Businesses to Become Voters in Delaware Town’s Economic Proposal

Seaford, Delaware, a small town about 40 miles inland from the Atlantic Ocean, wants to ratchet the state’s corporate-friendly reputation up a notch, trying to give town-based businesses votes on electing its mayor and council members.

Nearby smaller coastal towns in the state have experimented with similar laws to give business owners who flee the state after summer to have a say in municipal matters. But Seaford’s initiative is one of the first attempts in the state—if not the first—wherein a town aims to turn businesses into voters as an economic development tool to spur more outside investment.

Opponents of the proposal say the initiative is the “corporations-are-people” concept gone amok, with businesses gaining outsize influence on matters that affect full-time residents.

“We have an aggressive stance on how we are keeping the businesses here and growing and attracting businesses,” Seaford Mayor David Genshaw said. “Businesses in our community that have invested money here deserved to participate in elections, if they want, with a single vote.”

A state bill (HS1 for HB121) would allow Seaford to revise its charter to authorize “artificial entities—including limited liability companies (LLC), corporations, trusts or partnerships—to vote in municipal elections held in Seaford.”

That would result in about 230 business entities based in Seaford becoming eligible to vote, according to Delaware legislatures. That number could have a sizable influence in Seaford since only 340 of its 8,000 residents cast ballots in an April election, according to state election records.

The bill passed the state’s House chamber on June 30 but wasn’t taken up by the Senate Friday. Regardless of the final outcome, the town’s leaders plan to reintroduce the bill in the next available opportunity, Genshaw said. “It will just remain at Dover until the next available opportunity, which I believe someone told me could be January when it would come back up,” he said.

Seaford was once known as “the nylon capital of the world,” backed by the world’s first nylon producer, DuPont. But the town’s economy has struggled since Dupont’s departure and a cocaine crack pandemic arrived. It was a “complete flip” Genshaw said, “We have been working since the 80s to rebuild the town into something different.”

The town is trying to woo investors who have been in the community to stick around, as well as new businesses eyeing rental buildings. The demand for voting rights is usually from “downtown investors” who buy old buildings, refurbish them and create jobs, Genshaw said.

Under the proposal, each business based in Seaford would get one vote. Business owners who are residents in Seaford are exempted as they already get a vote from their residency. Owners of multiple businesses in Seaford also get only one vote.

Companies must cast their vote by “a duly executed and notarized power of attorney” and are required to register the person to the town’s “Book of Registered Voters.”

“I’ve been in business 53 years on High Street, and I’ve never had a choice to vote for mayor and council people,” said Sara Lee Thomas, who owns Fantasy Beauty Salon in downtown Seaford but lives less than a mile outside Seaford city limits.

Seaford, Delaware’s City Hall

Photographer: Yun Park/Bloomberg INDG

‘Disenfranchising’ Voters

Seaford’s initiative has a slew of opponents, including lawmakers and residents, who are concerned that voting companies’ influence in the town’s public policy might be bigger than envisioned, given historically small individual voter turnout.

The number of votes for the city council, held every other year, total only about 300, according to Delaware Representative Eric Morrison (D). Only 500 to 600 people vote in the bi-annual mayoral contest.

Allowing nonperson entities to vote is “disenfranchising” people, said Morrison.

Inviting corporations to vote will mean that they will probably have an “outsize influence on the politics in that town,” Rachel Goldman, partner at Bracewell LLP, added.

Genshaw isn’t concerned. The mayor predicts only 10 to 12 businesses to participate and says their participation is “not going to swing elections.”

Finding who’s behind a corporate vote also could be difficult, some say. One person could own hundreds of different LLCs and appoint different individuals to vote, said Craig de Mariana Aleman, Managing Attorney at Aleman & Associates and owner of four businesses in downtown Seaford.

“If individuals have business interests in Seaford, it will be worth it to set this up,” Aleman added. “It could be worth millions of dollars. There’s a lot of redevelopments going on.”

Aleman warned of outsiders potentially engaging in “nefarious activity” given the opportunities in town.

Coastal Practice

Several towns near seashores, including Fenwick Island, Henlopen Acres and Dagsboro, have long allowed businesses to vote for decades. Rehoboth Beach, known as President Biden’s favored vacation spot, considered the option in 2017 but rejected it after residents’ pushback.

The majority of residential lot owners in Henlopen Acres are non-residents, the town’s mayor Joni Reich said. “We welcome the participation of all our owners in the affairs of the town,” Reich said.

Fenwick Island also has long granted businesses a vote on selecting seven commissioners. The commissioners—all voluntary positions-- oversee the police department and govern issues like zoning ordinances, licenses and taxes.

“Back in the day, nobody lived here full time,” Fenwick Island mayor Natalie Magdeburger said. “Everyone contributed to paying for the services that they wanted here in the summer, so it didn’t really become an issue. Everyone who pays taxes should get a say.”

Seaford’s Genshaw acknowleges his town is borrowing other towns’ playbook. “We’ve literally mirrored other communities’ charter change that the state legislature has already passed,” Genshaw said.

Many of the towns that have adopted the voting rights measure are in Sussex County, including Seaford. But comparing towns in the eastern part of Sussex County and the western part is like “apples and oranges,” Aleman said. “They don’t have the same problems.”

“It upsets me that there’s so much taxpayer money that’s wasted when the money can be spent more wisely in more redevelopment to help with some of homelessness issues or drug problems that we have,” he said.

Governance Issues

Delaware is home to over 1.8 million LLCs, and 66% of all Fortune 500 companies are incorporated in the state, according to the state’s 2021 annual report.

Few Seaford-based companies are publicly traded. But any proliferation of the proposal could become a corporate governance issue. Shareholders have already been aggressively seeking details about how companies devote money for political lobbying.

“Shareholders are going to be very concerned with who those companies are voting for,” Goldman said. “It could create a lot more shareholder disputes or proxy actions or other further issues for companies that are not small or closely held.”

Charles Elson, a retired business professor and founder of the John L. Weinberg Center for Corporate Governance at the University of Delaware, also noted that another key shareholder dilemma: a company is not a political entity, but a group of people working together to create a business.

“You can’t force a shareholder to use their money to take a view contrary to what they believe in,” he said.