(Bloomberg) — The lobbying powerhouse for the US private equity industry is throwing its weight behind a controversial bill to overhaul Delaware’s corporate laws that could make it harder for shareholders to beat companies and executives in court — a long-simmering campaign reignited by Elon Musk.
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A team of five lobbyists hired by the American Investment Council, which is funded by the likes of Blackstone Inc. and KKR & Co., has been pressing lawmakers to support the bill. If passed into law, the “billionaires’ bill,” as some detractors call it, would lower the standards for insider deals involving controlling shareholders and for rich compensation packages for founders like Musk. An army of professional influencers has been “swarming the statehouse,” as one legislator put it.
The bill, which is up for a decisive vote in the Delaware legislature as early as Tuesday afternoon, comes after growing criticism that the state’s corporate law has become obstructive. But the effort gained new urgency when Musk, the world’s richest person, gave Delaware a scare by reincorporating his companies in Texas and Nevada. He acted after the Chancery Court’s chief judge shot down his Tesla Inc. pay package, the largest ever awarded to a business leader.
Big Stake
Private equity firms have a big stake in Senate Bill 21 because they often retain a significant holding in companies after listing them through initial public offerings, exposing them to potential shareholder lawsuits that can drag on fund returns. Among the PE players, the biggest firms have the most to gain from the bill, since it may help contain shareholder suits in take-private or take-public transactions, said Bill O’Neil, a partner at Winston & Strawn who advises corporations and private equity firms.
“There is no bad news here for private equity,” O’Neil said.
Critics of SB 21, including public pension funds and shareholder advocacy groups, say fears of a corporate exodus are overblown and have been conjured up to push through a giveaway to billionaires and powerful corporate insiders at the expense of smaller stockholders.
“The lobbying over this bill is getting intense,” said Delaware Representative Sophie Phillips, a Democrat who opposes the bill. “Lobbyists for both sides have been swarming the statehouse. This is the most intense lobbying I’ve ever seen on a single piece of legislation.”