Tag: Delaware

Delaware

The Data Does Not Support the Narrative

daelnorwood

Or, Why Are Delaware’s Leaders Huffing Musk’s Swamp Gas? 

Louis Dalrymple, “Uncle Sam’s Dismal Swamp,” Puck, November 15, 1893, https://www.loc.gov/pictures/resource/ppmsca.29155. Print shows Uncle Sam sitting on a log in a swamp labeled "Spoils System" from which snakes labeled "Quayism", "Bardsleyism", and "Tannerism", and noxious fumes rise in the form of shades labeled "Raumism - Pension Swindler, Crokerism, McLaughlinism, Tweedism, Prendergast - Political Assassin, [and] Guiteau - Political Assassin". Also shown among the tree roots is Charles A. Dana.

The state government of Delaware is in the process of amending its corporate law to benefit Elon Musk, personally, and people like Elon Musk – oligarchic managers who use their control of corporate boards to loot regular investors – more generally. The mechanism is Senate Bill 21, legislation that was drafted by Elon Musk’s attorneys, a fact confirmed by the bill’s filer, Senator Bryan Townsend.

The rationale for this rash action is fear: fear that if Delaware does not extinguish judicial independence to better fit Musk’s perverse desires, Delaware will lose critical revenues, as Musk leads corporations to “DExit,” or registering in other states, because of Chancery Court decisions that since 2022 have supposedly upset the balance of power between shareholders and corporate managers. 

The data does not support the panicked narrative that SB 21’s supporters have been promoting, however. That narrative seems to be a product of Musk, and his paid agents, spreading misinformation like a miasma across the state.

Delaware’s Corporate Franchise is a Volume Business

Delaware benefits in several ways from having outside corporations registered here. The most valuable benefit is revenues from the “corporate franchise tax.” This is a fee that corporations headquartered outside the state provide Delaware for the “privilege of being incorporated in Delaware.” (Fiscal Notebook, 2024 ed, p. 108). In recent years, the corporate franchise tax, alone, has provided ~20% of total state revenues, or about 1.2 billion dollars. (Personal income tax, paid by human people, provides 33% of the total state revenue). (Fiscal Notebook, 2024 Ed, p. 32).

The critical thing to know about the corporate franchise tax is that it is not an income tax: it’s a set of tiered fees, assessed based on a corporation’s total number of authorized shares – but with a max payment cap of $250,000. 

In other words, Delaware is in a volume business, not a value business. Delaware has – or rather, should have – an interest in appealing to the largest number of corporate registrants, not the wealthiest billionaires. That’s a critical point, because the interests of most corporations – and most investors – do not align much at all with the desires of oligarchs like Elon Musk.  If it wants revenue, Delaware shouldn’t be catering to the tiny cohort of vampires. 

Back to Delaware politicians’ panic: you would think if the corporate franchise tax revenue is indeed in peril – if the “DExit” movement is real, and not just a propaganda hallucination  – then there would be some data to support that claim.

Alas for Musk et al., and their well-paid agents, three data points suggest the opposite is true.

1) Startups Continue to Choose Delaware

Peter Walker, “head of insight” at Silicon Valley data infrastructure firm Carta, recently shared a chart from his company’s private dataset demonstrating that 90% of startup C-Corps are domiciled in Delaware – a percentage that has “barely shifted in the last 5 years.” Including in 2024.

Source: Peter Walker, “Is Delaware Losing Startup Incorporations to Other States? … (No),” LinkedIn (blog), February 21, 2025, https://www.linkedin.com/feed/update/urn:li:activity:7298753740558254080/.

2) The Number of Corporations Filing Franchise Taxes Keeps Going Up

The most recent public figures show that 309,911 firms filed franchise tax payments in FY 2024 – an increase that continues the unbroken upward trend of the last decade, before the recent Chancery Court decisions, and then through and beyond them.  

A bar chart showing a steady increase in the number of franchise tax filers from 2015 to 2024. Annual Comprehensive Financial Report, FY 2024 (Delaware Department of Finance, Division of Accounting, 2024), p.206.

Source: Annual Comprehensive Financial Report, FY 2024 (Delaware Department of Finance, Division of Accounting, 2024), p.206

Now, total corporate franchise tax receipts have dipped, somewhat, from 2023 to 2024. But they have done so following the same patterns as the Corporate Income Tax. 

Source: “Tax Receipts: Corporate Franchise Tax,” and “Tax Receipts: Corporate Income Tax,” in Fiscal Notebook FY 2024 ed., pp. 109, 115

That suggests to me that the cause lies in macroeconomic conditions – unemployment, inflation – rather than anything to do with Delaware’s legal regime. (Corporations paying income tax here do business here; they can’t exit as easily as paper registrants, and have less incentive to do so). 

