One of the most enduring debates in corporate law is whether the United States system of corporate law federalism leads to a “race to the bottom” or a “race to the top.” [1] Race to the bottom theorists argue that because insiders of companies must initiate incorporation decisions, jurisdictions compete to provide legal rules that favor insiders, allowing them to extract private benefits at the expense of the corporation or its shareholders. Race to the top theorists argue that market constraints prevent insiders from favoring such jurisdictions, and that jurisdictions actually compete to provide efficient legal rules that enhance shareholder value. Although the dichotomous framing as a “race” to the “top” or “bottom” is a bit of an oversimplification of a more nuanced debate, that version of the debate has dominated discussions of corporate law for decades.

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