International Regulatory Competition and Coordination: Perspectives on Economic Regulation in Europe and the United States

By William W. Bratton; Joseph McCahery et al. | Go to book overview

4
Explaining American Exceptionalism in Corporate Law1

ROBERTA ROMANO

State competition for corporate charters is unique to the United States of America (USA). This chapter examines American exceptionalism in corporate law by contrasting the legal rules, institutions, and corporate ownership patterns of other federal systems, Canada and the European Community (EC), that impede a state or nation-state's ability to exercise effective jurisdiction over firms, thereby preventing corporate charter competition. Although Canada has a federal system--firms can incorporate in one of ten provinces or under the Canada Business Corporations Act (CBCA) as a national corporation--an active market for corporate charters has not developed. Similarly, the Treaty of Rome envisions a federal system for the EC, with its integrated economic market, but it has not fostered corporate charter competition among EC members, despite concerns by corporate law commentators that it would.

The chapter concludes by considering a theme in the popular press with implications for corporate law, the declining rate of growth of USA productivity relative to other nations. The best available evidence on productivity growth rates indicates that the concern is, in fact, misconceived. More important, the relative decline in the growth rate of USA productivity over the past several decades cannot readily be ascribed to differences in corporate governance régimes.


I. INTRODUCTION: THE PRODUCTION OF AMERICAN CORPORATE LAW

In the USA, corporate law, which concerns the relation between a firm's shareholders and managers, is largely a matter for the states. Firms choose their state of incorporation, a statutory domicile that is independent of physical presence, and can be changed with shareholder approval. One state, Delaware, has dominated firms' domicile choice for the past seventy-five years. Approximately one-half of the largest industrial firms are

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1
This essay is adapted from Romano ( 1993).

-127-

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