Delaware
Delaware plays fair: Corporate law amendments will protect investors | Opinion
4-minute read
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The best umpires in baseball are those you don’t notice. The same could be said of the game of business. In that arena, the state of Delaware has acted as the nation’s umpire for 125 years, providing a playing field of corporate laws so clearly marked, consistent and fair that businesses can focus on performing for the benefit of their shareholders, their customers and our country. These very features have allowed Delaware to go unnoticed, while they led eight out of 10 newly public companies and more than two thirds of the Fortune 500 to choose to incorporate here.
But suddenly, Delaware is attracting attention. This week, lawmakers proposed changes to our General Corporation Law, placing the business world’s focus squarely on the umpires. In response, as predictably as fans aggrieved by a call, some commentators have questioned the motivation behind the bill. They intimate that it wrongly serves the interests of specific political agendas, companies or individuals. Most often they point fingers toward Elon Musk, whose pay package was famously invalidated in a Delaware court.
We can say this, as individuals who responded to the call from Delaware’s governor and legislative leadership for assistance drafting the proposed amendments that represent an attempt to reestablish long-accepted rules once familiar to the Delaware courts and are nothing less than a sincere effort by public officials to protect the interests of their constituents.
Two aspects of the legislative process have drawn particular attention: the participation of private citizens in drafting the bill, and the speed with which it was introduced. These are reasons for praise, not suspicion. Delaware Gov. Matt Meyer and bi-partisan lawmakers sought our help crafting legislation to restore confidence in Delaware as a trusted venue for incorporation. They turned primarily to us and Leo Strine, Jr. — a former chief justice of the Delaware Supreme Court — for our understanding of the nuances of Delaware law. They certainly did not seek us out for the cohesiveness of our political views (we include one Republican, two Democrats, and a former president of the ACLU in Delaware), nor our loyalty to Musk. Although we have different political perspectives on many things, we have a long, shared commitment to the integrity of Delaware corporate law.
The swiftness with which the state Senate introduced the bill is also laudable. Meyer, to his credit, responded within weeks of being in office to the growing crisis. Multiple companies, including Meta, had begun to consider alternatives to Delaware as their state of incorporation. We understand other companies are also considering whether to vote on the question at their upcoming annual meetings, with proxy season beginning next month for many public companies. The time to address concerns about Delaware’s continued value as a venue for incorporation is before play starts, not after the game has begun.
The proposed amendments answer those concerns, and their substance confirms that they were not drafted to serve any one company or individual. They respond to a trend in Delaware court decisions that has evolved rapidly in recent years, where changes to judge-made law have made it easier for shareholders to challenge company actions in court, often by expanding critical concepts beyond earlier boundaries. Take, for instance, the conflicts of interest among board members that trigger powerful shareholder derivative lawsuits. Previously, courts found such conflicts only when board members had a financial stake in a disputed transaction or material entanglements with someone who did; now they perceive conflicts over mere social ties between individuals, using a standard so loose that it becomes relevant whether one director was a guest at another’s family wedding or in pictures on social media.
Similarly, courts had long given heightened scrutiny to transactions between companies and their “controlling shareholders.” But that term has expanded from its natural meaning — someone who owns half or nearly half of a company’s stock — to include “superstar CEOs” who supposedly control investors through sheer force of personality.
These decisions have created an unknowable strike zone when companies try to anticipate lawsuits. Worse, in using nebulous standards, they have made it impossible for corporations to know if they are complying with Delaware law. When an advantageous deal comes before them, corporations do not know if they should swing or not.
Close observers have watched and worried over this trend for years. In fact, two important articles, one of which goes back to the turn of the century and was co-authored by the late Chancellor William Allen, Strine and then-Vice Chancellor Jack Jacobs, and another co-authored by Strine, Jacobs and Hamermesh, identified the principles underlying the current legislation as reflecting Delaware’s traditional approach to corporate law. The articles, which both predate Musk’s loss on his compensation package, addressed ways in which those traditions were under stress. The current bill reflects a good faith attempt to ensure that Delaware corporate law, as was understood and applied for many years, can be relied upon. It is designed to reaffirm what it was until recent years and to address departures from that tradition that have caused legitimate concern among companies in all industries and regions.
