For years, states have been busily engaged in what is commonly referred to as the “race to the bottom” with respect to corporation law, successively enacting laws which allow management a great deal of latitude in how corporations are run. Indeed, much of Delaware’s success as the home of most of the country’s publicly-traded companies is due to its position at the vanguard of management-friendly corporate law.
The flip side of that, according to many commenters (and shareholders), is that boards and shareholders have been weakened to the point of irrelevance. The current fiscal hangover has only drawn attention to the bargaining power of management, as companies with miserable balance sheets find themselves paying out millions in salary and bonuses to the people who got them there.
Now, North Dakota has decided to buck the trend by making its corporations more shareholder-friendly, with provisions allowing shareholders more of a say in ongoing operations, from executive pay to separation of directors and management. With only two publicly-traded companies in the entire state, North Dakota isn’t likely to become a center of corporate activity any time soon, but shareholder advocates hope it makes other jurisdictions rethink the race to the bottom.
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