3) DEFAC Forecasts Steady Corporate Franchise Tax Receipts

Since 1977, Delaware’s state government has relied on the Delaware Economic & Financial Advisory Council, or DEFAC, for economic forecasts. DEFAC meets quarterly to assess data, and issue guidance – guidance that the General Assembly usually regards as binding on legislation.

At the December meeting, DEFAC forecasts steady franchise revenues for FY 2025, 2026, and 2027. That is consistent with economic indicators – at least, prior to Musk’s installation as co-president – and suggests this expert body saw no threat in the data of the sort SB 21’s draftees were already hallucinating.

Musk’s Pungent Miasma is Not Reality

In short, private and public data sources agree: there is no observable decline in incorporations in Delaware, and no evidence that “DExit” is occurring in response to Chancery Court rulings. Further, the advisors specifically tasked with forecasting future franchise tax revenues – that is, a body of people mostly not employed by Elon Musk – do not see evidence for dramatic change. 

An alternate explanation does fit the data better, though. Elon Musk’s lawyers drafted SB 21 to benefit their oligarchic clients, not Delaware. Musk’s paid agents are breathing the bad vibe fumes they want to see in the world into existence. The odor of panic they’ve wafted into lawmaker’s nostrils is thus a miasma, in the classic sense: unhealhy and unpleasant air, produced as the unpleasant exhalation of rot and corruption, that causes feverish illness.

Delaware’s leaders should not radically revise our laws, and gut a valuable franchise, on the basis of huffing Musk’s swamp gas. 

———-

Header Image source: Louis Dalrymple, “Uncle Sam’s Dismal Swamp,” Puck, November 15, 1893, Library of Congress, https://www.loc.gov/pictures/resource/ppmsca.29155.

Data Sources

Note: while by statute, the heads of Delaware’s state agencies are supposed to provide public reports on things like the total number of corporations registered here, and revenues derived from them, in practice Delaware state government is … uninterested in transparency. Opacity is part of the value Delaware provides, apparently. 

The upshot is that basic data, and foundational statistics, are often hard to get, and difficult to parse using normal methods even when located. Still, while our state government officials are intentionally(?) incompetent at communicating to the public, they have not shirked their duties completely; there are sources worth your time & examination.

Delaware Department of Finance, Division of Accounting, Annual Comprehensive Financial Report, FY 2024, https://accountingfiles.delaware.gov/docs/2024acfr.pdf.

While this report is not linked on the DE Finance Department’s page, you can find it at that URL. An annual report, it offers a wealth of up-to-date statistics on the fiscal situation of the government of Delaware, including revenues and expenditures, as well as detailed supplemental information on specific taxes, fees, pension contributions, bond obligations, and subsidiary agencies. 

Delaware Fiscal Notebook: 2024 Edition (Delaware Department of Finance, 2024), https://financefiles.delaware.gov/Fiscal_Notebook/2024/2024-Fiscal-Notebook-Combined.pdf. (aka Fiscal Notebook, 2024 ed)

The fiscal notebook is a rehashing of much of what is in the ACFR, but summarized and more richly contextualized look at the state budget, with historical data and legislative histories. If you want to know when the corporate income tax changed, and under what legislation, the Fiscal Notebook is your guide. It has some charmingly 1990s graphic design, as well. Prior reports are available here.

Delaware Economic & Financial Advisory Council (DEFAC), https://finance.delaware.gov/financial-reports/defac-revenue-forecast/ 

DEFAC posts cryptic briefing books and terse meeting minutes, grouped by date, on this page. If you dig far enough, you can find their predictions; and if you want a bit of fun, take a look at how far off they were in their predictions (usually they underestimate revenues by quite a bit, and overestimate the cost of expenditures; there appears to be a spirally structural austerity built into their models, assuming any models actually exist beyond intuition).  

Delaware Division of Corporations, https://corp.delaware.gov/

In theory, under the law, this page should contain the division’s up-to-date annual reports, detailing numbers of business entities registered in Delaware, and other pertinent information. In practice, this website is a wasteland. 

Corporate Voters Project

The Persistence of Oligarchy 

daelnorwood

Or, What’s a Little Light Voting Restriction Between Friends, Across Decades?

Corporate Voters Project – Research Note #3


 
Having surveyed the swampy landscape of corporate voting in present-day Delaware, I’ve now turned to digging post holes in it. That is, to get a clearer sense of when as well as why the practice of enfranchising business entities took hold, I’m taking a closer look at a handful of municipalities with corporate citizens, by investigating the legal history of their charters – specifically, when corporate voting entered their basic law – and trying to contextualize those developments using historical newspapers. 

First up? Dagsboro, Delaware.  

