Delaware Leads the Nation in Business Incorporation

Washington, D.C., is working against it

BY NEIL BRADLEY

FEW STATES HAVE ESTABLISHED for themselves a reputation that is more positive with the business community than our nation’s first state, Delaware.

Delaware’s corporate environment, shaped through the state’s General Corporation Law and applied through its unique Court of Chancery, has made it first in the nation with respect to business incorporation. That’s why—as the Delaware Division of Corporation’s 2021 annual report found—66.8 percent of all Fortune 500 companies are incorporated in the state. Moreover, an astounding 93 percent of U.S.-based initial public offerings in 2021 chose Delaware as their corporate home.

Unfortunately, this example of dynamism being set by Delaware isn’t being followed by those in Washington. Now, as a result of an emergent neo-Brandeis movement, named after a Supreme Court justice from the early 20th century with a certain disdain for business, rogue regulators are threatening the state’s hard-earned successes.

Across the federal government, there is a unified message emanating from some lawmakers and virtually all regulatory agencies that businesses, particularly corporations, are to blame for the current economic calamities of high inflation and low growth facing Americans.

The solution, as they see it, is regulation. If only government could impose more constraints on the market, that would set things right. At present, bureaucrats at the Federal Trade Commission and the Department of Justice are engaged in an all-out blitz to achieve this goal. Both agencies are working in concert to throw as many hurdles as possible in the way of corporations looking to grow.

Of particular concern is the agencies’ efforts to rewrite merger and acquisition guidelines as well as competition policy. These efforts have come in the form of a regulate first, ask questions later approach.

In an environment where businesses are arbitrarily placed under scrutiny for their success, many will look out across the regulatory landscape fraught with administrative actions and judgments against businesses and conclude that it is simply too risky to attempt any merger and acquisition activity. In a state that has long worked to establish a regulatory and legal framework to encourage growth, the federal government now stands in the way as its biggest impediment.

Faced with these challenges, Delaware and the business community at large need to be clear in making our case to lawmakers, regulators, and most importantly, the public to whom they are ultimately accountable that business is the primary driving force behind America’s dynamic and competitive free enterprise environment.

Delaware shows that where governments work to establish a business environment that is not laden with regulatory roadblocks and constrained by the ever-changing whim of ideologically motivated regulators, economies and people thrive. Washington D.C. would do well to take a few pages from Wilmington when considering how best to ensure the health of our nation’s economy.

Neil Bradley is the executive vice president, chief policy officer, and head of strategic advocacy at the U.S. Chamber of Commerce.