A while back, when the Twitter/Musk mishegoss was just gearing up, there was a whole political aspect to the thing whereby conservatives accused Twitter’s board of intentionally stonewalling Musk’s takeover bid in order to advance their liberal commitments.  At the time, I said that it was comforting to know that whatever legal battles resulted, they would be decided by the relatively neutral principles extant in Delaware law.

Which is why I was so pleased to see Is Corporate Law Nonpartisan?, by Ofer Eldar and Gabriel Rauterberg, forthcoming in the Wisconsin Law Review, pop up on SSRN.  The authors use Carney v. Adams – the case where the Supreme Court considered, but did not decide, whether Delaware’s party-balance mandate for its judiciary violates the First Amendment – as a jumping off point, and from there conclude that many states’ corporate law is shaped by their party politics.  Delaware, by contrast, has been able to compete successfully for corporate charters because of its deliberately nonpartisan approach, which assures dispersed shareholders that their interests will not be subrogated to those of concentrated local stakeholders.  They also point out that Delaware can maintain this nonpartisan commitment in part because it’s such a small state, and substantively hosts so few businesses, which prevents local interests from hijacking the political process.

(To circle this back to Twitter, now it’s Musk resisting the purchase and Twitter trying to force it through.  Ken Paxton of Texas, apparently trying to ingratiate himself with Musk, has announced an investigation to back up Musk’s claims that Twitter lied in its securities filings.  How much do you imagine Twitter’s shareholders appreciate that?)

This system is certainly beneficial to Delaware in some ways but we may question how well this serves Delaware’s residents overall.  Delaware’s population is majority-Democratic, and, in addition to its role in generating corporate law, the state has all the usual issues associated with statehood, including criminal disputes, property disputes, and so forth.  One might reasonably ask whether it’s good for Delaware’s residents that the state has an ongoing commitment to, essentially, elevate a minority party within the judiciary.  On this, it’s worth going back to the important role that Delaware courts played in school desegregation, as highlighted in Omari Simmons’s paper, Chancery’s Greatest Decision: Historical Insights on Civil Rights and the Future of Shareholder Activism, 76 Wash. & Lee L. Rev. 1259 (2019).  Delaware does more than just corporate law.  Though, I suppose, if Delaware’s residents are being mildly disenfranchised, not having to pay sales tax takes some of the sting out of it.