Reply #8: Making a Federal Case of Chartering [View All]

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Making a Federal Case of Chartering
By Charlie Cray

The recognition of the limits that Delaware's corporate laws place on the public's ability to regulate them in the public interest has periodically caused corporate scholars and activists to revisit the notion that corporations should be chartered at the federal instead of the state level.

The proposal last received serious consideration in 1975, in the post-Watergate reform era, when three pioneers in the corporate accountability movement--Ralph Nader, Mark Green and Joel Seligman--reviewed the pros and cons of federal chartering in their book, Taming the Giant Corporation.

Boston College Law School Professor Kent Greenfield thinks federal chartering needs to be given serious consideration once again as the recent corporate crime wave provokes renewed debate over corporate reforms.

"We have made choices with regards to other frameworks of regulation where we don't want states or companies to compete, for example with regard to civil rights and healthy workplaces," he explains. "With federal chartering, every corporation would be on an equal footing. States would not be competing with each other on grounds that we as a society don't want them to compete on."

Proponents say federal chartering would establish a minimum standard of corporate accountability, and make it possible to bring back some of the other limits on corporations that were once written into charters at the state level. A federal chartering system could be used, for example, to restrict corporations from specific forms of campaign finance or from incorporating in offshore tax havens. It could also be used to require corporations to serve some public purpose.

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