Democracy and Delaware: The Puzzle of Corporate Law

Abstract

Corporate law does not conform to ordinary democratic norms: unlike human citizens, corporations may choose the law that governs their most fundamental acts of self-governance. Most major American corporations chose the law of Delaware, with the result that the Delaware courts and legislature, under heavy influence of the Delaware and national corporate bar, organized in to professional organizations, and of the market pressure of corporate managerial decisions to reincorporate (or threaten to reincorporate), determines much of the corporate law in America. This system seems on its face to violate the most fundamental principle of popular sovereignty - all non-Delaware citizens of the United States are excluded from even formal participation in the process of determining American corporate law, and even Delaware citizens are reduced to a largely for malistic ratification role of results coerced, to a large extent, by the market for corporate control. Corporate law scholars have devoted many pages to debating whether the surrender of corporate law to a market for corporate reincorporation generates substantively good or bad results, but there has been virtually no discussion of whether this process can be squared with the American commitment to self-governance. This Article aims to address that latter issue - with its obvious implications for other areas in which we, consciously or unconsciously, chose to subordinate politics to markets or vice versa.