Vigorous Race or Leisurely Walk: Reconsidering the Competition over Corporate Charters

The recent corporate governance crisis makes this time as good as any for reexamining the basic structure of this body of law. This essay provides such a reconsideration of a defining feature of US corporate law - the existence of regulatory competition among states. The standard case for state competition is challenged by questioning the claim of the first proposition that states vigorously compete for incorporations. The dominant state in attracting the incorporations of publicly traded companies is, and for a long time has been, the small state of Delaware. The alleged vigorous race among states vying for incorporations simply does not exist. The essay presents evidence that Delaware's dominant position is far stronger, and thus that the competitive threat that it faces is far weaker than has been previously recognized. The underlying reasons for the weakness of competition in the market for incorporations is explained.