~*~

Ten miles from the coast as crows and google maps fly, Dagsboro was first incorporated in 1899. The town proper was carved out of Dagsborough Hundred, in Sussex County. (“Hundreds” are unincorporated subdivisions of counties – not unique to Delaware, but unusually long-lived here, where they served as the primary local political unit from the colonial era through to the 1940s. Most were defined by waterways: “White Clay Creek Hundred,” in what is today Newark, centered on said creek, for example; there’s a similar story behind the much more metal “Murderkill Hundred”) [1]. 

According to Thomas Scharf, the excitable, voluble, and occasionally reliable nineteenth-century chronicler of Delaware history, Dagsborough Hundred was named after its lead proprietor under late British rule, John Dagworthy. Alternately described by Scharf in the course of one printed page as a captain, colonel, and general, in 1774, Dagworthy was granted generous tracts of land – known as “Dagworthy’s Conquest” – as a reward for military service rendered, and well-placed connections worked, in the Seven Years’ War. He repaid this boon during the American Revolution by seizing British war matériel and arresting accused loyalists. When not offering such forceful signs of ingratitude to the British Crown, Scharf records that “General” Dagworthy: 

“built a capacious one story house upon an eminence at the east end of the town…The approach was a broad avenue lined with trees. There surrounded by his family and a retinue of slaves he dispensed a liberal hospitality.”[2]

What a swell a petty tyrant, eh? 

When he died, Dagworthy was buried under the chancel at Prince George’s Chapel, a tiny but persistent house of worship, just off the main drag of what became the Town of Dagsboro in 1899.

Dagsboro’s inaugural charter has a number of interesting features – but corporate voting is not one of them. The municipal franchise, per Section 3, is reserved for tax-paying property owners: “every male taxable of said town above the age of twenty-one years” as well as the “husbands of woman freeholders in said town.” (It pays to marry well!) 

The franchise was premised on landholding – a “freeholder” is a resident who owns real estate in fee simple – and, critically, paying in to the town treasury: to vote you had to be up-to-date on your assessed taxes.[3]

The amount of tax you paid mattered, too. You’ve heard of voting with your dollars? Well, so had the legislators who chartered Dagsboro. In their wisdom, they decided that this jumped-up village was going to be an oligarchy, not a democracy. At town elections “each person entitled to vote shall be entitled to one vote for each dollar, or fractional part thereof, which shall have been paid by them or their wives as town tax on the property so assessed.”

To put it more plainly: the more land you owned, and the more tax you paid, the more votes you could cast! Like most oligarchies, this regime lasted only a short while: in 1903, the charter was amended to eliminate the vote-per-dollar scheme – though voting was still restricted to landowners, or men who married women who owned land.[4]

The press noted the Dagsboro charter’s passage through the legislature in January 1899 only perfunctorily. There are more stories about the sick wife of the charter bill sponsor (and first town commissioner), Rep. William P. Short, and his subsequent arrest for bribery (later dismissed), than there are about Dagsboro’s creation itself. 

That’s understandable: a town with at best one crossroads warrants little notice most days, and much less in a year when Delaware politics were as lively and consequential as they ever get. Dagsboro’s competition for column inches was, first, the extensive extralegal efforts of one J. Edward Addicks, erstwhile Republican, to bribe himself into the U.S. Senate (Rep. Short was part of that effort – caught but not prosecuted); and then second, the total revolution in the state’s political economy, via the wholesale adoption of the New Jersey corporate code. (This was Delaware’s bid to steal their northern neighbor’s revenue scheme – though it took until 1913 for fruit of that poisonous tree to fully ripen).[5] 

~*~

Corporate voting first appeared in Dagsboro with the town’s re-chartering and re-incorporation in 1941. So far, I have only found spare notices of this in state or local newspapers: Sen. Alden P. Short shepherded the bill through the General Assembly, but what his relation was to William P. Short, or why 1941 was the year to do this civic business, remains unclear.[6] 

What is clear, though, is that the 1941 charter enfranchises corporations to vote in bond referenda. In these “special elections,” residents and property owners, “whether individual, partnership or corporation” all received “one vote for every dollar and fractional part of tax paid.” Oligarchy, again!

Voting for annual municipal elections in Dagsboro was, in this revision, more open – reserved for taxpayers 21 and over, with no stated racial or gender restrictions – but the process became malignly unusual. To indicate their choice for town commissioner, voters “shall cross out the names of all candidates which he or she does not desire to vote for” – that is, in Dagsboro you vote via negation. I read this as a form of Jim Crow-restrictions in action: a purposefully confusing process put in place to allow white election officials to reject votes at their discretion. [7]

And while thus far, I have not found any newspaper accounts that shed light on why this re-incorporation happened when it did, I think it’s notable that the bond referenda section re-used the 1899 charter’s “one dollar, one vote” mechanism – even while other voting restrictions were loosened, or altered.

The past is never truly past, especially if property is involved.

