Delaware lawmakers have approved significant changes to the state’s corporate governance laws in an effort to maintain its status as a premier legal home for businesses.
The fast-tracked legislation, backed by Governor Matt Meyer and state business leaders, aims to provide greater protections for corporate officers against shareholder lawsuits. However, the measure has sparked criticism from shareholder attorneys and pension funds, who argue it benefits billionaires and corporate insiders at the expense of investor rights.
2.2 million – The number of business entities registered in Delaware, including two-thirds of Fortune 500 companies.
1,051,917 – Delaware’s estimated population, meaning corporations outnumber residents more than two to one.
81% – The percentage of all US initial public offerings (IPOs) in 2024 registered in Delaware.
$2.2 billion – The revenue Delaware collects annually from corporate license fees and taxes, which funds about one-third of the state’s operating budget.
0% – Delaware’s state sales tax rate, made possible partly by corporate tax revenues.
$55 billion – The potential value of Elon Musk’s Tesla compensation package that was rescinded by a Delaware judge, triggering criticism from business leaders.
The legislative changes come as Delaware faces increasing competition from states like Nevada and Texas, which have been actively marketing themselves as more business-friendly jurisdictions. Several high-profile companies, including Tesla and Meta Platforms, have considered relocating their corporate registrations due to concerns over Delaware’s legal environment.
The new law introduces “safe harbors” that limit shareholder lawsuits over conflict-of-interest transactions and narrows the criteria for determining board member independence. It also restricts shareholder access to internal company records, such as emails and text messages of directors and executives.
Opponents, including pension fund managers and investor advocacy groups, argue that these changes weaken corporate accountability. The California Public Employees’ Retirement System (CalPERS), one of the largest pension funds in the US, warned lawmakers that Delaware’s new approach could negatively impact long-term investment returns.
With input from the Associated Press, the Financial Times, and Reuters.
