New Jersey Corporate Chartermongering, 1875–1929

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.

Corporate governance and the expansion of the democratic franchise: beyond cross-country regressions

“…At that time, most states prohibited corporations from buying stock in other corporations, so the only way one firm could acquire another was for the acquired firms' shareholders to dissolve it and sell off its assets to the acquiring firm. New Jersey remedied this problem by allowing corporations to hold stock in other corporations and by creating a set of procedures that routinised corporate mergers (Grandy, 1989).…”

“…New Jersey's flush treasury in turn inspired a number of other states (most notably Delaware, but also West Virginia, Maryland, Maine, and New York) to enter the competition to attract corporate charters (Butler, 1985;Grandy, 1989). As more and more large firms took out charters in New Jersey, Delaware, and the other charter-mongering states, legislatures elsewhere reacted to the resulting loss of chartering revenue by liberalising their own general incorporation statutes, generating fears of a regulatory race to the bottom.…”

The Great Pyramids of America: A Revised History of US Business Groups, Corporate Ownership and Regulation, 1930-1950

“…Histories of America's rapid industrialization era, roughly between 1870 and 1904, reveal large business groups to be important (Chernow, 1990;DeLong, 1991 (Freedland, 1955;Nelson, 1959;Grandy, 1989). The New Jersey reform, soon emulated by Delaware, offered trusts possible reprieve from the Sherman Act if they reorganized as pyramids (Keller, 1979).…”

Corporate governance and incentive contracts: Historical evidence from a legal reform

“…Since then, the regulation of corporations in the US, which historically has been a state matter, has led to a more laissez-faire treatment of standards (Grandy, 1989). In Britain, free incorporation for all business sectors was finally introduced in 1856 (Taylor, 2006, p 135).…”