Delaware's Politics

TABLE OF CONTENTS INTRODUCTION I. THE RACE A. States Fight for Chartering Revenues B. The Federal Trump C. Delaware as a Quasi-Federal Agency II. MAKING AMERICAN CORPORATE LAW: DIFFERING IDEAS, DIFFERING INTERESTS A. In Delaware B. In Congress III. SEQUENCE A. Abstractions 1. The Narrow Result When Delaware Acts 2. The Wide Space in Which Congress Act 3. Delaware's Deflection: Why Don't Managers Fully Dominate Delaware? 4. How Delaware Diminishes the Congressional Deal Space 5. Congress: Wide Interests, Broad Ideas 6. The Tax Code and the Corporations Code 7. Shareholders' and Managers' Joint Interest in Minimizing Federal Influence 8. Delaware's Mixed Interest in Minimizing Federal Influence 9. Efficiency? B. Examples 1. Federal Displacement: Actual and Potential (a) Antitrust (b) Foreign Corrupt Practices (c) Takeovers (d) Sarbanes-Oxley (e) Shareholder Access 2. Analogous Larger Jurisdictions (a) CalPERS (b) Constituency Statutes (c) Europe 3. Regulatory Method (a) Ex Post Fiduciary Duties vs. Encompassing Regulation (b) Arbitration vs. Prosecution IV. POLITICAL THEORY AND THE DELAWARE-FEDERAL RELATIONSHIP A. Triggering Federal Action 1. Scandals, and Public-Oriented Action 2. Police Patrols vs. Fire Alarms B. Delaware as the Accidental Agency: Parallels to the Federal Reserve System 1. In Delaware's Insulation 2. In Its Porosity 3. In Separating Policy Domains 4. In Reducing the Time Inconsistency Problem 5. In Processing Information C. How Delaware Affects Congress 1. In Justifying Strong Regulation 2. In Faciliating Anti-Corporate Posturing 3. In Giving Congress Cover and Deniability 4. In Avoiding a Full Federal Corporate Takeover V. CORPORATE THEORY MEETS POLITIAL THEORY A. The Contractarian Paradigm 1. What Is It? 2. How the Public Choice Structure Makes the Contractarian Paradigm Possible 3. Limits to the Contractarian Paradigm B. The Internal Affairs Norm 1. What Is It? 2. The Internal Affairs Doctrine as Crude Interest Group Public Choice VI. IS DELWARE CAUSE OR EFFECT? A. Means and Ends 1. The Median Voter and the Institutional Structure 2. Does the American Voter Want Conservative Corporate Law? B. Restraining the Corporation: External Bumpers vs. Internal Brakes CONCLUSION FIGURE 1. ONE ISSUE IN DELAWARE FIGURE 2. THE TRADEOFF OF AUTONOMY AND PRODUCTIVITY FIGURE 3. THE EASE OF A FEDERAL COUNTERCOALITION IF DELAWARE IS IMMODERATE FIGURE 4. MODERATION IN DELAWARE STYMIES AN EASY FEDERAL COUNTERCOALITION FIGURE 5. THE DELAWARE DEAL IN THE FEDERAL SHADOW FIGURE 6. THE CONSTRICTED DEAL SPACE IN CONGRESS AFTER DELAWARE ACTS FIGURE 7. WHEN FEDERAL POLICYMAKERS DEMEAN PRODUCTIVITY FIGURE 8. WHEN ENTERING THE FEDERAL ARENA HURTS BOTH MANAGERS AND SHAREHOLDERS Delaware makes the state corporate law governing most large American corporations. Since Washington can take away any, or all, of that lawmaking authority--and, via the securities laws, already has taken away much--a deep conception of American corporate law should show how, when, and where Washington leaves that lawmaking authority in state hands. The interest groups and ideas in play in Delaware are narrow, the array in Congress wide. Three key public choice results emanate from this difference. First, the major state-level players usually want to minimize federal authority in making corporate law because a federal deal splits the pie with outsiders while a local deal cuts in fewer players. Second, because federal players may act if they see state results as lopsided, interest groups who could dominate Delaware lawmaking have reason to forgo a winner-take-all strategy. The Delaware players can be seen as a local caucus within national lawmaking, with Delaware as the institution that allows them to caucus and usually make corporate law first. …