~*~  

In 1991, the Town of Dagsboro re-incorporated again, and once again revised its charter. This time corporate voting was brought fully into all elections, both annual and special. The path, again, for corporate enfranchisement was property ownership – though now limited to one vote per person/entity.[8] As with the 1941 revisions, the motivation for this overhaul is not immediately clear from the newspaper record – but there is a notable coincidence, involving sewers.

The charter revision bill was sponsored by Sen. Richard S. Cordrey, a powerful pol from nearby Millsboro, who was then serving as Senate pro-tem. And while Cordrey’s other initiatives made the newspapers regularly – there was a redistricting that session, as well as smaller fights with the Governor over appointments and the budget – Dagsboro’s new charter only appears in the press as a one-line entries in legislative recap articles.[9]   

What did make the papers was a slow-moving effort by Sussex County to build new sewers to accommodate an ongoing wave of new residents and housing developments. Beginning in 1990, the County and affected towns – including Dagsboro – were involved in a series of lawsuits and legislative wrangling to select sites for wastewater treatment and disposal. By 1991 work was sufficiently underway on the job of replacing Dagsboro’s private septic systems with a County-administered municipal flush that the Wilmington News Journal, the state’s biggest newspaper, thought it warranted a town profile. 

The New Journal’s Southern Delaware correspondent noted the Dagsboro was a sleepy place, with one hill, one stoplight, and one predatory, “hawk-eyed lawman” eager to “fatten the town’s coffers” with tickets written to out-of-towners. But beyond that picaresque character, the story was that Dagsboro’s citizens – and possibly it’s corporate voters, too – expected the sewers to set off a “boom time,” attracting new residents and new economic vibrancy into the town.[10]

My hunch is that sewers and corporate voting are linked, both metaphorically and politically. The 1991 charter revision, by empowering non-resident property owners, both human and corporate, could have been part of a horse trade, to get the infrastructure investment needed to enable a “boom time.” Giving corporations the vote could have been what was needed to get them to invest in the project of the town’s growth – and in return, corporations got to help decide how much they’ll pay for all the new shit they bring. 

Call it the “Cum Cloacarum et Corporationes, Civitas” theory of government.[11] 

~*~

For the curious and civic-minded, the Town of Dagsboro website explains local election procedures. If you are a human resident – but not lucky enough to be a property owner – you face some hurdles. You have to present yourself with identification and documentation at the Town Hall office, during business hours, to be certified and entered into the town voter registration book. (Unlike other Delaware municipalities, Dagsboro does not participate in the state voter registration system). Then, come election time, provided the clerk can find and verify you in that book, you can vote.

However, if you are a property owner – whether a natural person or artificial entity – your task is requires less of a time expenditure. Simply appear at the polling place with your name on a deed to a property within the corporate limits; and if “you” are a business entity – a partnership, or a corporation – you proxy must appear with that deed, plus “a certified resolution of said entity authorizing the person therein to vote for the entity.” Two pieces of paper, and you’re golden, no fuss, no waiting. 

The Town of Dagsboro helpfully provides a standard certification form; all a corporation needs to do is fill in the blanks. 

——–

[1] The best and most detailed account of Delaware’s extraordinarily creaky administrative state that I have encountered is Penjerdel Corporation and Pennsylvania Economy League, Historical Development of Local Government in the Penjerdel Region, Penjerdel Governmental Studies 1 (Philadelphia, PA: Penjerdel, 1961), https://catalog.hathitrust.org/Record/005888599.

[2] J. Thomas Scharf, History of Delaware, 1609-1888, 2 vols, (Philadelphia: L. J. Richards & co., 1888), 2:1335, https://catalog.hathitrust.org/Record/001874039.

[3] 21 Del. Laws, c. 285: “An Act to Incorporate the Town of Dagsboro,” Approved February 9, 1899, pp. 549.

[4] 22 Del. Laws, c. 437: “An Act to Amend Chapter 285, Volume 21, Laws of Delaware, Being Entitled ‘An Act to Incorporate the Town of Dagsboro, Approved February 9, 1899’,” Approved March 31, 1903, p.435. 

Special thanks is due to Willard Hall Porter, Attorney at Law, who annotated his personal copy of the Laws of Delaware in bright red pencil to note this charter update. His copy was scanned in and made available by Princeton University via Hathi Trust. It takes a (long-dead) village to write a history, y’all!  

[5] Typical of press coverage of the charter is “Legislature,” News Journal, Mon, May 5, 1941, p.4. On Short’s wife’s pneumonia, “Mr. Short’s Sad Message,” Wilmington Daily Republican, February 24, 1899, p.2.  On his dismissed bribery indictment: “Kent Bribery Cases,” Middletown Transcript, April 29, 1899, p.3, https://chroniclingamerica.loc.gov/lccn/sn84026820/1899-04-29/ed-1/seq-3/

[6] 43 Del. Laws, c. 161:  “An Act to Reincorporate the Town of Dagsboro,” Approved May 14, 1941; “Legislature,” News Journal, Mon, May 5, 1941, p.4.

