The Modernization of Corporation Law, 1920-1940

Abstract

This Article provides a new perspective on the role state competition plays in the evolution of corporation law. It does so by examining an overlooked historical episode: the move by many states' to adopt self-consciously "modern" corporation laws in the 1920s and 1930s. Traditional accounts of the evolution of corporation law focus overwhelmingly on the importance of state competition for corporation charters. While the desire to compete with Delaware and other "chartermongering" states for incorporations was an important factor in the adoption of the laws considered here, it was not the only one; equally important was the drafters' desire to respond to larger social and economic changes by providing laws more shareholder-protective than were Delaware's. The fine-grained examination undertaken here thus suggests that the development of corporation law is best understood not as a process powered solely by corporate law federalism and resulting state competition but instead as one in which multiple influences - economic, political, and social - have combined to produce the law.

Keywords: corporation law, state competition, charter competition, federalism, Delaware, legal history, race-to-the-top, race-to-the-bottom

JEL Classification: K22