The amendments offer clearer, brighter-line definitions of key terms like “disinterested director” and “controlling shareholder.” They also establish procedures that offer safe harbors for companies to use in transacting with controlling shareholders or where members of the board have conflicts, so they can do the right thing and be confident that, if they do, they won’t be sued. Another provision places reasonable limits on a shareholder’s right to examine a company’s “books and records,” which has inflated over time to cover emails, text messages and other material that goes beyond that term’s normal and intended meaning.
These details may not excite anyone not steeped in corporate law. Yet non-specialists who only see the rules being changed deserve an explanation, so that the quick answer — it’s all Musk — can be seen for what it is. Assisting the Legislature and the governor with statutory drafting has been an inspiring exercise in sound government — one joined by lawmakers and citizens with varied economic and political interests, united only in our desire to serve Delaware by ensuring that investor and manager interests are fairly balanced. That exercise will serve its purpose if, after enactment, long-standing principles of Delaware law that maintain high levels of protection for shareholders, in a way that also gives corporations needed clarity, are restored.
As a result, the playing surface in Delaware’s business arena will be more definitively lined and fairly balanced than it has been in years. With the proposed amendments, Delaware as umpire has yelled “play ball!” After that, it can again recede from view, a comforting and reliable backdrop to the competition that is rightly at the heart of the game.
William Chandler III is a partner at Wilson Sonsini Goodrich & Rosati and a former chancellor on the Delaware Court of Chancery. Lawrence Hamermesh is a professor emeritus at the Widener University Delaware School of Law.
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Delaware child care has been a fixture of this budget season.
Gov. Matt Meyer pitched some $50 million toward early education in his proposed budget for next fiscal year. It included an $11.3 million federal grant to bolster systems, $8 million to pilot statewide hubs – and the largest piece in $25.3 million to boost Purchase of Care, or state-subsidized child care.
That line item proved a major talking point during a public health budget hearing in Legislative Hall on Monday, March 2, while connecting to broader visions for early childhood reform.
As it turns out, Delaware’s subsidized child care program in particular was already due to shoulder federal requirement changes dating back to the Biden administration. And those changes, effective April 1, could cost the state about $25 million to keep up.
That morning, lawmakers were briefed by the Delaware Department of Health and Social Services for more than three hours, before well over 50 public comments stretched late into the afternoon. Topics ranged from at-home care and centers supporting Delawareans with disabilities, to the ongoing strain of child care.
New Health Secretary Christen Linke Young said the Trump administration might drop these coming changes to pay providers based on child enrollment, before they’re effective.
And for Delaware, she would agree with that call.
Boosting Delaware child care, one way or the other
Purchase of Care is one program helping lower-income Delaware families – or those making below 200% of the federal poverty level, as of yet – afford care at various child care outfits across the state. Delaware pays those providers directly, around the end of the month, based on how many days these children attended.
Federal requirements could force states to change that.
Delaware would have to pay providers at the top of the month, based on their overall student enrollment, regardless of attendance. Young told lawmakers that would cost around $25 million each year, if requirements are not rescinded by the Trump administration.
It would mean more money for providers, she said, though also harsher policy needed around attendance expectations.
“If the federal government does change the rules, we need that full amount to shift to enrollment,” she said, addressing the Joint Finance Committee dais. “If not, our intention is to use it for increased eligibility.”
In other words, the administration hopes to invest about $25 million into this bucket either way. However, the health secretary said paying based on enrollment isn’t her recommendation.
Young told lawmakers the administration would rather see that amount infused into the program to expand eligibility to 250% of the federal poverty level. So, picture a family of three making roughly $80,000 would make the cut. No changes were proposed to co-payments or special education tiers.
This was met with mixed reviews.
“I’m sure some folks are going to have something to say about that,” cautioned Sen. Trey Paradee, committee chair.
For her part, Jamie Schneider was already editing her remarks in real time.
“Comments today suggested providers want to keep attendance-based payments instead of moving to enrollment-based payments,” said the interim executive director for Delaware Association for the Education of Young Children, representing some 900 early care providers. “That is inaccurate and I hope it’s a misunderstanding.”
Schneider welcomed the enrollment model, with “clear rules” to hold both providers and parents responsible. She and a handful of other speakers still also reinforced the necessity in bolstering the Purchase of Care program, from accessibility to reimbursement rates.