[7] On bond elections, 43 Del. Laws, c. 161, Sec. 22(B)6; on regular muncipal elections, Sec. 5(D). 

[8] 68 Del. Laws, c. 138; “An Act to Reincorporate the Town of Dagsboro,” Approved July 9, 1991. On annexations, see Sec. 3(F); on muncipal elections Sec. 7(G); and on bond referenda, Sec 33(A)5

[9] “Legislature,” News Journal, Thu, June 20, 1991, p.19; “Legislature,” News Journal, Thu, June 27, 1991, p.15; “Legislature,” News Journal, Sat, June 29, 1991, p.7; Nancy Kesler, “Castle OKs restrictions on adult entertainment,” News Journal, July 10, 1991, p.12

[10] Carolyn Lewis, “Sleepy Dagsboro gets wake-up call: Boom time predicted as sewer system nears completion,” News Journal, Tues Dec 24, 1991, A4. 

On the Susex sewers saga – which involved the legislature overturning a Chancery Court decision within weeks of its announcement – see:  Bruce Pringle, “Court Blocks Sewer Plants Outside District,” News Journal, Wed, Mar 21, 1990, p.1;  Bruce Pringle, “Sussex: Change Sewer District Rules,” News Journal, Thu, Mar 22, 1990, p.1; Bruce Pringle, “Sussex OKs boundaries for sewer district,” News Journal, Fri, Mar 23, 1990, p.5 ; Nancy Kessler, “Castle Signs Sussex County Sewer District Bill,” News Journal, April 19, 1990, p.22; “Sussex County Has Eye On Parcel,” News Journal, May 30, 1990, p.2; Bruce Pringle, “Decision on Sussex disposal site expected within 2 weeks,” News Journal, Thu, June 28, 1990, p.1; Bruce Pringle, “Piney Neck Picked for sewage disposal site,” News Journal, Wed, July 4, 1990, p. 1

[11] Google translate latin for “With Sewers and Corporations, [the] City.”

Corporate Voters Project

Little Delaware, Gangrened with Envy

daelnorwood

Or, Delaware Caught Heat for Playing the Sorcerer’s Apprentice, Even in 1899 

Corporate Voters Project – Research Note #2

Recently, there’s been a bit of controversy about amendments to Delaware’s General Corporation Law. Supporters pushing recent amendments have gotten quite hot under the collar in public print and in legislative debates, and have accused critics of (what is now the signed) law of threatening the state’s entire political economy with their unprecedented rudeness. 

Much like the recent revisions to state law themselves, these reactions to mild criticism are expressions of myopia. Criticism of the sort SB 313 attracted in 2024 – that it proceeded anti-democratically, that it harmed ordinary people, that it was motivated by a small set of special interests’, and would lead to abuse – were leveled at Delaware state legislators when the state’s corporate law first passed in 1899.

If anything, earlier observers of Delaware corporate law in the Gilded Age were far more blunt in their criticism than anyone in the 21st century has ever thought about being. To illustrate, lend your eyes to this brief article from the American Law Review, a legal journal based in St. Louis:  “Little Delaware Makes a Bid for the Organization of Trusts,” American Law Review 33, no. 3 (May-June 1899): 418–24.

Well-known to Delaware lawyers – and recently, at least one historian – the article takes the form of an unsigned “note,” one of a few dozen that appeared at the back section of every journal issue, after the treatises and articles, but before the listings of recent major court decisions. My assumption is that it is either written by the editors, Seymour D. Thomson and Leonard A. Jones, or one of their close associates – and either way expresses their editorial views. 

And my goodness, are the Am.L. Rev. editors unimpressed with Delaware trying to copy New Jersey’s loose corporate charter rules, much less their attempt to “improve” on them by giving corporations even more expansive powers. After some praise for Delaware’s old Democratic (and enslaving) political establishment (and some sharp elbows at the emerging state Republican party), the editors note that the curious feature of US federalism – that state sovereign powers are equal, and that states set corporate law – is what provides the temptation that Delaware has now given into:  

“The “sovereign” States of the American Union are equal: equal in the Senate, for little Delaware wields the same voting power there as does great New York. They are also equal in regard of the deviltry they can do – equal in regard of the injury they can inflict upon their sister States. It is as though a Klondike gold mine had been discovered in New Jersey, and all Delaware were on the rush to get there. In other words little Delaware, gangrened with envy at the spectacle of the truck-patchers, sand-duners, clam-diggers and mosquito-wafters of New Jersey getting all the money in the country into her coffers, – is determined to get her little tiny, sweet, round, baby hand into the grab-bag of sweet things before it is too late.” (p. 419)

