Proper care, feeding of corporations
On a green slope outside Wilmington, a four-story, $100 million office project is rising to house the market leader in an unusual industry: the procreation, care, and maintenance of corporations.
On a green slope outside Wilmington, a four-story, $100 million office project is rising to house the market leader in an unusual industry: the procreation, care, and maintenance of corporations.
It's the new home of Corporation Service Co. With a staff of 2,000 worldwide, registering more than one-quarter of new companies in "America's Corporate Capital" each year, CSC is the largest of scores of firms that service "legal entities" there. Its closest rival is CT Corp. (the former Corporation Trust Co.), owned by global publishing giant Wolters Kluwer.
"Delaware takes this very seriously," Rodman Ward III, CSC's fourth-generation chief executive, told me after steelworkers lowered a ceremonial beam to top off his new headquarters Wednesday.
Though his family owns the firm, Ward spent 20 years in sales, management, and executive positions at such companies as FMC Corp., Speakman Co., and Snap-on Tools. His succession wasn't assured until the CSC board chose him after predecessor Bruce Winn stepped down to take a Mormon Church job. Ward's father, Rodman Ward Jr., who still practices law in Delaware at age 82, recused himself from the vote.
The firm traces its roots to 1899, soon after Delaware became one of the last states to allow anyone to start a company - a "fictional person" that shields its owners from personal liability - without needing legislators to pass a special law.
With its low fees, high secrecy, and business-friendly Court of Chancery, Delaware quickly became corporate legal home not just to the locally grown DuPont Co., but to many industrial giants such as the Big Three automakers. The state Division of Corporations counts more than a million companies - more than Delaware's human population.
With legislators embracing policies that exempt intellectual-property fees from state taxation, generation-skipping trusts that enable rich people to pass fortunes to distant heirs, and other ingenious products of the state's corporate bar, Delaware became an early model for global tax shelters and their role as economic development magnets.
A senior official of the Cayman Islands government once complained to me - when I compared the two jurisdictions in a story about the former Enron Corp.'s notorious subsidiaries - that it is "much, much easier" to start a corporation in Delaware than in that British territory.
Can the Delaware difference survive digital tax collectors and confidential-document disclosures?
"The Panama Papers case helps us," Ward tells me. "We don't want those kinds of business."
Like Delaware, CSC markets itself as an aid to sophisticated, legit corporations, not fly-by-night cheaters. "We have to tell people 'No' sometimes," Ward says. It seems to be easier for law enforcement there to "pierce the corporate veil," or force corporate agents to identify their clients, than in rival U.S. havens like Nevada or Wyoming.
Mossack Fonseca, the Panama law firm whose leaked documents implicate global government and business officials in asset-hiding schemes - and which, like Delaware, says it refuses blatantly illegal business - has offices in Nevada and Wyoming but none in Delaware, "though we do business there," Mossack spokeswoman Ana Heeren says.
Under Ward, CSC has bought and developed new services. "We manage domain names online for most of the Global 1000 corporations," he says. "In the tax business, the future is in automatic filing," which CSC has developed through its Springfield, Ill.-based corporate-tax unit.
"Our secret ingredient is our knowledge base," and the probity of Delaware's appointed judiciary, like [State Supreme Court] Chief Justice Leo Strine Jr. and Chancellor Andre Bouchard, Ward says. "We are a facilitator for large, sophisticated companies - as long as Delaware doesn't get complacent."
215-854-5194 @PhillyJoeD