E. Norman Veasey
As one of the “Founding Brothers, “James Madison promoted a vision of American federalism based on a national government with strong powers. But in order to navigate the competing views represented in the Constitutional Convention and to marshal the nascent Constitution through the ratification process, Madison became nimble in his view of the federal structure. The Constitution he drafted ultimately left blurred the line delineating federal and state powers, allowing Madison and his colleagues to win the support of both those who favored and those who feared a strong national government.
That blurry line, and the two centuries of judicial gloss on the contours of that line, have created a “Fog of Federalism” in which Congress and federal agencies frequently grope around hastily and randomly in response to any perceived crisis of the day. In recent years, the federalism tensions in the corporate governance arena have been particularly acute, as federal legislators and regulators have made incursions into the internal corporate affairs traditionally governed by state corporate law.
After a glimpse of the historical context that gave rise to American federalism, this article surveys recent ad hoc federalization of internal corporate affairs. It then suggests that it might be time for a respected institution such as the American Law Institute or others to undertake a comprehensive analysis of federal/state authority, both generally and in the corporate governance arena in particular.