And, the editors note, this law will be a jobs-employment program for Delaware politicians; they may need to even import labor:

“But with this exception; and herein the little great “State of Delaware” casts its little great anchor to the windward. Although ” any three persons may organize a corporation,” yet ” only one director need be a resident of Delaware.” And this ” one director'” is going to be paid for being a director, and don’t you forget it. If the rush to organize corporations and trusts under this new Delaware law is as great as under the New Jersey law, there will not be politicians enough in Delaware to serve as directors of corporations and trusts for all the other States of the Union, but professional directors will have to migrate to Delaware from other States, and their name will be Legion.” (p.420)

 
Delaware legislators’ grandiose proclamations about their new law’s global applicability seem to be particularly grating:  

” Nor will you be confined, in the conduct of your business, when so happily incorporated, to your drought-smitten and grasshopper-eaten prairies. “It,”  – that is to say you when you have turned yourselves into Delaware corporations – ” may conduct business anywhere in the world.” Certainly you may. Why not? The great State of Delaware says so, and is not that enough?” (p. 421)

Halfway through, the editors re-frame their note as addressing the great political enemies of the Big Corporations in this particular moment – the hardworking, Populist Party-supporting farmers of Kansas.  (This is for rhetorical effect; I doubt too many populists were reading this attorney-specialty journal). And in this section, the editors suggest that should these farmers try to use the state power they control, they’ll face a potent force – in law, if not actually in the military.

“If Kansas attempts, through its legislation, to interfere with the sovereign prerogatives of Delaware, Delaware will be there with its oyster-boat and clam-boat navy, and with its unterrified militia; and what then will Kansas do about it?” (p.423)  

And then finally, they note the alchemical aspects of Delaware’s new law. 

“Let us not forget, oh, toiling brothers of the Kansas deserts, one other feature of this congenial law: 6. “The liability of the stockholder is absolutely limited when the stock has once been issued for cash, property or services.” Brother, do you need to photograph this sentence by means of an X-ray? Can you not see through it? Is it not pellucid ? It says, ” issued for cash.” It does not say paid for in cash. Is it not ” issued for cash” when it is issued for the promise of cash? and is it not issued for property or services when it is issued for the promise of such commodities? And if the gold bugs, bond- holders and other octopi, should render it hard to redeem your promise to pay for your shares – even in chips and whetstones, – why should you so pay? You have launched your corporation; the sovereign laws of Delaware allow you to commence business before any “sum whatever was paid in; ” and who or what is going to stop you from continuing your business? Do you not see that here is a scheme to turn the world into a sudden millennium? And if you object that a millennium must consist of a thousand years and cannot be created in a day, the answer is that all things are possible with the sovereign State of Delaware. What were the dreams of the ancient alchemists to this? They at most could, by processes somewhat tedious and expensive, convert gross metal into gold. But, without any gross metal of any kind to work upon, not even silver at the ratio of 16 to 1, the sovereign State of Delaware stretches forth her wand over the prairies of Kansas and calls upon money to come, and it comes.” (p.424)

What the irritated attorneys have described here is the central magic of finance, generally, and corporate finance, in particular. With some law and a bit of market faith – and a willingness to grift – you can conjure something out of nothing, and profit.  Devolving sovereign power onto private parties who derive artificial persons, and then mortgage those “persons’ ” future cash flows for current income to actually do something (well, sometimes) – That’s Capitalism, Baby! If it feels like fraud, well, you probably don’t sit on the right corporate boards.

This is all to say that criticism of those would weave this kind of spell – and of Delaware legislators’ meddling in its magics, specifically – is nothing new in 2024. The First State’s legislators been catching heat for playing sorcerer’s apprentice, and carrying water for outside financial interests, for a very long time. Maybe they should get used to it? (Or, I dunno, change their ways?)

Note: for further discussions of this article, and critiques of Delaware law generally, see:  “Law for Sale: A Study of the Delaware Corporation Law of 1967,” University of Pennsylvania Law Review 117, no. 6 (April 1969): 861–98, and Hal Weitzman, What’s the Matter with Delaware?: How the First State Has Favored the Rich, Powerful, and Criminal―and How It Costs Us All (Princeton, NJ: Princeton University Press, 2022).

Corporate Voters Project, Delaware, Power At Play

Corporations are Voters, My Friends

daelnorwood

Or, An Investigation Into Just How Deep Delaware’s Commitment to the Bit Goes

Corporate Voters Project – Research Note #1

In Delaware, corporations can vote. So can LLCs, partnerships, and trusts, provided they own real property within the municipality where the election is taking place. In “The Company State,” capital not only has a voice – it has the franchise. 

And I want to know why.  

