When Leaving Your Home State Becomes a Duty

In the year 1863, at the height of the Civil War in the United States that must have seemed at the time like an irrecoverable national death, a former bookkeeper turned entrepreneur built an oil refinery in Cleveland’s up-and-coming industrial area in order to capitalize on the market for kerosene.

His name was John Rockefeller. And within twenty years he would control close to 90% of the oil in America. And his Standard Oil would become the largest and most powerful company ever seen.

The trouble was holding it together. Standard Oil was comprised of a complex network of subsidiaries, and you practically had to be an engineer just to understand the structure.

The problem was that, in most states, a corporation wasn’t even allowed to own another corporation.

That restriction sounds strange today, but back then the corporation was still a young, distrusted creature of the state, chartered to do one thing— for example, run a railroad or a bank— with privileges no ordinary person enjoyed.

Industrialization was minting a handful of staggeringly rich men— the titans a later generation would call “robber barons”— and the public watched them swallow up entire industries. People feared that letting one corporation own another corporation would stack company on company until the combination was beyond the reach of any single state.

So Rockefeller ran his empire through a workaround.

On January 2, 1882, he and eight fellow “trustees” signed the agreement creating the Standard Oil Trust, a small group of men who held the stock of some forty companies— refiners, pipelines, and distributors— and ran the whole thing as a single entity.

Great idea, but it was fragile. The trust had no real legal home, and the states Standard Oil operated in were beginning to notice.

In 1892, Ohio’s attorney general hauled the company before the state Supreme Court and successfully argued his case; the court agreed, and ruled that Standard Oil had no right to hand itself over to out-of-state trustees. Consequently, Rockefeller had to cut all ties with the trust. And it appeared on paper that the whole arrangement was broken up.

Rockefeller went shopping to find a friendly state government that would let him keep control. And back in the late 1800s, there was exactly one place to do that.

New Jersey, hungry for revenue, rewrote its corporation law in 1888 and 1889 to let state-chartered companies own as many subsidiary companies as they wanted.

Under this new New Jersey law, for the first time a giant could put its whole empire under one legal roof— for a modest fee to the state.

It was purpose-built for the kind of company Rockefeller had. So in 1899, he reincorporated the entire empire as the Standard Oil Company of New Jersey: a single holding company that owned everything.

Initially, other states felt betrayed.

In 1905 the muckraker Lincoln Steffens branded New Jersey a “Traitor State” for getting rich by selling friendly charters to the monopolies while other states were trying to rein in those same monopolies.

New Jersey had made itself the best place in America to be a big, successful company, and it was eating everyone else’s lunch.

That is, until New Jersey’s own governor, Woodrow Wilson, ruined it. In 1913, in his final weeks as governor before leaving for the White House, he pushed through seven antitrust laws aimed at the very corporations the state had courted for a generation.

(Of course Wilson was just warming up. That same year he’d help ruin the whole country with the Federal Reserve and the federal income tax.)

Companies shopping for a friendly charter then shifted to Delaware, which had quietly copied New Jersey’s law in 1899. New Jersey repealed Wilson’s anti-trust laws within a few years, but by then it was too late; Delaware had become the gold standard.

(Now Delaware has screwed it up and companies are redomiciling in Texas and Wyoming.)

Over the next century New Jersey became one of the most heavily taxed and regulated states in the country, and today it carries the highest corporate tax rate in the nation.

Yet Rockefeller’s old empire kept its New Jersey home through it all.

When the Supreme Court broke Standard Oil into 34 companies in 1911, the largest piece was Standard Oil of New Jersey— which became Exxon, then ExxonMobil. And they remaind incorporated in New Jersey for 127 years.

Until now.

Just a few weeks ago, ExxonMobil shareholders voted 71% to move the company’s legal home from New Jersey to Texas.

Perhaps the final straw came in 2022, when New Jersey’s attorney general sued the company, along with the other oil majors, for allegedly “deceiving” the public about climate change.

Apparently it’s a private company’s responsibility to preach the Green Gospel to the world. Courts disagreed, and a judge threw out the lawsuit in 2025.

But the message was unmistakable: the companies that produce the energy powering modern life were no longer welcome in New Jersey.

New Jersey was joining a pile-on that had been building for years. In 2021, a tiny activist fund called Engine No. 1, holding a tiny amount of Exxon’s stock, won three seats on its board. That hedge fund’s big idea was that the largest oil company on earth should pump less oil.

But Exxon refused to be run by people who wanted it to shrink. It beat the activists back— and its shareholders finished the job, voting the company out of New Jersey for good.

Granted, the move was almost ceremonial.

A company’s legal home and its actual headquarters aren’t the same thing: Exxon has been headquartered in Texas since 1989, while only its legal state of incorporation remained in New Jersey.

The vote didn’t move a single desk. It just made the paperwork match a reality that had been true for decades— and fully aligned the company with a state that treats a profitable energy producer as a value creator, not a defendant.

And that is actually the point.

Exxon didn’t bolt in a panic. It had watched New Jersey turn hostile for years. Slowly, over time, it weighed its options and prepared. The move wasn’t impulsive— it was calculated long in advance.

This is not disloyalty, any more than New Jersey was a “traitor” for once being the friendliest place in America to do business.

Both were rational moves dressed up as betrayal (just as ExxonMobil is now being blasted for leaving New Jersey). You cannot expect to keep a company, or a person, or their capital, in a place that punishes them for succeeding.

In fact, for Exxon it was more than rational; it was a fiduciary duty. A board is legally bound to do what’s best for its shareholders.

And as a father, I’d say a man owes his family the same kind of obligation to prepare— to study the world honestly and rationally, to line up options early, and to keep them ready, so that if the day ever comes, the groundwork is already done.

That is what having a Plan B actually means.

Source

Simon Black is an international investor, entrepreneur and permanent traveler. His daily letter is both educational and entertaining, and we suggest that those who want unbiased, actionable information about global opportunities sign up for Sovereign Man’s free, actionable newsletter at http://www.SovereignMan.com.

From Simon Black of SovereignMan.com

Source: https://www.schiffsovereign.com/trends/when-leaving-your-home-state-becomes-a-duty-155294/