Annual Francis G. Pileggi Distinguished Lecture in Law
Published: October 5, 2007
The Pileggi Lecture series is an annual event held at the Widener University School of Law and funded through the generosity of Frank G. Pileggi, Esquire. Mr. Pileggi has been a friend and benefactor of the law school for many years, and the annual lecture has taken on a special significance not only to the school, but also for the Delaware bench and bar. The lecture is organized and administered by The Delaware Journal of Corporate Law. Normally the lectures are given in the month of October. Our past speakers are listed below.

Each year the Pileggi speaker presents two lectures. The first presentation is for the benefit of the Delaware bench and bar. It has traditionally been held at a breakfast gathering in downtown Wilmington. Focusing on corporate law topics, the speech attracts many members of the Delaware corporate bar and normally generates discussion before and after the lecture itself. Later that morning, the lecture is again presented for the students of Widener University School of Law. Because of its diversified corporate program, the Widener student body looks forward to this presentation with eagerness each year. 

The Delaware Journal of Corporate Law

Friday, September 28, 2007, 8:00 a.m. Hotel du Pont, Wilmington, Delaware

SPEAKER:

MARK J. ROE, David Berg Professor of Corporate Law, Harvard Law School

TOPIC:

Does Delaware Compete?

ABOUT THE SPEAKER

Professor Roe joined the faculty at Harvard Law School in 1999 as the Olin Visiting Professor of Law and in 2001 became the David Berg Professor of Corporate Law.

Before joining Harvard, he was the Milton Handler Professor of Business Regulation at Columbia University School of Law, which he joined in 1988. He had previously taught at the University of Pennsylvania School of Law (1986-1988) and Rutgers University School of Law (1980-1986). After graduating from Harvard Law School in 1975, he worked with the Federal Reserve System and practiced with Cahill Gordon & Reindel, in New York, New York.

Professor Roe has taught courses in Antitrust, Bankruptcy and Corporate Reorganization, Corporate Finance, Corporate Governance, Corporations, and Financial Institutions. He is a Fellow of the European Corporate Governance Institute (ECGI), Brussels, Belgium.

ABSTRACT

After a century of academic thinking that states compete for corporate chartering revenues, a revisionist perspective has emerged in which states do not compete for chartering revenues, leaving Delaware alone in the interstate charter market. Firms either stay incorporated in their home state or reincorporate to Delaware, but rarely go elsewhere. Delaware has a monopoly, one that goes unchallenged.

I here use industrial organization concepts to better illuminate this competitive setting. Even if no other state challenges Delaware for the reincorporation business, it still must operate in three key competitive arenas. First, it must attract firms to reincorporate away from their home state. The dynamism of American business interacts with the corporate chartering structure to create a broad avenue of chartering competition, even if no state actively seeks to take chartering revenue away from Delaware. Second, a once-and-for-all exit of corporate America to another state or an awakening of a dormant competitor are not impossible. It's a slim risk, but it would be catastrophic for Delaware's budget and I outline how what might motivate one or the other. The one instance we have of serious state-to-state competition--New Jersey's demise as the corporate capital at the beginning of the twentieth century--was just that: the rise of a new competitor, rapid exit from the old winner, the fast emergence of a new winner, not long-term hand-to-hand combat. Similarly, and third, Delaware has reason to fear federalization of core elements of its corporate law even if no other state actively competes for charters. A reputation for bad decision making (or bad decision makers) could impel Congress to displace Delaware, in whole or in part, perhaps as an excuse during an economic downturn. While the odds of full displacement are quite low, Sarbanes-Oxley shows us that the odds of substantial partial displacement are not.

These ideas have parallels in the industrial organization, antitrust literature on contestable markets: a single producer can dominate a market, but, depending on the nature of its technology and its market, it could lose its market share overnight or suddenly face a new entrant if the incumbent missteps badly. Hence, it has incentives to act like a competitor on some issues, or knows it must provide a package that overall is attractive to its primary customers. Delaware could face this kind of catastrophic loss in two dimensions: the traditional horizontal one of a competing state, and the vertical one of federal displacement.