~*~

I first learned about corporations’ access to the ballot when I moved to Newark, DE in the summer of 2018. In breaks between schlepping boxes to our rented house, I caught up on local news, and learned that the City of Newark had recently held a referenda to authorize infrastructure borrowing – bonds to pay for new parks, and better sewers. All the measures passed handily. But of the over 2,000 ballots cast, some 118 “came from non-residents and corporations” – including 31 votes made by one representative of a local real estate company. 

So just as I became a new, working citizen of Delaware, I discovered that my rights paled next to the those enjoyed by old, rentier capital.

Though the election raised many questions – as well as my blood pressure – in the busy season of a new semester on an unfamiliar campus, I let it lie as an oddity. In the wake of that bond election, there was enough concern expressed by other locals that the City Council petitioned the state legislature to revise its charter, to limit the franchise to human residents and human non-resident property owners “in accordance with the principle of ‘one person, one vote.’” The charter was successfully amended in 2019. [1] 

But “dead labour” in the form of company capital, wasn’t done enlivening Delaware’s politics. In late spring 2023, news broke that the leaders of Seaford, DE had got a charter revision bill of their own introduced. It was the mirror image of Newark’s reform. Seaford wanted to empower a property owner, “whether a natural person or an artificial entity,” to vote in all town elections. (It seems the unpopular town council in Seaford was eager to substitute property for people, as voters). Delaware Republicans, eager to claim fifteen minutes of public infamy for supporting corporations’ right to stuff the ballot, used parliamentary tactics to bring the legislature to a screeching halt until the bill passed in the House. It did – though the measure was later quietly smothered in a Senate committee, and never became law. [2]

Needled twice by the news, my interest – and my ire – was piqued. And if that’s not a reason for research, what is?

~*~

If there was anywhere in the United States you might expect to find a corporation voting, Delaware is it. A state that only recently reached the milestone of one million human residents, the self-proclaimed “Corporate Capital of the World” is home to over two million business entities, including two-thirds of the Fortune 500.  

Corporations and LLCs don’t come here for the beaches, though. They sink shallow roots into our clayey soils because the state government offers a uniquely “business-friendly” regime. In return for filing a simple registration form and paying some light taxes and fees, DE state officials ask few questions, and impose fewer regulations. When conflicts between companies arise, as they tend to in the hurly-burly world of modern business, Delaware’s uniquely commercially-oriented Court of Chancery offers speedy, jury-free resolutions. And if that service fails to satisfy, well, the Delaware legislature is ready to bend to meet the whims of capital with a flexibility an Olympic gymnast would envy.

While intentionally obscured from ordinary residents, “The Franchise,” so-called, is well understood by CEOs and corporate lawyers, as well as the state’s politicians and their lobbyist handlers. For multinational conglomerates, secretive shell companies, and mom & pop landlords alike, Delaware offers the best deal within U.S. territory for running your business cheaply, opaquely, and just “legally” enough. 

This frictionless pliability pays for Delaware’s government. In fiscal year 2023, for example, the various fees and taxes levied on nominally Delaware-domiciled corporations and business entities provided $2.9 billion in revenue – a fairly typical 46.4% of total state collections. Whether clued in or not, all Delawareans are complicit in these arrangements. Their tax burden is low, yet their roads remain well-paved – because the First State has decided to use its sovereign power to charge a light toll in return for  displacing the true costs of unchecked capitalism onto the rest of the nation, and the world. [3]

It’s a little gift, from our little state. 

~*~

Still, even in Delaware, the idea that a corporation can vote gives people pause. It sure as heck arrested my attention, and puzzled me. So as the furor of the 2023 Seaford bill died down, and with my new hometown’s recent bond vote in mind, I’ve spent the last month or so digging into the practice of corporate voting in Delaware. 

I’ve tried to keep my questions simple, obvious, and answerable:  

  • How widespread is corporate voting? Does it only happen in Delaware towns, or beyond? 
  • When did the practice take hold – and under what circumstances? Is corporate voting a relic of the state’s Jim Crow past, or a more recent disease of the body politic? 
  • And finally: why? Of all the ways to arbitrarily pervert the democratic process to favor the wealthy, why have Delawareans chosen this method? And how is the local “corporate franchise” connected to “The Franchise” – if it is at all? 

My research plan is similarly straightforward. I’ve completed the first step, a close examination of the current charters of all 57 municipalities incorporated in the state of Delaware.  

Some early findings:

  • 70% of DE municipalities (40 towns & cities) allow corporations and other “artificial entities” to vote in at least some circumstances, usually referenda on annexation and/or bonds; 
  • Three towns (Dagsboro, Fenwick Island, and Henlopen Acres) allow corporate voting in all circumstances
  • The local corporate franchise is premised on property ownership: the “entity” must own real property within municipal limits (or proposed municipal limits, for annexations); and generally companies exercise their voting rights through a representative with power of attorney;
  • Most towns that allow corporate voting limit it using a “one person / one entity” rule – but not all of them do;

There is also a pronounced geography to corporate voting rights in Delaware: it gets more common as you travel south. New Castle County only counts 3 municipalities that allow it; Kent Co. has 16; and Sussex Co., land of beaches, chicken farms, and confederate monuments, has a whopping 21.   

