Delaware lawmakers approve bill to slow lawsuits; Weinberg Center panel featured in news coverage
…Among U.S. start-ups last year, 89% were incorporated under Delaware law, Columbia law professor Dorothy Lund said Feb. 24, at a conference in New York sponsored by the University of Delaware’s corporate governance program. Lund said the lawsuit restrictions in Senate Bill 21 are mostly of interest to a small group of companies whose bosses are also controlling shareholders, like Musk and Zuckerberg are. “I don’t think this is the story of a huge threat,” Lund said. “Yet we have a big reaction.”
At its roots, “corporate law is simple: ‘Though shalt not steal,’” said Sean Griffith, a law professor at Fordham University. He compared past Delaware cases to “morality plays” in which judges reviewed whether boards had done enough to ensure shareholders’ interests were protected. But ruling against Musk’s billions even after shareholders endorsed the payout may be “logically compelling but politically untenable,” Griffith added.
New York University law professor Edward Rock, a longtime scholar of the Delaware court, suggested the Senate bill was a reaction to a recent “vibe” that Delaware’s reputation for “sophisticated courts with business acumen” has suffered. Rich company founders find it “outrageous to be told they can’t take big money” without meeting extra court-ordered conditions. Rock worried about the “rushed” attempt to fix these perceptions by restricting judges’ powers through legal limits. The more law is spelled out on the books, not left to veteran Chancery judges’ discretion, the easier for competing states to copy, he added, removing Delaware’s competitive advantage.
Gov. Meyer, after consulting corporate lawyers, told residents the law must be passed to preserve the state’s ability to continue without a retail sales tax. He warned against opponents’ “misinformation.” Meyer’s stance marked a departure from state officials’ usual reticence about corporate law. “The governor faced very intense pressure,” said Lawrence Cunningham, head of the University of Delaware’s corporate governance center, at the New York event. “He did something most governors haven’t: He exercised leadership.”
[Read Full Article – View PDF] | Philadelphia Inquirer, The (PA) | Joseph N. DiStefano (Staff Writer)