The dismantling of Delaware’s corporate code in service of billionaires took a great leap forward today when state senate Democrats unveiled proposed legislation that will dramatically alter corporate governance with national implications. Less than a year after Tesla CEO (and world’s richest person) Elon Musk reincorporated his companies from Delaware to Texas, and just weeks after Meta announced plans to do the same, a bipartisan coalition of legislators made clear that they are ready to give billionaires whatever they want in order to maintain Delaware’s standing as the nation’s corporate capital.

According to a press release from the Senate Democrats, the bills seek to address “specific concerns that lawmakers have received since late January’s flurry of reincorporation announcements regarding the importance of certainty as companies undertake efforts to have unconflicted directors make key corporate decisions.”

In a message to the senate Democrats, Delaware Call asked if the proposed legislation would unfairly benefit powerful investors. We are awaiting a response.

The announcement also comes after the Delaware Supreme Court ruled in favor of a reincorporation dispute involving Trip Advisor’s parent company, making it easier for companies to leave the state, a move that was praised by Nevada’s secretary of state. 

The reason for Trip Advisor leaving Delaware? Greater protections against liability for directors and officers under Nevada’s corporate code, which shields the most powerful people in a corporation from accountability, even if they breach their fiduciary duty. Texas’s substantive law is less draconian but companies perceive that the state’s political climate will ensure favorable rulings, and in a national environment where billionaires and corporate executives are emboldened to push or exceed the boundaries of the law, they are predictably in search of jurisdictions that will allow them to do so. 

Now in Delaware — where incorporation fees amount to one-third of the state’s $6 billion budget — political leaders want to change the corporate code to align more closely with Nevada and Texas, according to the synopsis of Senate Bill 21: “The amendments provide that controlling stockholders and control groups, in their capacity as such, cannot be liable for monetary damages for breach of the duty of care.”

As the Financial Times explained, SB 21 would “make it more difficult for shareholders to show that a corporate director is ‘conflicted’ in a deal, a legal status which makes it easier to prove the transaction was unfair to ordinary shareholders. . . . The legislation also provides an easier legal path for deemed conflicted transactions, which arise when a controlling shareholder seeks a deal where they may personally benefit, to repel shareholder litigation.”

This legislation is likely to draw stiff opposition from public pension funds, unions, consumer advocates, and others who care about the rule of law. 

Why now? In an interview with Business Insider earlier this month, Gov. Matt Meyer indicated that Delaware corporate law may have drifted too far from the interests of corporate officers.

“It’s really important we get it right for Elon Musk or whoever the litigants are in Delaware courts,” he said. “We’re cognizant that there may be some things that need to change. We’re going to work on them.”

Musk famously criticized Delaware after the state’s renowned Court of Chancery rejected his $55 billion pay package at Tesla. Musk went on a social media tirade against the decision and its author, Chancellor Kathaleen McCormick, calling it “absolute corruption” and advised his followers to “never incorporate your company in the state of Delaware.” Since then, Musk’s legions of his followers have pressured companies to leave the state. 

In a message to Delaware Call, Meyer said he has not yet taken a position on the bill, but according to the Business Insider interview, Meyer met with “leading corporate legal brass and state government leaders to chart a path forward.”

“I think within the coming weeks, you’re going to see some things rolled out that will help move our state forward and bring us into 2025 and beyond to make sure we’re protecting and growing the corporate franchise,” he said.

In addition to SB 21, the same bipartisan coalition of lawmakers also filed Senate Concurrent Resolution 17, which asks the Council of the Corporation Law Section of the Delaware State Bar Association to “prepare a report of recommendations for legislative action regarding awards of attorney’s fees in certain corporate litigation cases.”

For CEOs seeking to replicate Musk’s controversial Tesla pay package, the changes to Delaware’s corporate code will allow them to do so without facing similar legal obstacles. The billionaires are sure to love it.