Should Corporate Law Go Private?

Delaware’s dominance in corporate law is traditionally attributed to its expert judiciary, extensive case law, specialized bar, responsive legislature, and insulation from interest-group lobbying—factors thought to produce a desirable product for firms. This Article challenges the continued viability of that formula, arguing that Delaware faces daunting challenges in maintaining an optimal corporate law regime. We nevertheless show that the state retains an underappreciated secret weapon—the ability of Delaware corporations to opt out of courts and adopt fully privatized law—that can bolster and even strengthen its competitiveness.

We make three contributions in this Article: conceptual, practical, and prescriptive. Conceptually, we show that prevailing jurisdictional competition debates are unhelpfully simplistic as to both demand and supply side features in the market for corporate law. On the demand side, the highly heterogeneous economic, strategic, and financial challenges facing corporate entities make a one-size-fits-all governance model highly improbable. On the supply side, law-producing states must be mindful of this heterogeneity while balancing their own goals and constraints—revenue needs, political capture, interest group pressure, and other frictions. In place of a simplistic account of regulatory competition, we develop and refine a “differentiated product” framework that reflects these demand- and supply-side heterogeneities and delivers concrete insights about the nature of regulatory competition in corporate law. 

Our second contribution is a practical application of our conceptual framework: using Delaware’s 2025 legislative amendments as a case study, we demonstrate how interest-group politics shaped the process and outcome in ways that appear inconsistent with the state’s espoused goal of defending its incorporation franchise. Our conceptual analysis corroborates empirical evidence indicating that Delaware did not improve its competitive position through the reforms. More importantly, it suggests that in Delaware (as well as other jurisdictions), the veneer insulating corporate law production from broader interest group pressures has worn thin, a state of play that appears unlikely to abate for the foreseeable future.

Nevertheless, our prescriptive contribution offers an escape hatch from this perilous political predicament: private ordering. Other recent Delaware reforms have explicitly empowered shareholders to design governance terms through contract, and even to outsource the adjudication function. We propose a transactional template for leveraging private ordering to deliver stable governance arrangements better insulated from interest group politics, enabling Delaware corporations to remain in state while revitalizing the broader competitive landscape of corporate law.