Some lawmakers hesitated on shifting away from enrollment boon for providers, while others pushed for attention on the benefits cliff. Meanwhile, child care became an economic discussion.
Is Delaware child care everyone’s business?
Some lawmakers did not care for this price tag, either way.
“So, there’s $25 million that will be saved because of this non-change, and you’re going to expand the program?” Sen. Dave Lawson posed to Young, while expressing concern for taxpayer dollars.
The secretary quickly turned to economic impact.
“Child care is expensive,” she said, in a portion of her remarks. “It is keeping people out of the workforce. It is posing an enormous burden on families and keeping them from making choices that they want to make, to participate in the economy, or to drive change.”
The Rodel Foundation released survey data in fall 2025 that would buttress these claims. The nonprofit is focused on public education and policy, with early childhood education as one pillar. At a glance:
- About 92% of Delaware employers surveyed said child care challenges are hurting their employees, while some 76% reported such problems directly impact their business operations.
- About 1 in 4 caregivers said they considered leaving Delaware because of child care challenges.
- 1 in 3 employers cited productivity declines, lost hours or services and staff turnover.
- 2 in 3 have seen their employees miss work, reduce hours or report absences at least monthly.
- For parents, 1 in 3 reported turning down a job or promotion, cut hours or left work to meet child care demands.
“The cliff is real for me,” Sen. Eric Buckson said. “It disincentivizes individuals to climb out, and I’ve seen it work against folks.”
Purchase of Care’s “graduated phase out” level – often referred to as the “benefits cliff,” when eligibility runs up – would remain at 300%, according to DHSS budget documents and hearing remarks. It was unclear Monday if it would be solidified in more years to come.
There is a long runway ahead.
Untangling a bigger picture for Delaware child care
Sometimes Lt. Gov. Kyle Evans Gay describes the state of Delaware’s early childhood education system as the backside of an average desk. Tangled wires trace down the wall, with various colors and knots headed toward different outlets.
She’s been tapped to help straighten it up.
Named chair to the Interagency Resource Management Committee last year, Gay has overseen several Delaware departments as they centralize on early education. Those are state departments like Health and Social Services, Education, Services for Children, Youth and their Families and more.
The cross-agency group – with cabinet secretaries, agency leadership, lawmakers and the Delaware Early Childhood Council – landed a $11.3 million preschool development grant. Gay sees this next year ahead as setting the stage.
“That will go to projects in each of the agencies, as well as projects in my office,” the lieutenant governor said.
“And truly, with that money, we are building that investable system so that we can have information, including data about how to better serve Delawareans. We’re going to be building local infrastructure so that we can make sure that providers, educators, parents, have resources at their local levels.”
The former state senator and longtime advocate on child care issues sees a north star of early education as a universal, public good.
“But that’s an incredibly large project,” she said. “And it’s a big change from how we traditionally think about birth through 5.”
From exploring finance models to connecting public and private partners, this could be one step in that direction.
DDOE’s Office of Child Care Licensing has also been working to digitize electronic record systems to elevate the office’s public database, while tracking compliance and investigating complaints across Delaware’s licensed providers. A combined $2.4 million was pledged to make it happen, in the last two years, and it’s highly anticipated, Gay said.
The “Delaware Early Childhood Care & Education Alliance,” or likely hubs to the north and south, may also land an $8 million infusion to work across area providers and assist the state in expanding child care access, as outlined in the governor’s proposed budget.
A budget hearing on public education should bring more on that, Tuesday, March 3.
Got another education tip? Contact Kelly Powers at kepowers@usatodayco.com.
This story was produced by Spotlight Delaware as part of a partnership with Delaware Online/The News Journal. For more about Spotlight Delaware, visit www.spotlightdelaware.org.
A Delaware law passed last year in the wake of escalating assaults on the state’s corporate brand shielded powerful company leaders from facing certain lawsuits brought by smaller investors.
What it didn’t do was violate the Delaware Constitution, the state Supreme Court ruled on Friday, Feb. 27.
More than three months after hearing arguments, the justices ruled that the corporate law reform – known as Senate Bill 21 – did not strip Delaware’s prominent Court of Chancery of its constitutional authority to decide when a business deal is fair.
“The General Assembly’s enactment of SB 21 falls within the ‘broad and ample sweep’ of its legislative power,” the justices stated.
