到300个人


Sovereign of the Seas


Tao, 10/16/2012

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why british navy rules during the age of sail

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