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This is hugely important. What’s happened here is the first time I’ve seen a major corporation do this and the law was only changed to allow it to happen in 202

This is hugely important. What’s happened here is the first time I’ve seen a major corporation do this and the law was only changed to allow it to happen in 2022. Does this mean Delaware corporations are going to move in larger numbers? This could extract a lot of companies into other states and cause a real big split among corporations and their tax bases. It could cause states to start competing for this incorporation too.

justapassenger 3y ago
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huytersd 3y ago
States incorporate in Delaware for a reason. Isn’t Elon’s move just because his pay ask was rejected in Delaware? It wasn’t a move based on fundamentals. I don’t see why other companies would do this.
- dreamcompiler 3y ago
  His Tesla pay ask was rejected. He wants to move Tesla too but that's going to be much tougher: Tesla is a public company and some of its shareholders will probably object and sue. SpaceX is a private company with many fewer investors who are presumed to be sophisticated, so they can pretty much do whatever they want with very little oversight. Moving Tesla will be much harder.
  - DoesntMatter22 3y ago
    It's not really going to be much harder. They are going to put it to a vote at the annual meeting and if the vote passes then they will move it.
    - f0e4c2f7 3y ago
      For context, Elon's comp was also put to a vote in an annual meeting, passed, a minor shareholder (9 shares) filed a lawsuit and here we are. In the case of Tesla in Delaware at least, the court did not optimize for shareholders wishes. This is what has Elon wanting to move out of Delaware as much as the comp.
  - cma 3y ago
    I wonder if Elon recused himself from the shareholder vote to move SpaceX since it was from personal stuff affecting him at another company?
  - grecy 3y ago
    > His Tesla pay ask was rejected It wasn’t an ask. It was a payout agreed to by the board and shareholders if and only if he added a trillion dollars of value to the company. He did that, and now a court denied the deal. If my company signed a deal where I would get an astronomical bonus for pulling off the impossible then reneged when I did it I would be pretty pissed.
    - TheCoelacanth 3y ago
      That's why you don't negotiate your pay package "against" someone who was also your personal lawyer. If it wasn't for massive conflicts of interest in the process of him getting that deal, it never would have been overturned.
toomuchtodo 3y ago
Companies and investors want stability and consistency. Elon moved SpaceX because he's upset about accountability and governance of corporate structures. It likely won't impact investment from "friends and family" or other individuals who don't mind the volatility for the potential returns and lack of liquidity if private Elon companies stay private to avoid said governance and accountability, but Fidelity might think twice at the next raise. Matt Levin's take is top notch as always: https://archive.today/XMmoF https://archive.today/XMmoF > Of course, this is the reason to incorporate in Delaware: Someone is keeping an eye on managers and boards of directors to make sure that they’re running the company in the best interests of all of the shareholders, not just those of the idiosyncratic controlling founders. You can raise capital from investors more easily, because the investors trust that there are rules to protect them, that they are not subject to the whims of self-interested entrepreneurs. > And yet there is something awkward about a judge second-guessing the CEO compensation decisions of the board of directors of a $600 billion company, even if, yes, it’s the board of Tesla. Musk wanted this pay package, Tesla’s board thought it was a good idea to give it to him, and a majority of Tesla’s shareholders voted to approve it. And then Musk did in fact create a trillion dollars of shareholder value, earning his big pay package and making the shareholders happy. Most of them. But one complained, and that’s enough for a judge to reverse the board’s decision. > This is not a Delaware thing, really, though it is possible that business courts in Texas or wherever might be more sympathetic to CEOs generally, or to Musk specifically. (Bloomberg reports that “Musk also asked X devotees Tuesday to vote on whether he should shift Tesla’s incorporation papers to Texas,” sure.) It is a public company thing: If you run a public company, not only do you have corporate-law fiduciary duties to your shareholders, but you also have genuinely outside shareholders, index funds and activists and gadflies and anyone else who wants to buy stock. If you run a private company, even one incorporated in Delaware (as, for instance, SpaceX is), you can have a lot of control over who your shareholders are, and you can run the company the way they want, which is usually also the way you want. If you run a public company, you have no control over who gets to be a shareholder, or what they can complain about, or what a court will make of their complaints. > You know what’s really awkward? A few weeks ago, even as this decision was pending, Musk was out publicly demanding another giant stock grant from Tesla’s board. The threat that was implicit in the 2018 pay deal — if the board didn’t shower Musk with options, he’d take his attention to SpaceX or elsewhere — is explicit today; Musk posted that he’s “uncomfortable growing Tesla to be a leader in AI & robotics without having ~25% voting control,” and that “unless that is the case, I would prefer to build products outside of Tesla.”
tzs 3y ago
The law in question was one that required unanimous shareholder approval for moves. Now it just requires majority approval. I can find plenty of articles talking about the repeal of that law in 2022, but I haven't found one that tells me when it was enacted. Does anyone happen to know? In 1993 Microsoft moved from Delaware to Washington. Microsoft went public in 1986 and so I'm having a hard time imagining that they could have gotten unanimous shareholder approval for anything in 1993 and so infer that the unanimous requirement law came sometime after that.

