The organizational structure of a large railway company in Spain: the rail company of Madrid-Zaragoza-Alicante (MZA): 1900–1941

Which mechanisms can the owners of a large firm use to ensure control when the firm grows, diversifies and merges with others and they lose some ownership? We discuss the sometimes conflicting relationships among the founders, shareholders, and managers of the Madrid to Zaragoza and Alicante Railway Company, a Spanish firm that was in operation between 1856 and 1941. We review the mechanisms through which communication among the stakeholders flowed in an effort to bridge possible conflicts of interests. From a historical perspective, we also show the effectiveness of the mechanisms adopted by the owners (mainly the Rothschild family) to ensure control over the company. We highlight how the executive committee played a key role in taking control of the firm. Rather than documenting a classic principal – agent conflict between owners and managers, this paper demonstrates how agency problems were mitigated through a combination of trusted managerial elites, committee-based governance, and shareholder control mechanisms. In doing so, it qualifies agency theory by showing how governance arrangements were contingent on historically specific institutional and ownership structures.