Business Corporations

States before the Civil War had used the privilege of incorporation as a spur to economic activity. By 1860 most states had enacted general incorporation laws, even though the vast majority of businesses still preferred to organize under special charters. In the late nineteenth century, Democratic and Republican state legislators recognized that they could create a more appealing business environment by affording a high degree of freedom to corporations. West Virginia, Delaware, and New Jersey made themselves attractive by granting corporations broad powers. A revision in 1899 to the already liberal corporation law of New Jersey, where John D. Rockefeller's powerful Standard Oil Corporation had reincorporated after leaving Ohio, provided that "the conduct and condition of [a corporation's] business are treated as private and not public affairs." ¹¹ New Jersey law also made it possible for corporations chartered there to own stock in foreign corporations, which made the holding company legally viable. A Massachusetts legislator in 1903 captured the new spirit of corporation law by insisting that "the modern theory [held] that an ordinary business corporation should be allowed to do anything that an individual may do." ¹²

Corporation law changed because it had to. Many states, buffeted by demands from local producers, attempted before the Civil War to enforce antidrummer legislation aimed at out-of-state sales personnel. For example, in 1845 Missouri passed a statute that required agents of nonresident corporations to pay a license fee for the right to sell commodities "not the growth, produce, or manufacture of [ Missouri]." ¹³ After the Civil War, the Singer Sewing Machine Company, which had set up a nationwide sales force to distribute its new invention directly to the public, successfully fought the legislation in federal courts. Similar laws in other states either atrophied for lack of enforcement or were repealed, because they discouraged new business formation.

Municipal Corporations

The states also facilitated economic growth by easing the terms on which municipal corporations operated. Special charters gave way to general charters; municipal corporations gained greater independence and authority to manage their affairs. Swelling urban populations and the growing economic importance of cities as centers of manufacturing necessitated greater local autonomy. Under the traditional special charter provisions, legislatures had to recast and remodify the operating documents of the cities. Even general charters called for legislative oversight from time to time, denying municipalities flexibility in dealing with myriad problems, including often massive corruption in city administration. The quest for municipal reform was coupled to municipal self-rule, and both of these were critical to the economic health of the cities.

By the last quarter of the century, home rule appeared as the solution. The Missouri Constitution of 1875 was the first to include a home-rule provision. Under it, a municipality was given control over its local affairs in return for a pledge to abide by certain legislative provisions. The most important of these involved the borrowing

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power of the municipality. Home rule applied usually to the largest municipalities, although California in 1890 extended the privilege to communities of 3500 or more people. Home rule freed busy legislatures from the time-consuming task of overseeing the day-to-day operations of local government, while aiding municipalities in planning and administering local government.

Date: 2015-01-29; view: 643