justapassenger 3y ago

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huytersd 3y ago

States incorporate in Delaware for a reason. Isn’t Elon’s move just because his pay ask was rejected in Delaware? It wasn’t a move based on fundamentals. I don’t see why other companies would do this.

dreamcompiler 3y ago
His Tesla pay ask was rejected. He wants to move Tesla too but that's going to be much tougher: Tesla is a public company and some of its shareholders will probably object and sue. SpaceX is a private company with many fewer investors who are presumed to be sophisticated, so they can pretty much do whatever they want with very little oversight. Moving Tesla will be much harder.
- DoesntMatter22 3y ago
  It's not really going to be much harder. They are going to put it to a vote at the annual meeting and if the vote passes then they will move it.
  - f0e4c2f7 3y ago
    For context, Elon's comp was also put to a vote in an annual meeting, passed, a minor shareholder (9 shares) filed a lawsuit and here we are. In the case of Tesla in Delaware at least, the court did not optimize for shareholders wishes. This is what has Elon wanting to move out of Delaware as much as the comp.
- cma 3y ago
  I wonder if Elon recused himself from the shareholder vote to move SpaceX since it was from personal stuff affecting him at another company?
- grecy 3y ago
  > His Tesla pay ask was rejected It wasn’t an ask. It was a payout agreed to by the board and shareholders if and only if he added a trillion dollars of value to the company. He did that, and now a court denied the deal. If my company signed a deal where I would get an astronomical bonus for pulling off the impossible then reneged when I did it I would be pretty pissed.
  - TheCoelacanth 3y ago
    That's why you don't negotiate your pay package "against" someone who was also your personal lawyer. If it wasn't for massive conflicts of interest in the process of him getting that deal, it never would have been overturned.

toomuchtodo 3y ago

Companies and investors want stability and consistency. Elon moved SpaceX because he's upset about accountability and governance of corporate structures. It likely won't impact investment from "friends and family" or other individuals who don't mind the volatility for the potential returns and lack of liquidity if private Elon companies stay private to avoid said governance and accountability, but Fidelity might think twice at the next raise. Matt Levin's take is top notch as always: https://archive.today/XMmoF https://archive.today/XMmoF > Of course, this is the reason to incorporate in Delaware: Someone is keeping an eye on managers and boards of directors to make sure that they’re running the company in the best interests of all of the shareholders, not just those of the idiosyncratic controlling founders. You can raise capital from investors more easily, because the investors trust that there are rules to protect them, that they are not subject to the whims of self-interested entrepreneurs. > And yet there is something awkward about a judge second-guessing the CEO compensation decisions of the board of directors of a $600 billion company, even if, yes, it’s the board of Tesla. Musk wanted this pay package, Tesla’s board thought it was a good idea to give it to him, and a majority of Tesla’s shareholders voted to approve it. And then Musk did in fact create a trillion dollars of shareholder value, earning his big pay package and making the shareholders happy. Most of them. But one complained, and that’s enough for a judge to reverse the board’s decision. > This is not a Delaware thing, really, though it is possible that business courts in Texas or wherever might be more sympathetic to CEOs generally, or to Musk specifically. (Bloomberg reports that “Musk also asked X devotees Tuesday to vote on whether he should shift Tesla’s incorporation papers to Texas,” sure.) It is a public company thing: If you run a public company, not only do you have corporate-law fiduciary duties to your shareholders, but you also have genuinely outside shareholders, index funds and activists and gadflies and anyone else who wants to buy stock. If you run a private company, even one incorporated in Delaware (as, for instance, SpaceX is), you can have a lot of control over who your shareholders are, and you can run the company the way they want, which is usually also the way you want. If you run a public company, you have no control over who gets to be a shareholder, or what they can complain about, or what a court will make of their complaints. > You know what’s really awkward? A few weeks ago, even as this decision was pending, Musk was out publicly demanding another giant stock grant from Tesla’s board. The threat that was implicit in the 2018 pay deal — if the board didn’t shower Musk with options, he’d take his attention to SpaceX or elsewhere — is explicit today; Musk posted that he’s “uncomfortable growing Tesla to be a leader in AI & robotics without having ~25% voting control,” and that “unless that is the case, I would prefer to build products outside of Tesla.”

tzs 3y ago

The law in question was one that required unanimous shareholder approval for moves. Now it just requires majority approval. I can find plenty of articles talking about the repeal of that law in 2022, but I haven't found one that tells me when it was enacted. Does anyone happen to know? In 1993 Microsoft moved from Delaware to Washington. Microsoft went public in 1986 and so I'm having a hard time imagining that they could have gotten unanimous shareholder approval for anything in 1993 and so infer that the unanimous requirement law came sometime after that.