Delaware lawmakers recently rushed out proposed changes to the State’s time-tested corporate law, claiming that the risk that companies will leave Delaware demands an “urgen[t]” vote this month. We know now that the bill, SB 21, was written by Elon Musk’s lawyers.
I’m a fourth-generation Delawarean, a graduate of Independence, St. Mark’s, and the University of Delaware. Today, I teach at The Wharton School, where I study economic incentives and analyze data for a living. Make no mistake: there is no crisis of companies leaving Delaware. To see why lawyers manufactured one, all you have to do is follow the money.
For a century, Delaware’s corporate law has been the envy of the world. That’s why over two-thirds of the Fortune 500 is incorporated in the First State. Companies incorporated here mostly don’t operate in Delaware or pay Delaware income tax; instead, they pay a franchise fee to use the State’s corporate law. Last year we collected $1.3 billion in franchise fees; the maximum per company is $250,000. By comparison, Delaware’s total revenue last year was over $7 billion.
That’s why I was surprised when those behind SB 21 said that “Delaware’s 0% sales tax” and plans to “increase[e] teacher pay” and give “tax breaks to hardworking Delawareans” were at risk because “companies feel forced to relocate” out of Delaware, with one SB 21 sponsor claiming that every “major company that leaves here is $250,000 out of the state’s annual budget, so that’s tremendous.” No, it’s not. Each company that incorporates elsewhere reduces the budget by just 0.0036%, and since most Delaware corporations have no employees in the State, Delawareans’ jobs are unaffected. For there to be a real effect on actual Delawareans, hundreds of companies would have to leave.
So I dug into the data to find out how many publicly traded companies recently reincorporated out of Delaware. The answer is eight—not 8,000, not 800, just eight. In fact, state records show that last year the number of Delaware-registered companies grew by over 275,000, and Delaware had a net gain of 85 publicly traded companies. In 2024, 80% of all newly public companies were incorporated in Delaware. There is no evidence of an urgent need to change Delaware law.
Like many Delawareans, when I find out that someone tried to sell me a bill of goods, my next question is: who benefits from their story? For SB 21, the answer is clear: corporate lawyers created a crisis they can get paid to fix. Musk’s lawyers lost when Delaware judges made their client obey the law like the rest of us; SB 21, which makes Delaware law more friendly to Musk-style corporate controllers, lets them claim victory. Others who drafted SB 21, like Delaware’s former Chief Justice and Chancellor, now work for Big Tech bosses like Mark Zuckerberg that have pending cases before Delaware courts, so it’s no surprise that SB 21 provides a pathway for their clients to be “immune from liability.” This bill lets former Delaware officials sell their services by telling their clients that they—not the people—control Delaware corporate law
I’m not a lawyer, but I do have common sense, and the way lawyers talk about SB 21 says plenty. Sometimes supporters tell us that the bill will save us from the “historic circumstances” we face with companies leaving Delaware. Those same attorneys then say that all the bill does is enshrine legal “principles that have been in place for a long time.” Either SB 21 makes significant change that we need urgently, or it doesn’t change Delaware law enough to matter. Which is it?
It’s unfortunately all too common for lawyers to tell two different stories at the same time. But what really insults me as a Delawarean is that lawyers are threatening the State’s basic needs if they don’t get what they want. All of us want tax breaks for hardworking citizens and for kids to have good teachers. The people of Delaware deserve that, regardless of whether SB 21 passes this month.
It’s one thing for lawyers to invent a crisis so they can get paid; it’s entirely another to threaten kids’ education and working families’ finances if their corporate clients don’t get the sweeping legal protections that they want.
I love Delaware, and I want the best for its people. The citizens of the First State deserve better than SB 21. There is zero evidence of any crisis of reincorporation, let alone one that would put the people of Delaware at risk. Rather than ram through a corporate-lawyer wish list that benefits their clients, I hope Delaware’s Legislature and new Governor will stop to ask whether this is the most “urgent” thing they need to do for the people of Delaware.
Daniel Taylor is the Arthur Andersen Chaired Professor at The Wharton School, where he is Director of the Wharton Forensic Analytics Lab. He has served as an economic expert in the Delaware Court of Chancery and is a proud UD football booster.
