Most states had Courts of Chancery in colonial times, but then combined them with other courts for cost reasons. Not Delaware. Established in 1792, the Delaware Court of Chancery has gained power over time. Its judges are some of the country’s most renowned experts in business law. The cities in Delaware where billion-dollar cases are decided are not exactly on the beaten path—I visited one branch of the Court of Chancery located in Georgetown, Delaware, a rural county with more chickens than people. “I think it’s a very remarkable thing that Delaware common law is really the national law of corporations for the most part,” one of the five Chancery judges, vice chancellor Sam Glasscock III, told me.

While the expertise of the judges may serve corporations and their directors well, Delaware’s dominance may not be good for the rest of the nation. Delaware law requires, and the Court of Chancery enforces, that a company’s directors must always be trying to maximize profits for shareholders, said Lawrence Hamermesh, a professor at Delaware Law School at Widener University. That means doing what’s best for the company’s share price, no matter how it affects employees or the environment. Many other states, by contrast, have statutes that allow a company to take into account employees or other stakeholders, in the event of a hostile takeover, for instance.

“One thing is absolutely clear: Delaware corporate law cares not at all about employees, communities, customers, or other stakeholders, except insofar as shareholders also gain,” the Boston College law professor Kent Greenfield wrote in Democracy: A Journal of Ideas earlier this year.

Where Fortune 500 Companies Are Incorporated

Greenfield and a small number of other scholars argue that the practice of allowing corporations to be governed by Delaware law is undemocratic. A state that is hardly affected by a company’s business (except to collect revenues from it) dictates rules governing how a company treats people in other states. “Power without accountability has no democratic legitimacy,” Greenfield writes. For Americans who work for companies incorporated in Delaware, this court may as well be in a whole other country—they essentially have no say over the laws that guide it.

Yet Delaware has no incentive to change its laws. If the state did that, companies would leave. “The law is effectively decided by the very people it is meant to regulate,” Daniel J. H. Greenwood, a professor at Hofstra Law, told me.

Is this the best way to govern corporations, some of the most powerful institutions in American life?

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Corporations, in their current form, are relatively new institutions. In much of the 18th and 19th centuries in America, anyone who wanted to form a corporation had to go to the state legislature, convince them that the corporation was in the public interest, and get a charter, Glasscock, who is also a Vanderbilt professor, told me. There was very little flexibility in what that company could do once it received that charter. If a company was incorporated as a gristmill, for instance, and wanted to also start selling ice from a nearby river, it would have to go to the legislature and get approval to add that purpose.