Dissertation Research: The Political Transformation of Corporate Rights: Business Incorporation Law in American State and National Politics, 1885-1914

University Of Texas At Austin, Austin TX

Investigators

Abstract

Recent corporate scandals have led to calls for reform with administrative oversight. In order to assess possibilities for successful reform today, this project seeks to explain variations in legislative strategy in granting or restricting corporate charter rights in the past. Corporations in America rely on state laws for their existence. Up to the late nineteenth century states carefully restricted corporations from merging, forming holding companies, or extending their range of business. Beginning in 1888 in New Jersey these laws were relaxed, enabling the legal viability of the large corporation. Some legislatures granted easy charter law in order to attract capital, whereas others resisted this trend. The Federal Government attempted regulation with the Sherman Act, but then largely left the field after narrow construction of that act by the Supreme Court in the E.C. Knight case. The authors ask how legislators, operating in an era of laissez faire, mediated the tension between corporate pressures for easy charters and democratic impulses to maintain popular control over the economy. Was the large corporation inevitable? What are the possibilities for popular resistance to concentration of economic power? This project to argues that federalism combined with property representation can explain corporate development. Walter Dean Burnham (1965) has noted that accumulation in initial stages of mass industrialization in any political system requires some form of political insulation from mass pressures; Richard Bensel (2000) argues that the Supreme Court served this role in regards to the creation of a national market. Although state legislatures are considered to be less insulated from democratic pressures, the corporate transformation required positive action from this source. Contemporary explanations of economic forms of development have centered on arguments of power or of efficiency. Efficiency arguments, often based implicitly on Alfred D. Chandler's (1977) "Visible Hand" of middle level management, are underdetermining: they do not explain why some states were able to resist these pressures. Arguments that power explains social construction of corporate organization are overdetermining: they rely on a tautology that winners won because they had power. This project advances our knowledge of the rise of the corporation by an examination of political and economic variables affecting the development of charter law in New York, Pennsylvania, New Jersey and at the national level from 1885-1914. A focus on the northeast emphasizes competitive dynamics of American federalism. A focus on national politics emphasizes the vertical aspect of nation and state relations. The researchers gather documents from state archives in order to discover how actors justified incorporation law. Did actors see the corporation as natural? Were their arguments partisan, ideological, or related to economics? Did they seek to compete with other states? Second, votes for charter liberalization in legislatures will be tested for statistical relationships to a variety of census and industrial data, including degree of economic development, partisanship, and state sectionalism. Finally, there is an analysis of state partisan and political structures. Federalism may be divided into issues of state subordination and of state competition. Political studies of the Progressive Era typically either ignore federalism, or only pay attention to the first of these. A gap thus remains to be filled on the impact of state dynamics on economic development. This examination of the origins of corporate charters promises to shed light on sources of abuse of the corporation in America, and the range of legitimate reform solutions. It thus has the broader social value of enhancing knowledge on sources of corporate abuse.