Elon Musk's Clash With Delaware Has Enormous Stakes

Elon Musk got into a fight with Delaware, and the consequences for American business is bigger than you might think, writes Michael Steinberger in the New York Times Magazine. For a century, tiny Delaware has been the legal home for most big US companies, its Court of Chancery serving as the country's unofficial corporate referee. The story cites the remarkable stat that two-thirds of the companies in the Fortune 500 cite Delaware as their "legal domicile." But that grip is now in danger. After a Delaware judge voided Musk's record Tesla pay package, an angry Musk shifted the company's headquarters to Texas and implored others to do the same. Venture firm Andreessen Horowitz, Coinbase, Dropbox, Dell, and others have since followed, mostly to Texas and Nevada.

Delaware, which relies on corporate registrations for about a third of its budget, is scrambling to keep its franchise. It passed a new state law "making it harder for judges to rule against tycoons like Musk and making it harder for investors to sue them," writes Steinberger. Critics see the move as the state entering a "race to the bottom" with Texas and Nevada, a development that "will result in ever weaker checks on boardroom malfeasance." As rival states openly court corporations with more management-friendly rules, legal scholars are asking whether Delaware's century-long dominance—and the American system of state-based corporate oversight—is beginning to unravel. For the deeper legal and historical analysis, read Steinberger's full piece.