Over half of publicly traded companies on the NY Stock Exchange are incorporated in Delaware. Compared to the corporate laws of most states, Delaware’s make the state the ultimate corporate haven. How did that come about?
“During the interval between 1898 and 1899,” says Samuel Arsht in ‘A History of Delaware Corporate Law,’ “a small group of individuals perceived the possibilities of large revenues if new enterprises could be induced to incorporate in Delaware.”
Arsht is coy in naming names of the ‘small group’. In a footnote he suggests that these people were influenced by an unpublished, undated thesis, “The Development of the Delaware Corporation Law,” submitted by James L. Wolcott to the Harvard Graduate School of Business Administration. “As best as can be determined, no copy of this treatise still exists,” says Arsht.
“This group,” he goes on to say, “is generally credited with the drafting of the 1899 General Corporation Law. Their efforts were not altogether altruistic, however, since they planned to organize their own corporation, modeled upon similar ones operating in New Jersey, to engage in the business of incorporating companies under the new law, and representing them in Delaware.”
James L. Wolcott, of Dover, was Chancellor of Delaware’s Court of Chancery from 1892 to 1895. The chancellor is the lead justice, with 4 additional justices being vice-chancellors, in this court that deals with disputes involving internal affairs of corporations registered in Delaware.
Wolcott died mysteriously in March 1898, apparently in good health one day; dead of ‘apoplexy’ [stroke] the next. He was 56 years old. The General Corporation Law was voted into law a year later. Wolcott, his thesis unpublished and missing, received none of the credit.
James H. Hughes served as the Delaware Secretary of State from 1897 till 1901. His preceptor when he was studying law was none other than James L. Wolcott, before he became Chancellor. By 1899 Hughes “was one of the authors of, and largely instrumental in securing, the General Corporation Law,” reported the News Journal [Wilmington] in 1916.
So ‘small group’ member number one. The Steubenville [OH] Herald-Star was quick to name the rest in November 1900. Ex-governor William T. Watson, and W.H. Stayton were appointed president and vice president respectively of the Corporation Trust Company of Delaware. George Gray, an ex- US Senator, and William M. Ross, and ex-treasurer for the State of Delaware, were directors of the CTC.
And James H. Hughes, who was Secretary of State of Delaware at the time, served as counsel for the CTC. “This concern acts as agent, with Mr. Hughes as the immediate representative for more than 500 corporations doing business in different states, but chartered in Delaware,” said the Herald-Star.