Since it quickly became apparent to me reading charters that property ownership is critical to local corporate voting rights, I also tallied how many Delaware towns enfranchise non-resident property owners, and found that:

  • 81% of DE municipalities (46 towns & cities) allow non-resident real property owners to vote in at least some circumstances (again, most commonly annexation and bond elections); 
  • However, fully 23% of them (13 towns & cities) allow non-residents to vote in all elections – and some even allow people who don’t reside within the municipality to govern, as members of the town council!

As with corporate voting, the enfranchisement of non-resident property owners is more common in Sussex (24 towns), than it is in Kent Co. (17 towns), with New Castle coming last in the number of municipalities that allow it (just 5 towns).

Now that I’ve gotten a sense of the current landscape of corporate and property-defined voting, my next task is to dig into the history of a handful of municipalities, using newspapers and legislative archives, to see if I can find out when – and perhaps why – this corporate citizenship first appeared. 

I have no doubt but that further unpleasant surprises await; but that’s history, in Delaware.

[1]: Charter of the City of Newark, Art. IV,  Sec. 407.2(5); 82. Del. Laws., Ch 107; 

For coverage, see: Karl Baker, “Newark, Delaware, Where Some People Can Vote More than Once,” News Journal, July 5, 2018, https://www.delawareonline.com/story/news/2018/06/29/newark-delaware-where-some-people-can-vote-more-than-once/735314002/; Karl Baker, “Only Person with ‘Heartbeat,’ Not Companies, Should Vote in Newark Elections, Council Says,” News Journal, March 12, 2019, https://www.delawareonline.com/story/news/2019/03/12/latest-backlash-against-llc-voting-newark-sends-heartbeat-voting-standards-dover/3127235002/ ; Josh Shannon, “Newark Asks State to Eliminate LLC Voting Rights from City Charter,” Newark Post, March 13, 2019, https://www.newarkpostonline.com/news/newark-asks-state-to-eliminate-llc-voting-rights-from-city-charter/article_afc76923-c835-5c68-a61e-79fed13d80ca.html

[2] HS 1 for HB 121: “An Act to Amend the Charter of the City of Seaford Relating to the City’s Ability to Authorize Artificial Entities, Limited Liability Corporations’ Partnerships and Trusts to Vote in Municipal Elections Held in Seaford,” (April 20, 2023), https://legis.delaware.gov/BillDetail?LegislationId=130205.

For coverage, see: Meredith Newman, “Why This Delaware Town Wants Corporations to Vote in Its Local Elections,” News Journal, May 11, 2023, https://www.delawareonline.com/story/news/politics/2023/05/11/why-seaford-wants-corporations-to-vote-in-town-elections/70203037007/ ; Meredith Newman, “If Seaford Gets Its Way, These Corporations and LLCs Could Be Voting in the next Election,” News Journal, May 17, 2023, https://www.delawareonline.com/story/news/politics/2023/05/17/delaware-llcs-could-vote-in-seaford-elections-if-charter-passes/70224526007/; Meredith Newman, “House Gop Kills $1.4 Billion Bond Bill After Effort to Allow LLCs in Seaford to Vote Fails,” News Journal, June 29, 2023, https://www.delawareonline.com/story/news/politics/2023/06/29/delaware-house-republicans-bond-bill-not-passed/70368194007/ ; Meredith Newman, “House Democrats OK Seaford LLC Voting Charter, Leading GOP to Pass Spending Bills,” News Journal, June 30, 2023, https://www.delawareonline.com/story/news/politics/2023/06/30/delaware-legislature-bond-bill-grant-in-aid-house-democrats-ok-llc-voting-bill/70372196007/

[3]“State General Fund, Revenue by Category (FY 2022-FY 2024),” Delaware Fiscal Notebook: 2023 Edition (Delaware Department of Finance), Section 2, p. 32, https://finance.delaware.gov/financial-reports/delaware-fiscal-notebook/.

In my calculation of the revenues generated by “The Franchise,” I include the corporate income tax, the franchise tax, the LLC/LP tax, business entity fees, “unclaimed property” (aka escheatment, aka Delaware skimming off of unused gift cards), and the bank franchise tax. 

For more on this system see: Hal Weitzman, What’s the Matter with Delaware?: How the First State Has Favored the Rich, Powerful, and Criminal―and How It Costs Us All (Princeton, NJ: Princeton University Press, 2022).