Why the North Dakota Publicly Traded Corporations Act Will Fail

Abstract

In this short essay for a forthcoming symposium, I comment on the North Dakota Publicly Traded Corporations Act. North Dakota hopes that the Act will empower it to compete with Delaware in the market for corporate charters. In my view, North Dakota is doomed to failure. If state chartering competition is a race to the bottom, managers will prefer Delaware to North Dakota because the former facilitates the extraction of private rents. If state competition is a race to the top, investors will prefer the director primacy approach taken by Delaware to the shareholder primacy one adopted by North Dakota. Either way, North Dakota loses.

Keywords: corporation, corporate statute, race to the bottom, race to the top, Delaware, North Dakota, Public Corporation Act

JEL Classification: K22