Hostname: page-component-78c5997874-4rdpn Total loading time: 0 Render date: 2024-11-17T18:18:21.476Z Has data issue: false hasContentIssue false
  • English
  • Français

New Jersey Corporate Chartermongering, 1875–1929

Published online by Cambridge University Press:  03 March 2009

Christopher Grandy
Christopher Grandy
Affiliation:
Assistant Professor of Economics, Barnard College, 3009 Broadway, New York, NY 10027.
Get access Rights & Permissions [Opens in a new window]

Abstract

New Jersey played a dominant role in the merger wave at the turn of the century. The state facilitated the rise of large firms by liberalizing its corporation law in exchange for incorporation fees and franchise taxes. This article suggests that chartermongering emerged from the U.S. federal political system and the economic structure of the state. Delaware became the preferred state of incorporation as New Jersey's economic structure changed.

Type
Articles
Information
The Journal of Economic History , Volume 49 , Issue 3 , September 1989 , pp. 677 - 692
Copyright
Copyright © The Economic History Association 1989

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

l For the classic statement objecting to state incorporation as practiced by Delaware, see Cary, William, “Federalism and Corporate Law: Reflections Upon Delaware,” Yale Law Journal, 83 (03 1974), pp. 663–705.CrossRefGoogle Scholar The view that competition between states for corporation charters is efficient is represented by Fischel, Daniel, “The ‘Race to the Bottom’ Revisited: Reflections on Recent Developments in Delaware's Corporation Law,” Northwestern Law Review, 76 (02 1982), pp. 913–45.Google Scholar A useful summary of the debate and an attempt to resolve some of the issues appear in Romano, Roberta, “Law as a Product: Some Pieces of the Incorporation Puzzle,” Journal of Law, Economics, and Organization, 1 (Fall 1985), pp. 225–67.Google Scholar

2 Lamoreaux, Naomi R., The Great Merger Movement in American Business, 1895–1904 (Cambridge, 1985), p. 2.CrossRefGoogle Scholar

3 Nelson, Ralph L., Merger Movements in American Industry 1895–1956 (Princeton, 1959), and Lamoreaux, Great Merger Movement, provide economic analyses of the movement. Some contemporary studies allude to the political economy of the merger wave.Google Scholar See Jenks, Jeremiah and Clark, Walter E., The Trust Problems (Garden City, NY, 1929);Google Scholar and Seager, Henry R. and Gulick, Charles A., Trust and Corporation Problems (New York, 1929).Google Scholar

4 Nelson, Merger Movements, p. 67.Google Scholar

5 The seven were: Amalgamated Copper, American Smelting and Refining, American Sugar Refining, Consolidated Tobacco, International Mercantile Marine, Standard Oil, and U.S. Steel. See Moody, John, The Truth About Trusts (New York, 1904), pp. 453–69.Google Scholar

6 As with many states in this period, New Jersey divided its budget into several funds. The State Fund was the largest and most general of these and the repository of all nondedicated receipts. Since the State Fund was the relevant fund for most discretionary spending, I measure New Jersey's fiscal experience from this source.Google Scholar

7 For an analysis of New Jersey's relationship with the railroads, see Christopher Grandy, “Can Government Be Trusted to Keep Its Part of a Social Contract? New Jersey and the Railroads, 1825–1888,” Journal of Law, Economics, and Organization (forthcoming, 1989).Google Scholar

8 New Jersey Session Laws, Apr. 10, 1884, chap. 101, p. 142.Google Scholar

9 Central Railroad Co. v. State Board of Assessors, 48 New Jersey Law Reports (1886), pp. 2, 146.Google Scholar

10 New Jersey Session Laws, Apr. 18, 1884, chap. 159, p. 232.Google Scholar

11 See Steffens, Lincoln, “New Jersey: A Traitor State,” McClure's Magazine, 25 (05 1905), pp. 42–43;Google Scholar and Stoke, Harold W., “Economic Influences Upon the Corporation Laws of New Jersey,” Journal of Political Economy, 38 (10 1930), pp. 570–71.CrossRefGoogle Scholar

12 See New Jersey Department of State, “Annual Reports of The Corporation Trust Company of New Jersey” (Trenton, 1892), file X-14890.Google Scholar

13 An appendix presenting a compilation of New Jersey corporate legislation that played a role in the chartermongering phenomenon is available from the author upon request.Google Scholar

14 New Jersey Constitution (1875), article 4, section 7. See also “An Act Concerning Corporations,” New Jersey Session Laws, Apr. 7, 1875, p. 174. For a general discussion of the demise of special incorporation charters,Google Scholar see Butler, Henry N., “Nineteenth-Century Jurisdictional Competition in the Granting of Corporate Privileges,” Journal of Legal Studies, 14 (01 1985).Google Scholar

15 New Jersey Session Laws, Apr. 17, 1888, chap. 294, p. 441 (merger); and Apr. 17, 1888, chap. 295, p. 445 (intercorporate stockholdings).Google Scholar

16 New Jersey Session Laws, Mar. 8, 1893. chap. 67. p. 121 (horizontal merger); and Mar. 14, 1893, chap. 171, p. 301 (general intercorporate holding).Google Scholar

