| Every country with a business segment has a number | | | | own system, the vast majority of businesses are |
| of standards or modes of operation for the | | | | incorporated in Delaware. Delaware has been the |
| businesses that are based or do business in the | | | | state of choice of the majority of corporations for a |
| country. These models or standards are known as | | | | number of reasons. The first is that its rules regarding |
| corporate governance. | | | | corporate governance have been written in broad |
| Corporate governance is the system and structure by | | | | vague terms that can all be interpreted in a variety of |
| which a corporation is run. It is, like a government for a | | | | ways. This makes it possible for a corporation to do |
| country, a system of allocating power among the | | | | mostly what it wants. |
| shareholders and those that run the company. In some | | | | Next, the corporate governance statutes of Delaware |
| countries, the employees of the corporation are given | | | | are focused on contracts. As part of this, there are |
| a seat at the table in determining how the company is | | | | very few rules in the list of constraints that cannot |
| run. | | | | actually be contracted away and avoided altogether, |
| One of the main purposes of corporate governance is | | | | provided there is a contract stating that. |
| to solve the agency problems. When a person is | | | | A third factor in Delaware's overwhelming popularity is |
| merely hired to run a company or corporation, he or | | | | its case law body. Delaware has a large quantity of |
| she may make increasingly risky decisions because it | | | | precedent and case law that can all be used to make |
| is not his or her money that is being invested or played | | | | decisions easier for a corporation. There is a lot of law |
| with by the company. As a result, the risky decisions | | | | that says what the rules actually mean and where the |
| may make the agent of the owners behave poorly. | | | | courts of Delaware stand in that regard. |
| Corporate governance puts a set of rules in place to | | | | Finally, Delaware has created a specialized judiciary |
| constrain the actors or agents of the company. In the | | | | system. The Chancery Court of Delaware, the special |
| United States, each state is allowed or able to make | | | | court, handles only corporate or business cases. This |
| its own rules for constraining the actions of managers | | | | means that when or if a corporation is sued, it can be |
| of companies. | | | | ensured of having a court that is well versed in the |
| While each of the states has been able to make its | | | | complexities of Delaware corporate governance law. |