Monday, December 8, 2008

Delaware's Dominance Doomed?

The WSJ Law Blog has posted a story about the emergence of a new shareholder-friendly corporate governance law in North Dakota.  Delaware and it's corporation-friendly laws are home to a large majority of US corporations.  The reason for this is that DE has intentionally crafted its laws to welcome corporate officers and directors to a corporate-friendly environment where they are free to act reasonably without too much fear of litigation by shareholders.  

North Dakota's governance laws enable shareholders to exercise a little more control over their corporations' directors and officers.  The shareholder advisory vote and ability to consider executive pay are both aspects of the ND law that you will not find in Delaware.  Although these laws were enacted a year ago, there are only two publicly-traded companies that are incorporated in North Dakota.  It is unlikely for corporations to flock to ND; most boards and officers likely prefer the friendly confines of Delaware corporate law.


  1. Drew Kelly said...

    No company is going to incorporate in North Dakota with these new requirements in place; the only reason the out-of-state "activists" were able to get the changes passed is that companies already weren't incorporating in North Dakota and, thus, the state didn't stand to lose any tax revenue.

  2. Anne Szkatulski said...

    I don't know, Drew, in this economy it would send a pretty strong message to shareholders if a company was confident enough in its governance practices to reincorporate in North Dakota. While I agree that any sort of mass exodus to ND is unlikely, I would be careful not to underestimate the significance of this legislation.