Sunday, August 30, 2009

The Corporate State

Fred Clark, a Delaware-based journalist, has recently written an essay explaining why his home state, the first to ratify the Constitution and the last to outlaw flogging,* is the headquarters of 63% of the United States' Fortune 500 companies. State leaders credit Delaware's Chancery Court, which they describe as a font of wisdom on corporate law. More cynical observers, like Jonathan Chait in The New Republic (whose 2002 article Clark cross-references in his essay), instead give credit to Delaware's highly permissive general-incorporation laws and its lack of usury laws. Thanks to corporations' legal personhood and the Privileges and Immunities Clause of the U.S. Constitution, a company chartered in Delaware can operate elsewhere in the United States without having to worry about other states' more restrictive regulations. In return, Delaware derives a third of its budget from corporate charter fees - and the rest, I assume, from the state's tollbooth on I-95.

*Thus earning it a brief but favorable mention in Robert Heinlein's political science-fiction novel Starship Troopers (1959). Delaware outlawed flogging in 1971.

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