17 New Jersey Session Laws, May 9, 1889, chap. 265, p.412; and Mar. 10, 1892, chap. 56, p. 90.Google Scholar

18 New Jersey Session Laws, May 15, 1894, chap. 228, p. 346; and May 17, 1894, chap. 300, p. 446.Google Scholar

19 New Jersey Governor, “Annual Message,” New Jersey Legislative Documents (Trenton, 1896), pp. 4–5.Google Scholar

20 New Jersey Session Laws, Mar. 31, 1897, chap. 69, p. 147 (railroad revenue diversion); and New Jersey Governor, “Annual Message,” New Jersey Legislative Documents (Trenton, 1905), pp. 13–14.Google Scholar

21 New Jersey Session Laws, May 15, 1894, chap. 231, p. 352; May 11, 1897, chap. 191, p. 374; Apr. 1, 1903, chap. 97, p. 145; Apr. 18, 1905, chap. 173, p. 325 (roads and highways); Mar 27, 1888, chap. 207, p. 267 (feeble-minded women); Apr. 27, 1911, chap. 229, p. 504 (idiotic males); Mar. 26, 1898, chap. 113, p. 185 (epileptics); and Apr. 3, 1902, chap. 126, p. 395 (tuberculosis).Google Scholar

22 New Jersey State Legislature, Senate, “Report and Record of the Proceedings of the Select Committee of the Senate of New Jersey to Inquire into the Charges of Extravagance in Furnishing the State House, and certain other Charges touching the Conduct of Public Officials, etc.” (Trenton, 1895), pp. vii–xiii.Google Scholar

23 New Jersey State Legislature, House Investigation Committee, “Majority and Minority Reports of the House Investigation Committee to Inquire into and Investigate the Subject of State Expenditures” (Trenton, 1907), p. 3.Google Scholar

24 Ibid., p. 6.

25 Steffens, “The Traitor State,” p. 46–47;Google Scholar and Meade, Edward S., Trust Finance (New York, 1903), p. 38.Google Scholar

26 See McCurdy, Charles W., “The Knight Sugar Decision of 1895 and the Modernization of American Corporation Law, 1869–1903,” Business History Review, 53 (Autumn 1979), pp. 338–40.CrossRefGoogle Scholar

27 Larcom, Russell Carpenter, The De1aware Corporation (Baltimore, 1937), pp. 14–15.Google Scholar

28 Ibid., pp. 25–26.

29 Romano, “Law as Product,” p. 235;Google Scholar and Williamson, Oliver, “Credible Commitments: Using Hostages to Support Exchange,” American Economic Review, 73 (09 1983), pp. 519–40.Google Scholar

30 Grandy, Christopher, “The Economics of Multiple Governments: New Jersey Corporate Chartermongering, 1875–1929” (Ph.D. diss., University of California at Berkeley, 1987), chap. 4.Google Scholar

31 U.S. Industrial Commission, Final Report, 19 (Washington, DC, 1902), pp. 642–43.Google Scholar

32 Noble, Ransom E. Jr, New Jersey Progressivism before Wilson (Princeton, 1946).Google Scholar For contemporary perspectives on the antitrust movement within New Jersey, see Hosford, Hester E., The Forerunners of Woodrow Wilson (East Orange, 1914);Google Scholar and Sackett, William E., Modern Battles of Trenton, vol. 2 (New York, 1914).Google Scholar

33 A description of New Jersey regulatory legislation after the turn of the century appears in Grandy, “New Jersey Chartermongering,” pp. 170–207.Google Scholar

34 New Jersey Governor, “Inaugural Address,” New Jersey Legislative Documents (Trenton, 1905), p. 6.Google Scholar

35 Stoke, “Economic Influences,” p. 577.Google Scholar

36 Ideally, one would want to examine the ratio of incorporations to firms operating within the state for the same class of corporations, adjusting for the extent of New Jersey operations and for size. Data limitations compel using the cruder measure exhibited in Figure 4.Google Scholar

37 New Jersey Governor “Inaugural Address,” New Jersey Legislative Documents (Trenton, 1911), p. 6.Google Scholar

38 New Jersey Session Laws, Feb. 19, 1913, chaps. 13–19, pp. 25–33.Google Scholar

39 New Jersey Governor, “Inaugural Address,” New Jersey Legislative Documents (Trenton, 1917), p. 25.Google Scholar

40 U.S. Department of Commerce, Bureau of the Census, Population 1930 (Washington, DC, 1931), vol. 1, p. 10.Google Scholar

41 New Jersey Governor, “Annual Message,” New Jersey Legislative Documents (Trenton, 1918), p. 5.Google Scholar

42 New Jersey Comptroller, “Annual Report,” New Jersey Legislative Documents (Trenton, 1907), p. 2.Google Scholar

43 New Jersey Session Laws, Apr. 5, 1906, chap. 82. p. 121; May 18, 1906, chap. 280, p. 572 (railroad); and Apr. 20, 1909, chap. 228, p. 325 (inheritance).Google Scholar

44 New Jersey Governor, “Annual Message,” New Jersey General Assembly Minutes (Trenton, 1925), p. 17.Google Scholar

45 New Jersey Session Laws, Mar. 11, 1922, chap. 215, p. 374.Google Scholar

46 I am currently at work on an examination of the failed movement for national incorporation laws in the early twentieth century.Google Scholar