The ruling ends a bruising fight in Delaware over when the state’s business court should allow small-time investors to interrogate insider deals struck within companies by founders or other business leaders.
The ruling also averts what could have been an embarrassment for the state’s legal and political establishment had the high court overturned the law.
More than a year ago, Tesla CEO Elon Musk — the world’s richest person — was calling on business leaders to move their companies’ legal homes out of Delaware. Musk had launched the campaign, which became known as “DExit,” after a Delaware Chancery Court judge ruled that he could not accept a multibillion-dollar pay package from Tesla.
Just as the campaign appeared to be gaining a foothold, Gov. Matt Meyer, legislative leaders, and Delaware attorneys who represent corporations threw their collective heft behind SB 21.
They argued then that the legislation amounted to a “course correction” that would bring the state’s business courts back into alignment with rulings from a decade ago. Many also said the bill was needed to pacify executives who were considering following Musk’s calls to move their companies’ legal homes out of Delaware.
In response, a cadre of critics — which included national law professors, pension fund attorneys, and a handful of progressives within the Delaware legislature — derided SB 21 as a “billionaires bill.”
Some also argued that the legislation was the latest in a string of recent changes to Delaware corporate law that have shifted the state away from protecting shareholder rights and toward giving greater deference to powerful executives.
Meyer and others SB 21 supporters rejected those characterizations last year. And on Friday, he celebrated the Supreme Court’s ruling.
In a statement, he said the decision affirms that “Delaware is the gold standard locale for global companies to do business.” He also stated that the number of companies that maintain their legal home in Delaware had increased throughout 2025 despite the DExit campaign.
“In short, SB 21 is working, and I’m glad it will continue to be the law,” Meyer said.
The legal arguments for SB 21
When arguing against SB 21 in front of the Supreme Court last fall, one attorney asserted that the new law removed the Chancery Court’s time-honored and constitutional duty to say what is fair – or equitable – in a business dispute.
The attorney, Gregory Varallo, argued that by removing a shareholders’ ability to sue their company, the law reduced what he described as the immutable power of the Court of Chancery to oversee a “complete system of equity.”
During his arguments, Varallo also offered the justices an unusual acknowledgement, stating that he knew that his stance was unpopular — and that he understood “well the pressures on this court.”
The comments were a likely reference to the consensus of big business groups and the state’s political establishment that believed SB 21 was necessary for Delaware to remain the world’s preeminent corporate domicile.
Following Varallo, Washington, D.C.-based attorney Jonathan C. Bond defended SB 21, in part, by characterizing his opponents arguments as unprecedented. If adopted, he said they would imperil several existing Delaware laws that go back decades.
He also argued that changing the rules of corporate law – as SB 21 did – “is the same as wiping out jurisdiction merely because it makes some plaintiff’s claims harder.”
Also arguing in favor of SB 21 during the hearing was William Savitt, an attorney with the Wachtell, Lipton, Rosen & Katz – among the most prominent corporate law firms in the country.
Last spring, Meyer hired Savitt’s firm to represent the state in the legal defense of SB 21 for a budget rate of $100,000. By comparison, Wachtell Lipton charged Twitter $90 million in 2022 to ferry that company through its arduous, four-month-long acquisition by Elon Musk.
Wachtell’s client list also includes Mark Zuckerberg and other Meta executives and board members, who last summer settled a seven-year-long, multibillion-dollar shareholder lawsuit in the Delaware Chancery Court.
During his arguments on SB 21, Savitt said equity as determined by judges must follow the statutes created by the legislature, and “not displace the law.”
“No natural reading of the words (of the Delaware Constitution) support plaintiff’s position,” he said.
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What to do if you come across a serious car accident
Here is some information about what to do if you come across a serious car accident.
State police identified 29-year-old Brian Silva of New Castle as the victim of a fatal motorcycle crash in Wilmington.
Silva was riding a Harley-Davidson northbound on Dupont Highway approaching Millside Drive in Wilmington around 3:30 p.m. on Feb. 27 when it collided with the rear of a stopped Lexus at that intersection, police said. Silva was ejected from the motorcycle. He was taken to the hospital, where he died.
Delaware State Police are still investigating this incident, and anyone with information is encouraged to reach out to them or to Delaware Crime Stoppers.
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