As lawmakers and regulators continue to tinker with the Sarbanes-Oxley Act for U.S. public companies, they could do worse than look to the 14th century, when the budding capitalists of Southern France developed corporate governance institutions for the ages.As detailed in a treatise published some 50 years ago, the well-heeled citizens of Toulouse invented a way to pool their capital, spread their risks and provide a healthy return on their investment. In the process, they created the first public companies, along with pragmatic yet ingenious mechanisms for controlling the greedy impulses of shareholders, employees, suppliers and customers, while keeping the government at bay and enduring for some 600 years.

Beginning in the late 13th century, a group of investors embarked on a quest to ensure a steady and reliable power supply for their growing economy from the mills that harnessed the swift-moving Garonne River to grind wheat into flour, forge iron, and saw timber. At first, they devised a structure for investors to own specific assets, such as land or the grinding stone. But this proved unworkable when owners wanted to dispose of their interests and as costs mounted for maintenance of the physical plant.

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