In today's founder-centric climate, many VCs avoid confrontation to protect their reputation (NPS) within the founder network. This fear of being blacklisted leads them to abdicate their fiduciary duty to shareholders, failing to intervene even when a company's performance is dire and hard decisions are needed.

When governments become top shareholders, corporate focus shifts from pleasing customers to securing political favor and appropriations. R&D budgets are reallocated to lobbying, and market competition devolves from building the best product to playing the policy game most effectively, strangling innovation.

The financial benefit of many shareholder lawsuits is illusory. Payouts for breaches of duty typically come from Directors & Officers (D&O) insurance policies, which the corporation itself pays for. This circular flow of funds means shareholders are indirectly paying for their own settlement, questioning the efficacy of such litigation.

Corporate statutes in Delaware are not primarily created by legislators, who often lack expertise. Instead, the Delaware State Bar Association's corporate law section drafts proposed statutes in a technocratic manner, which the legislature then typically rubber-stamps, further shielding the process from partisan politics.

Opponents with deep pockets can initiate lawsuits not necessarily to win, but to drain a target's financial resources and create immense stress. The astronomical cost and duration of the legal battle serve as the true penalty, forcing many to fold regardless of their case's merit.

Delaware's status as a corporate haven is no accident. In the late 1800s, it strategically designed its legal system to be pro-business by constitutionally mandating political balance on its courts and requiring a two-thirds legislative vote to change corporate code, insulating corporate law from political pressure.

Investment research suggests the significant performance signal in governance isn't achieving a perfect score, but rather avoiding companies in the worst decile. The key is to steer clear of clear red flags—like misaligned boards or poor capital allocation—as this is where underperformance is most clearly correlated.

The current threat of companies leaving Delaware is not new. In the 1980s, after court rulings increased director liability and limited hostile takeover defenses, boards threatened to leave. This pressure forced Delaware's legislature to amend its corporate code, making it significantly more protective of managers and directors.

Geopolitical shifts mean a company's country of origin heavily influences its market access and tariff burdens. This "corporate nationality" creates an uneven playing field, where a business's location can instantly become a massive advantage or liability compared to competitors.