Delaware is facing backlash from critics as it rushes to pass legislation aimed at protecting its reputation as the corporate capital of the world following a judge’s rejection of Elon Musk’s Tesla compensation package. The bill, supported by Delaware Governor Matt Meyer, is being fast-tracked through the legislature to maintain the state’s status as a premier destination for businesses to incorporate.
While proponents argue that the bill will modernize corporate law and maintain a balance between corporate officers and shareholders, critics, including investors and pension funds, fear it will lower corporate governance standards and limit shareholder rights. The legislation has already passed the state Senate unanimously and is expected to move forward in the House.
The controversy stems from a Delaware judge’s decision to invalidate Musk’s compensation package, leading Musk to criticize Delaware and relocate Tesla’s corporate listing to Texas. Other businesses, including Meta Platforms and DropBox, are reportedly considering similar moves in response to the legislation.
The bill aims to provide more protections to corporations in conflict-of-interest cases and limit the documents that companies must produce in court. Critics argue that these changes will make it harder for shareholders to hold corporate officers accountable for their actions.
Delaware heavily relies on corporate license fees and tax revenues, with about one-third of the state’s revenue coming from these sources. The potential exodus of businesses as a result of the new legislation could have significant financial implications for the state. As the debate continues, legal challenges and further developments are expected to unfold.
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