Washington, D.C. — In response to news that the Delaware State Senate passed SB 21, a bill that weakens corporate governance protections by making it harder for shareholders to challenge self-dealing and hold corporate insiders accountable, the American Economic Liberties Project released the following statement.

“Delaware’s Senate just chose billionaire insiders—like Elon Musk and Mark Zuckerberg—over pension funds, retirement savers, and other investors by passing SB 21,” said Laurel Kilgour, Research Manager at the American Economic Liberties Project. “This bill only serves to make it easier for corporate boards to rubber-stamp excessive executive pay and self-serving deals that drain returns from pensioners and retirement accounts. Coming on the heels of another panicked giveaway to the corporate defense bar just last year, this is a reckless move that will undermine investor confidence and further erode Delaware’s credibility as a fair corporate forum. The Delaware House must step in and stop this dangerous bill before it’s too late.”

SB 21 jeopardizes the ability of investors to protect themselves from harmful board decisions that slash returns to investors’ hard-earned retirement savings, such as awarding exorbitant executive pay packages that far exceed any rational benchmark, or overpaying to acquire companies in which controlling shareholders have financial stakes. The bill makes it easier for corporate boards to insulate directors and controlling shareholders from litigation over conflicts of interest and self-dealing by corporate insiders, narrows who qualifies as a controlling shareholder, imposes a new presumption that board members are independent no matter who they are appointed by, and makes it more difficult for shareholders to discover conflicts by restricting their access to internal corporate records.

Last year, Elon Musk reincorporated Tesla and SpaceX outside of Delaware, after the Delaware Court of Chancery rejected his $56 million pay package from Tesla—which would have been largest in the history of public markets—because the Board’s compensation committee was packed with people who had decades-long business and personal ties with Musk, leading to a “deeply flawed” process with no “objective benchmarking data” and “no meaningful negotiation.” SB 21 likely won’t change that ruling, but it will make it easier for other corporate insiders to evade scrutiny for similarly egregious behavior.

Last month, Delaware Governor Matt Meyer urged state legislators to “get it right for Elon Musk,” despite the fact that Delaware’s own Secretary of State admitted there is no mass corporate exodus from the state, as some billionaires have claimed. This is confirmed by other quantitative analyses. The overall number of filers continued an upward trend in 2024, and nearly 90% of startups incorporated in Delaware that year, similar to previous years. Delaware’s tiered fees are capped, so the overall number of corporate registrations matters more to Delaware’s budget than retaining any particular firm with a large market cap.

States are required to allow corporations chartered by other states to do business within their borders, which incentivizes corporations that do business nationwide to incorporate in whichever state has the most corporate-friendly terms (and the most thoroughly developed body of common law), rather than the state where they are physically headquartered or do the most business. As a result, two-thirds of Fortune 500 companies are incorporated in Delaware. Some members of Congress have proposed replacing the “race to the bottom” among states with a federal chartering system for firms engaged in nationwide commerce, which could heighten standards for corporate conduct by including labor in corporate governance processes and conditioning corporate political expenditures on shareholder and director approval.

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