65 Tex. L. Rev. 469 (1986-1987)
Toward an Interest-GroupTheory of Delaware Corporate Law

handle is hein.journals/tlr65 and id is 503 raw text is: Texas Law Review
Volume 65,       Number 3,       February    1987
Toward an Interest-Group Theory of Delaware
Corporate Law
Jonathan R. Macey* and
Geoffrey P. Miller**
I. Introduction
This Article applies a model based on the interest-group theory of
regulation to explain and predict the legal rules that affect the affairs of
corporations chartered in Delaware. Two existing theories purport to
explain and predict these legal rules. The traditional, reformist theory
depicts Delaware as the winner of a deplorable race to the bottom' in
which competition among the states for franchise taxes has led Delaware
to produce a system of corporate law rules that permits corporate man-
* Associate Professor, Emory University School of Law; Visiting Associate Professor, Uni-
versity of Virginia School of Law. A.B., Harvard College, 1977; J.D., Yale Law School, 1982. The
John M. Olin Foundation provided financial assistance for this project. We would like to thank
Douglas G. Baird, Richard J. Bonnie, Henry Butler, William J. Carney, Frank Easterbrook, Daniel
R. Fischel, David D. Haddock, Richard Posner, Cass Sunstein, Robert E. Scott, and participants at
the Emory University Law and Economics Program, the Northwestern University School of Law
Faculty Workshop, and the University of Virginia Legal Studies Workshop for helpful comments.
We also thank Lisa Felderstein, Eileen Goldgeier, and Catherine Torgerson for valuable research
** Assistant Professor, University of Chicago School of Law. A.B., Princeton University,
1973; J.D., Columbia Law School, 1978.
1. The phrase race for the bottom was coined by Professor William Cary. See Cary, Feder-
alism and Corporate Law: Reflections Upon Delaware, 83 YALE L.J. 663, 666 (1974). It is derived
from the famous dissenting opinion of Justice Brandeis in Louis K. Liggett Co. v. Lee, 288 U.S. 517,
559 (1933), describing competition among states for corporate chartering revenues as a race not of
diligence but of laxity. Many others have become adherents of the traditional race-to-the-bottom
Folk, Corporation Statutes: 1959-1966, 1966 DUKE L.J. 875; Jennings, Federalization of Corporation
Law: Part Way or All the Way, 31 Bus. LAW. 991 (1976); Kaplan, Fiduciary Responsibility in the
Management of the Corporation, 31 Bus. LAW. 883 (1976); Young, Federal Corporate Law, Federal-
ism and the Federal Courts, 41 LAW & CONTEMP. PROBS., Summer 1977, at 146 (1977).
In modern parlance, the phrase is race to the bottom. See, e.g., Young, supra, at 151 (mis-
quoting Professor Cary). Whether termed a race to the bottom, id., a race of leniency, Kaplan,
supra, at 883, or a race for the bottom, Cary, supra, at 666, the concept is well recognized. This
Article adopts the phrase race to the bottom.


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