Back in June of 2024, in connection with the legislative debate in Delaware over the approval of § 122(18) of the General Corporation Law of the State of Delaware (DGCL § 122(18)), I authored a blog post in which I raised concerns about whether there was adequate understanding of the public policy impacts of the proposal to adopt DGCL § 122(18).  I then wrote:

I have one large and important question as Senate Bill 313 continues to move through the Delaware legislative process: do members of the Delaware General Assembly voting on this bill fully understand the large shift in public policy represented by the introduction of DGCL § 122(18)?  If so, then they act on an informed basis and live with the consequences, as they do with any legislation they pass that is signed into law.  If not, we all must work harder to enable that understanding.

Later that month, I authored and published a second blog post that cross-referenced the earlier blog post and offered several policy-related values relevant to the proposal.

Two-and-a-half weeks ago, I found myself affected by similar concerns about the need for serious, thoughtful policy engagement in Delaware.  The occasion was the Gala Celebration of the Weinberg Center for Corporate Governance at the University of Delaware’s 25^th anniversary.  As many readers may know, a large group of policymakers, academics, and practitioners gathered at the University of Delaware for the Gala and an amazing symposium earlier that same day.  Larry Cunningham and his staff did a great job in organizing an impactful day, including the formal Gala program, which featured  a series of Delaware and national luminaries.  Information about the celebration can be found here.  I am grateful for Larry inviting me to speak at the symposium and write a related book chapter on board leadership and for the accompanying invitation to the Gala.

Among the speakers at the Gala was U.S. Securities and Exchange Commission (SEC) Chair Paul Atkins.  The speech is posted on the SEC website here. Bloomberg, among others, also covered the speech here.  Chair Atkins’s remarks, which centered on regulatory reform regarding shareholder proposals, have generated some controversy (see, e.g., here and here).  The Weinberg Center is convening a panel discussion on the SEC’s shareholder proposal rule, Rule 14a-8, in December.

It is Chair Atkins’s speech that night—together with co-blogger Ann Lipton and Mike Levin’s recent Shareholder Primacy podcast on the same—that catalyzes my post today.  I write today not to stake a claim on the substance of Chair Atkins’s remarks.  Rather, I write in the spirit of law reform in general, and especially as it relates to business law.  I became a business lawyer 40 years ago in part because I like the idea that law could encourage people—promoters, managers, investors, employees, contractors, and others—to form and operate business entities that serve public needs and wants. 

As I listened to Chair Atkins’s speech that night, I was most struck by his call for Delaware to clarify its law to assist the SEC in the pursuit of its regulatory initiatives.  (Ann notes this also toward the end of the Shareholder Primacy podcast.)  The essential bundled rationales for that call to action?  Delaware would be supporting the very capital markets that have helped make the state an international corporate formation and governance leader at a time when that leadership has been called into question (expressly referencing the “DExit” movement). Although one might debate (as some have) the substance of Chair Atkins’s request (or, indeed, the appropriateness of using the Weinberg Gala as a forum for making that request), my concern is merely that Delaware’s lawmakers consider and address Delaware’s own public policy in making legislative and regulatory decisions, including interpretive decisions about Delaware’s revered corporate governance rules.

Delaware’s corporate law is broad and deep.  Its relative stability and predictability, among other things (including the expertise of its judiciary), have encouraged venturers to come together to form sustainable businesses—a core public policy value—over a long term.  The existence of commentators with divergent perspectives (e.g., those who have argued that the state’s laws are pro-promoter/manager or pro-stockholder and those who have argued that the law represents a race to the bottom or a race to the top) suggests that Delaware law has delicately—and successfully—balanced and rebalanced the interests of managers (directors and officers) and stockholders over time.

Our federal and state securities laws have a different set of purposes that are founded on distinct public policy judgments.  (Again, Ann alludes to this in the Shareholder Primacy podcast.)  By protecting investors, maintaining fair capital markets, and encouraging capital formation, these laws enable an important—but not exclusive—component of the overall environment for business: corporate finance.  Delaware’s corporate law serves more than that one component.  And it serves corporations of all types and sizes—those that access public capital markets and those that do not.  The corporate governance rules established by the U.S. Congress, the SEC, and Delaware’s General Assembly and courts may overlap, but the reasons for having and enforcing those rules may be quite distinct.

Apropos of these considerations and Chair Atkins’s speech, the Weinberg Center reports that the State of Delaware has asked the University of Delaware’s Institute for Public Administration to study “the intersection between federal rule and state law” in proxy regulation, with a goal of determining how that intersection “implicates Delaware’s corporate franchise.”  I am interested in this work.  I am hopeful that initiatives of this kind will help inform robust public policy debates that, in turn, inform law reform efforts.

With all of this in mind, I write today to encourage Delaware’s influential policymakers to act with the purposes and values of Delaware corporate law in mind when they adjust and fashion corporate governance rules.  With this core focus, policymakers can best assess whether and, if so, how those purposes and values are best served by legal stasis or change.  Without this focus, Delaware lawmaking may produce a less coherent legal framework for business organizations and the venturers who form and participate in them.