Corporate vandalism

SB 21 is making its way through the Delaware legislature. From my perspective, it's ill advised for a number of reasons.  Here's just one: with little deliberation, it will leap frog Delaware over all the MBCA states so that it sits next to Nevada amongst the least protective of public shareholders in the country. It's really inexplicable. 

In any event, proponents of this bill have been saying that this bill has nothing to do with Elon Musk or his pay package, to wit:

In the wake of the report, the sponsor of SB 21, Senate Majority Leader Bryan Townsend, said his legislation had nothing to do with Musk, and that he has “no reason to believe it has any impact” on his billion-dollar pay package dispute.

“This legislation applies equally to every Delaware corporation, and it’s not retroactive, so it’s not about affecting any kind of pending litigation,” Townsend said in a reference to Musk’s pay dispute, which is currently pending before the Delaware Supreme Court.   (Here)

But, today, the actual truth comes out in the form of the most recent changes to the draft of SB 21. For the most part, the changes are cosmetic, except that the drafters have back-tracked on their attempt to write Weinberger v UOP and the Delaware common law jurisprudence on fairness out of the law. Entire fairness lives on ... for now.  And the board level cleansing mechanism is closer to the MBCA than the earlier version, so that's good.

What's most important and what gives away the whole game is what appears in the Synopsis of the bill in the second to last paragraph:

And there it is. The whole game. This legislation is not retroactive, but the lack of retroactivity shall not affect the ability of a court to reach an outcome consistent with one that would be dictated by this Act. 

What does that mean?

Well, don't forget the Musk pay package is up on appeal. This legislation - the whole thing - appears to be about dictating an outcome for the Tornetta appeal. Not content to sit by and wait for the Delaware Supreme Court to reach that outcome on its own, which it very well could have done on its own, the sponsors of this bill appear to want to ensure the court comes to this conclusion. The Synopsis clarifies the question of retroactivity in a way that signals to the Court how it should decide on a pending case. Wow. I mean, seriously? Wow.

-bjmq