Carney, William J.; Shepherd, George B.; Shepherd, Joanna M. --- "Delaware Corporate Law: Failing Law, Failing Markets" [2010] ELECD 396; in Pacces, M. Alessio (ed), "The Law and Economics of Corporate Governance" (Edward Elgar Publishing, 2010)

Book Title: The Law and Economics of Corporate Governance

Editor(s): Pacces, M. Alessio

Publisher: Edward Elgar Publishing

ISBN (hard cover): 9781848448971

Section: Chapter 1

Section Title: Delaware Corporate Law: Failing Law, Failing Markets

Author(s): Carney, William J.; Shepherd, George B.; Shepherd, Joanna M.

Number of pages: 45

Extract:

1. Delaware corporate law: failing law,
failing markets
William J. Carney, George B. Shepherd and
Joanna M. Shepherd

INTRODUCTION

For nearly a century Delaware's corporation law has dominated its
market. The explanations given for its dominance have varied over the
years, and new ones continue to be offered. At the same time that expla-
nations for success have been offered, some commentators have criticized
the quality of Delaware law, and have suggested that it is not ideal, and
indeed, may be inferior to some other laws. We offer some additional evi-
dence on this point and explore possible reasons for its continuing success
in the wake of a decline in quality. Our study focuses on the role of lawyers
as advisers on the choice of the state of incorporation.


1. DELAWARE'S DOMINANCE OF
THE CHARTERING COMPETITION

Two of us have previously reviewed the history of the competition for
corporate chartering business.1 This competition was possible because
virtually all American states followed the English choice of law rule, the
`Internal Affairs Rule', which applies the law of the incorporating jurisdic-
tion to the governance of the corporation, rather than Europe's `Real Seat
Rule', which required incorporation at the location of the corporation's
real headquarters.2


1 William J. Carney and George B. Shepherd, The Mystery of Delaware Law's

Continuing Success, 2009 U. Ill. L. Rev. 1. Much of the early part of this chapter
is drawn from that article.
2 William J. Carney, The Political ...