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How Delaware Became the King of U.S. Corporate Charters

The last decade has been unkind to investors in some of America’s most prominent corporations, from Adelphia Communications Corp. to WorldCom Inc. Flawed governance lay at the root of many bankruptcies (and of many near-bankruptcies that necessitated government bailouts).

Is Delaware the problem? The tiny state has long chartered most of the nation’s large, nonbank corporations. And critics of corporate governance argue that Delaware won a “race to the bottom,” enticing out-of-state companies to charter there by offering the laxest regulations. Defenders counter that the state won a “race to the top” by maintaining the best system of governance available.