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Doubts about his stability notwithstanding, Steele expressed the fears of many Wilmington lawyers who worried that shareholder activists would be able to seize on the crisis of 2008 to push Congress and the Securities and Exchange Commission to adopt reforms that would reduce Delaware's influence over corporate law or, in the worst case, federalize it. That didn't happen, and it certainly won't now that the Republicans have captured the House of Representatives and guaranteed two years of gridlock in Washington.

The activists did win a version of proxy access from the SEC, but its effects will likely be quite modest. Even that reform has been delayed, pending a judicial challenge from the Business Roundtable. Overall, Delaware has weathered a difficult stretch, book-ended by the passage of Sarbanes-Oxley in 2002 and Dodd-Frank this year, as well as anyone could have expected.

Nevertheless, the Wilmington bar shouldn't get too merry this holiday season. The Delaware corporate law complex remains a profoundly elitist endeavor in a populist era. Two courts, 10 judges and a handful of law firms in the nation's smallest state have crafted American corporate law for a century. Companies incorporated in Delaware pay the state hundreds of millions of dollars a year in franchise taxes. From the perspective of a Tea Partier in the heartland or a lefty in Berkeley, the Court of Chancery might well look as mysteriously and suspiciously powerful as the Federal Reserve.

Delaware law is a nuanced body of doctrine that evolves slowly -- virtues that smell of appeasement and ineffectuality to legislators searching for obvious villains. Unlike the Fed, Delaware law has the advantage of being faceless and largely unknown outside legal circles, which reduces its attractiveness as a target for a Congress intent on showing its ability to set things right in corporate America. But the possibility of such action will
always exist -- as Delawareans who remember efforts in the late 1970s to federalize corporate law know -- and it only increases when populists are baying.

While easy to caricature as a tool of corporate America, the Court of Chancery, in a fistful of other rulings, recently demonstrated a significant capacity to change. For example, in September, Chancellor William B. Chandler III took the rare step of invalidating Craigslist Inc.'s poison pill and offered a broad statement on the purpose of a corporation.

Craigslist was in no danger of being taken over, but that didn't stop controlling shareholders Craig Newmark and James Buckminster from installing a poison pill as part of a series of moves against minority investor eBay Domestic Holdings Inc. Chandler held that Newmark and Buckminster installed a pill only "so that their vision of Craigslist's culture can bind future fiduciaries and stockholders from beyond the grave." Providing free online classified advertising may be a praiseworthy undertaking, the judge held, but it does not constitute a "corporate culture" worthy of protection under Delaware law.

The chancellor thereby took on the classics of Delaware takeover law. His predecessor, William Allen, held in the 1990 case Paramount v. Time that the Time board could consider the disparate effect two possible transactions might have on the company's magazines in deciding which deal to take, a decision reflecting a belief that shareholder value shouldn't be the ultimate measure of a company's worth.

In Chandler's view, it is. Corporate culture, he wrote, is not "worthy of protection as an end in itself. Promoting, protecting, or pursuing non-stockholder considerations must lead at some point to value for stockholders." Companies are the property of those who own them rather than institutions with a social function to be defined and protected by management and directors -- who, like Newmark and Buckminster, tend to confuse their own interests with those of the company.

Shareholder activists have been making this argument for a generation. Delaware judges have become increasingly skeptical of boards and CEOs, a trend reflected in Chancery's suspicion of target CEO behavior in leveraged buyouts, and Chandler's decision in Craigslist is the most candid admission yet of the shift.

Chandler joined the Court of Chancery in 1989, when J. Travis Laster, Chancery's newest judge, was still in college. Vice Chancellor Leo E. Strine Jr. was appointed in 1998, when Laster was a second-year associate at Richards, Layton & Finger PA in Wilmington. Laster came of age as a lawyer at a time when Delaware judges were becoming more skeptical of boards and management and when the federal government was asserting control over issues that had traditionally been matters of state corporate law, and his jurisprudence reflects that background.

Laster joined the Court of Chancery in the fall of 2009 and began his tenure with several opinions that showed a desire to preserve Delaware's role as an important arbiter of corporate behavior. He issued rulings that asserted state law jurisdiction over violations of federal securities and insider trading regimes. He also suggested a revision to Delaware treatment of the shareholder voting mechanics, a technical issue but a critical one, given that the legitimacy of Delaware's system is based on shareholder voting. The Supreme Court reversed him on the point but asked the state legislature to fix the issue.

Laster has been quieter over the past several months, a hiatus that probably owes more to the vagaries of the docket or to an attempt to assume a more modest judicial profile than to a fundamental change in outlook. However much Steele may lament it, Delaware has no choice but to engage with shareholder activists, federal regulators, academic and other creatures in the governance bestiary. Regardless of who's in power in Washington, that won't change.