The Delaware Historical Society recently hosted an engaging and, ironically, distinctly forward-looking event that neatly illuminated both threats and opportunities the state faces in plotting our economic future.
The tenth annual “History Makers” dinner featured two of Delaware’s finest: Chancellor Andre Bouchard and CSC Corporation CEO Rod Ward, home-grown individuals of integrity and vision, leaders ably representing globally-renowned institutions that have never been more important to our state.
This particular rubber-chicken affair was anything but the prototypical exercise in self-congratulation by a roomful of local players. Refreshingly, Bouchard and Ward presented a clear-eyed examination of Delaware’s special franchise as the nation’s preeminent corporate hub – a lucrative and oft-ballyhooed point of pride but a present fact no one should take for granted.
It was a timely discussion given that the Court of Chancery – so central to the state’s reputation in this regard – is both celebrating its 225th anniversary and under a kind of assault by, in the words of State Senator Greg Lavelle, “astroturf” activists unhappy with a recent decision. More on that shortly.
With 1.2 million entities listed in Delaware, as much as 40 percent of the state’s revenues are tied to our position as a preferred corporate venue. That means funds coming into state coffers via the corporate franchise tax, escheat (abandoned property), and the robust, not-so-micro economy that has bloomed around incorporation – a thriving legal practice and service companies like CSC – are Delaware’s most vital financial lifeblood.
Should that perch get wobbly, the $400 million hole that Dover budget writers are now scrambling to fill would shimmer like the proverbial lost change in the couch. We hardly dare imagine what the city of Wilmington would look like without the vitality of the courts and the world-class law firms left keeping downtown alive.
Bouchard was appointed to the top spot on the Court of Chancery in 2014 after a sterling career as a litigator and he has been widely praised for meeting the high bar set by previous chancellors. The court is a distinctly Delaware institution with heritage in feudal England, where a High Court of Chancery (led by noble notables including Sir Thomas More) “provided judicial relief to those left remediless because of the procedural rigidity, corruption, and inadequate enforcement machinery of the common law courts.”
On the court’s bicentennial, the late former Chancellor William T. Quillen wrote that our Delaware version had proven to be a sustained success, “never [becoming] so bound by procedural technicalities and restrictive legal doctrines that it has failed the fundamental purpose of an equity court — to provide relief suited to the circumstances when no adequate remedy is available at law.”
The nimble, steady application of these principals by highly qualified individuals continues to make the court an object of international repute, drawing litigants ranging from huge corporations to local property owners confident their disputes will be resolved swiftly, fairly and rationally – without a jury.
President and CEO of CSC since 2010, Ward is a fourth-generation descendant of a company founder. Since its beginnings in 1899, CSC has grown to employ more than 2,500 in Delaware and 17 countries, with a business expanded far beyond providing basic services to Delaware LLCs and other entities.
Ward explained that while Delaware’s corporate “brand” is built on strong foundations, we should not assume it will continue forever. He listed concerns including short-sighted increases in the corporate franchise tax, questions about the state’s handling of escheat, and the need, in a Wikileaks and Panama Papers-era, to ensure the absolute highest ethical standards when it comes to transparency.
In a roomful of judges and lawyers, Ward and other panelists were too polite to mention specific court cases or legislation. But I imagine these guardians of the Delaware corporate brand would also look askance at capricious legislative tinkering spurred by unhappy litigants simultaneously waging an expensive PR campaign trashing the state and one of our enduring hallmarks of excellence.
Providing comfort to those efforts makes no sense. The Court of Chancery is an extremely rare example where the private sector and government have come together in a seamless, nonpartisan way to sustain an institution that has delivered inestimable value to stakeholders of all kinds, not least of which our little state’s bottom line. Sometimes Delaware’s size and intimacy can work to hold us back, but not here: for decades, the Judicial Nominating Commission, the Bar Association, the legislature and successive governors have delivered a wildly productive alchemy that no state has been able to reproduce.
I take from the Historical Society’s dinner two economic conclusions.
First, we have no option but to nurture and fortify the state’s leading global perch as a corporate destination of choice. And we should continue to look for smart ways to leverage that unique position that create jobs and entrepreneurial opportunity. This would be the opposite of entertaining bills that would strip the court of its well-earned authority to make equitable decisions and give watchers of this space reason to question if Delaware has its act together.
Second, we need a serious Plan B should our special status take a turn for the worse. This means developing a business plan for the state – an economic strategy with clear but ambitious objectives that starts with what we can control (why not aim to run the best and most efficient government in the country?) and builds on our ineffable strengths: our central location and natural assets, the University of Delaware and the depth of experience and talent we have in industries like the sciences and credit products and financial services.
Due in part to business leaders like Ward, Governor Carney is said to be looking favorably upon the idea of creating a public-private entity to help drive economic development in the First State. But it would be a mistake to expect some new organization can or should deliver a strategy. A plan should come first, with an organizational structure fit to purpose for executing on a vision inspired by the defining characteristic of the Court of Chancery itself: being the world’s best.