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New Jersey Corporate Chartermongering, 1875–1929

Published online by Cambridge University Press:  03 March 2009

Christopher Grandy
Christopher Grandy
Affiliation:
Assistant Professor of Economics, Barnard College, 3009 Broadway, New York, NY 10027.
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Abstract

New Jersey played a dominant role in the merger wave at the turn of the century. The state facilitated the rise of large firms by liberalizing its corporation law in exchange for incorporation fees and franchise taxes. This article suggests that chartermongering emerged from the U.S. federal political system and the economic structure of the state. Delaware became the preferred state of incorporation as New Jersey's economic structure changed.

Type
Articles
Information
The Journal of Economic History , Volume 49 , Issue 3 , September 1989 , pp. 677 - 692
Copyright
Copyright © The Economic History Association 1989

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References

l For the classic statement objecting to state incorporation as practiced by Delaware, see Cary, William, “Federalism and Corporate Law: Reflections Upon Delaware,” Yale Law Journal, 83 (03 1974), pp. 663–705.CrossRefGoogle Scholar The view that competition between states for corporation charters is efficient is represented by Fischel, Daniel, “The ‘Race to the Bottom’ Revisited: Reflections on Recent Developments in Delaware's Corporation Law,” Northwestern Law Review, 76 (02 1982), pp. 913–45.Google Scholar A useful summary of the debate and an attempt to resolve some of the issues appear in Romano, Roberta, “Law as a Product: Some Pieces of the Incorporation Puzzle,” Journal of Law, Economics, and Organization, 1 (Fall 1985), pp. 225–67.Google Scholar

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12 See New Jersey Department of State, “Annual Reports of The Corporation Trust Company of New Jersey” (Trenton, 1892), file X-14890.Google Scholar

13 An appendix presenting a compilation of New Jersey corporate legislation that played a role in the chartermongering phenomenon is available from the author upon request.Google Scholar

14 New Jersey Constitution (1875), article 4, section 7. See also “An Act Concerning Corporations,” New Jersey Session Laws, Apr. 7, 1875, p. 174. For a general discussion of the demise of special incorporation charters,Google Scholar see Butler, Henry N., “Nineteenth-Century Jurisdictional Competition in the Granting of Corporate Privileges,” Journal of Legal Studies, 14 (01 1985).Google Scholar

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29 Romano, “Law as Product,” p. 235;Google Scholar and Williamson, Oliver, “Credible Commitments: Using Hostages to Support Exchange,” American Economic Review, 73 (09 1983), pp. 519–40.Google Scholar

30 Grandy, Christopher, “The Economics of Multiple Governments: New Jersey Corporate Chartermongering, 1875–1929” (Ph.D. diss., University of California at Berkeley, 1987), chap. 4.Google Scholar

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33 A description of New Jersey regulatory legislation after the turn of the century appears in Grandy, “New Jersey Chartermongering,” pp. 170–207.Google Scholar

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36 Ideally, one would want to examine the ratio of incorporations to firms operating within the state for the same class of corporations, adjusting for the extent of New Jersey operations and for size. Data limitations compel using the cruder measure exhibited in Figure 4.Google Scholar

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46 I am currently at work on an examination of the failed movement for national incorporation laws in the early twentieth century.Google Scholar