Sometimes I post for a naive audience, sometimes I want to get something out quickly and assume a more sophisticated audience, and with so much movement on SB 21 right now I’m opting for the latter.

So, first – the CLC offered some proposed changes to the law, which you can see here. (Mike Levin and I had just recorded a Shareholder Primacy podcast about the original flavor SB 21; that will still drop tomorrow morning; you can be the judge whether the overall assessment remains good in light of the proposed amendments). Brian Quinn says all that needs to be said about the CLC’s concept of retroactivity; I’ll just highlight what I think is significant.

Under the original version of the law, if the transaction did not involve a controlling shareholder, board level cleansing was achievable even if the board was majority-conflicted. As long as the disinterested directors voted in favor of the deal, it was cleansed – meaning, a board 4-1 conflicted could still cleanse the deal, so long as that single director voted in favor. If the transaction did involve a controlling shareholder, board-level cleansing required the creation of a majority-independent committee, but there was…

Just dropping a quick plug for my post at FT Alphaville on, well, the broad strokes theme we’re seeing in corporate governance.

And another thing: In this week’s Shareholder Primacy podcast, Mike Levin and I discuss the new 13D/13G guidance from the SEC. Available at Apple, Spotify, and Youtube.

Why Are Delaware Democrats Trying to Give Elon Musk $55 Billion?

For over a century now, Delaware has been the home of most large American corporations. The state government has set up an incredibly corporate-friendly regulatory, tax, and legal regime, and so big companies locate their official headquarters there. Many trusts and on-paper shell corporations are Delaware-based as well, for the same reasons. It’s a classic race-to-the-bottom dynamic where, because the federal government does not set a consistent baseline, states competed as to who could pander the hardest to big business, and Delaware hit bottom first. Most Fortune 500 companies locate there, and in return the state gets about a third of its budget from corporate franchise fees and taxes.

But Delaware’s incorporation laws also provide some rights to shareholders. While shareholders have extremely limited ability to sue over the business judgment of corporate managers, corporations must prioritize them and treat them fairly.

The Nevada Legislature will consider a constitutional amendment this session to create an appointed business court. This is the language of the resolution as it was introduced by Assembly Members Joe Dalia and Shea Backus. Full disclosure, I strongly support Nevada creating this legal infrastructure and have helped on this issue.

The amendment would authorize the Legislature, at some future date, to create an appointed business court with “exclusive original jurisdiction to hear disputes involving shareholder rights, mergers and acquisitions, fiduciary duties, receiverships involving business entities and other commercial or business disputes in which equitable or declaratory relief is sought.”

It envisions creating a court comprised of at least three judges to be appointed by Nevada’s Governor off of a list of nominations to be provided by an existing Commission on Judicial Selection. In contrast to the short terms for the Texas business court, these appointed judges would serve six year terms.

Amending the Nevada Constitution is no easy feat. For this to succeed, it will need to pass the Legislature twice and then pass a public referendum. Nevada’s Legislature only meets once every two years. If it passes this cycle, it will need to pass again the…

So on Monday I threw up a rather inflammatory post about SB 21, which would dramatically rewrite Delaware law.  (Here’s a post by Eric Talley, Sarath Sanga and Gabriel V. Rauterberg, which takes a more measured tone).

As I’ve talked to people about the law, the first question I get asked is, “Is this a good thing or a bad thing?”  And that’s a really difficult question to answer, because “good” can have many meanings in this context.

Is this good for shareholders?

Well, I find it very difficult to take seriously the notion that the procedures written into the law will have any protective effect for shareholders.  The independence standards of the exchanges are notoriously weak; that’s why ISS and Glass Lewis frequently adopt their own definitions of independence, so much so that the Business Roundtable accused them of proxy fraud. The cleansing standards would insulate transactions by a board that is entirely captured by a counterparty, so long as a single member of that board is independent and votes with the others (a standard that one can easily see being transferred to the demand excusal context).  The definition of controlling shareholder would exclude people…

I suppose it’s gratifying that the proposed changes to Delaware law support the thesis of my new paper, The Legitimation of Shareholder Primacy.  There, I argue, among other things, that Delaware imposes procedural limitations on managerial behavior that function more as a performance to the general public, to grant corporations a social license to operate, than as real constraints.  So, of course, as soon as those limitations started to have even the tiniest bit of actual bite – and in an environment where the prospect of federal preemption is largely nil, and corporate power has reached the point where a social license to operate may no longer be necessary – managers threaten to depart the state, and Delaware proposes of package of statutory changes that undo certainly the last 10 years of Delaware jurisprudence, if not the last 50, in favor of a model of corporate self-policing.

The story actually begins last year, when, in response to the Moelis decision, Delaware rushed to amend its corporate code to add Section 122(18), permitting corporate-governance-by-contract.  At the time, I asked – quite seriously – what is the value of the corporate form? 

This is very much a debate that’s been…

Lately, several media and news organizations have “settled” somewhat frivolous lawsuits filed by President Trump, raising suspicions in at least some minds that the settlements were a rather unsubtle form of bribery, intended to win Trump’s favor with respect to other aspects of their businesses.

I am not particularly knowledgeable about bribery laws but let us assume, for the moment, that if these settlements were, in fact, shams to funnel money to Trump in exchange for regulatory favors, that would be illegal under some law somewhere. And, given that Trump is, you know, president, I also assume that, to the extent those laws are federal, charges are unlikely to be pursued by federal authorities.

But Disney/ABC, and Meta – not X – are incorporated in Delaware. And Delaware makes it a breach of fiduciary duty for corporate managers to intentionally break the law. I’ve blogged about the doctrinal difficulties that Caremark creates for Delaware (and they’re discussed extensively in my new paper, The Legitimation of Shareholder Primacy, now forthcoming in the Journal of Corporation Law), but whatever the doctrine’s flaws, there remains the intriguing possibility that an enterprising shareholder might bring a lawsuit – or even…