The Lowell Milken Institute for Business Law and Policy and the UCLA School of Law recently sponsored a conference entitled Can Delaware Be Dethroned? Evaluating Delaware’s Dominance of Corporate Law.
Although Delaware’s domination of corporate law seems now to be well entrenched, this has not always been the case. At the end of the 19th Century, it was New Jersey that was the center of the corporate law world. As is the case in Delaware today, New Jersey law then provided both tax and doctrinal advantages giving it significant competitive advantages in attracting incorporations from out-of-state businesses. In 1913, however, New Jersey adopted the so-called “Seven Sisters Acts,” a package of legislation that collectively made New Jersey much less attractive to incorporators. Delaware swooped in and attracted a flow of New Jersey corporations to Delaware. Today, 64% of the Fortune 500 companies are incorporated in Delaware, as are more than half of all companies listed on the New York Stock Exchange, NASDAQ, and other major stock exchanges.
Whether Delaware’s domination resulted from a race to the top or to the bottom has been the subject of much argument. In either case, however, there is no doubt that Delaware benefits greatly from its dominance. Delaware gets a significant percentage of state revenues from incorporation fees and franchise taxes, typically over 20% of the state's budget. Delaware’s government thus has a very strong interest in maintaining Delaware’s dominant position.
In recent years, however, some observers have suggested that Delaware’s competitive position is eroding or, at least, that it should be doing so. In a 2008 law review article, “The Mystery of Delaware Law's Continuing Success,” Emory law professors William Carney and George Shepherd challenged “the widely held view that Delaware corporate law is dominant because it possesses superior traits, such as a well-understood statute, many judicial decisions interpreting the law, and wise and experienced judges administering that law.” They contend that if Delaware ever truly possessed such advantages, they have eroded substantially.
The purpose of this conference was to explore how Delaware achieved its dominance of corporate law, the threats (if any) to Delaware’s continued dominance, and the social and economic consequences of Delaware’s dominance for shareholders, stakeholders, and the national economy.
Here is the video from Day 1:
Here is the video from Day 2: