As the colony grew, Winthrop found himself doing more administrative work in his role as governor. The General Court met quarterly to legislate and tax. Once a year it elected a governor, deputy governor, and eighteen assistants who would serve as the executive council for the colony. The charter granted its leaders total control, and, with England's belief in the divine authority of kings, it stood to reason that an oligarchy would eventually rise. Winthrop, John Endecott and Thomas Dudley stood as the colony's three main leaders, and all three believed that their near oligarchic rule was justified since as godly men they merely meant to enforce God's word on earth. Throughout the colony's early history, though, the three never succumbed to their ability to rule dictatorially–always offering to include the citizens of the colony in its rule.
They expanded the General Court and after laying down basic rules, such as prohibiting trading with the Indians and setting maximum salaries for tradesmen, Winthrop announced open elections among the freemen of the colony. The "assistants" became a legislative assembly. The only restriction was that freemen were limited to voting in elections for the assistants, who would in turn elect the governor and deputy governor. The final step in the colony's transformation from trading company into the Commonwealth of Massachusetts was completed at the next General Court meeting when it admitted all the adult males–excluding servants–in the colony as freemen. In keeping with the Puritan aspects of the colony, the freemen in turn voted to limit their numbers to those who were members of a church.
In governing, the colonial leaders often did not bother to distinguish between judicial and legislative functions, since they believed God empowered them to do both jobs. Although the Bible proscribed the death penalty for adulterers, English courts had often looked the other way in adultery cases. Therefore, the new colony saw it prudent to specifically legislate and enforce God's punishment. The government, however, was careful never to cross the line into allowing clergy to govern. It early on established a precedent whereby ministers would not serve as public officials. They had a powerful influence in the colony in their role as clergy, but the colonial leaders were loathe to grant them actual authority since the colony remained wary of the theocracy established in Rome and the Church of England. As long as Winthrop was alive, no minister ever ran for or served in public office.
In February 1632, Winthrop suffered perhaps his largest defeat during his twelve years as governor, during in a dispute with citizens of Watertown. They demanded a larger role in colonial taxation since under the charter the freemen were allowed to help legislate. Winthrop countered that there were too many freemen to legislate, and, besides, they were not all qualified in parliamentary roles. The General Court overruled Winthrop, however, and voted to allow the freemen to meet quarterly to legislate and tax the colony.
During the summer, Winthrop and Dudley became involved in a dispute when Dudley accused Winthrop of being too lenient in the enforcing of laws, which was a common complaint against Winthrop. While Winthrop successfully answered Dudley's charges, they set in motion a series of events that would end Winthrop's administration two years later. That same fall, Winthrop consented to allow the freemen to vote for governor and deputy governor. Finally, the issue of Winthrop's governance came to a head in 1634, when the General Court demoted him to assistant and promoted Dudley to governor after more complaints about Winthrop's administration. The court expressed reservations about Winthrop's enforcement of laws and the potential that he could become a despot if he served too long. Winthrop, however, embarrassed the court when it asked for an accounting of all the funds spent during his tenure; he pointed out how time and again over the preceding four years he had dipped into his own pocket to buy supplies for the colony, even once building a fort to protect Boston with his own funds.
Winthrop expressed no bitterness in his journal over his demotion, and as an assistant he remained an active member of the General Court. Besides, many members of the colony continued to treat him as governor of the colony, asking for his help and advice in their problems. After all, Massachusetts Bay likely would not have survived at all if it weren't for Winthrop.