Academic

The North Dakota Publicly Traded Corporations Act

By Gordon Smith, Christine, Hurt, Vic Fleischer, Fred Tung, Lisa Fairfax, David Zaring

North Dakota adopted a new "shareholder friendly" corporations statute in 2007, which ginned up enough attention to attract the W$J. At last month's Notre Dame conference, Chief Justice Myron Steele of the Delaware Supreme Court mentioned the North Dakota statute, but he didn't seem worried, given that less than a handful of public companies use North Dakota as their state of incorporation.

Despite the big yawn from most corporations scholars, the new statute is attracting some attention from shareholders (prompted by John Chevedden). According to Michelle Leder, the number of companies with reincorporation proposals on the ballot has now reached 11: Southwest Airlines, Exxon Mobil, Lowes, Marsh & McLennan, Amgen, Sempra Energy, and Qwest Communications, Oshkosh Corp., Hain Celestial, Whole Foods, and PG&E. These are precatory proposals, so even if they passed, which is highly unlikely, the corporations would not be required to reincorporate.

Steve Bainbridge has has written, "North Dakota is doomed to failure" in the race for corporate charters:

Steve's paper is a contribution to a symposium sponsored by the North Dakota Law Review. For a description of the program, see here.

Steve is right that North Dakota will not overtake Delaware with this new statute, but how should we think about "success" and "failure" with regard to this new statute? While North Dakota won't reap any financial benefits without actual reincorporations, my view is that the statute is already a success with shareholder activists. They have managed to place the statute on the ballots of 11 major corporations with more to follow. The North Dakota venture seems designed as a symbolic gesture, rather than as a real threat to Delaware, and it seems to me that it has already served that function.

Full post as published by Conglomerate on April 22, 2009 (boomark / email).