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Put yourself in Drew Houstons position. You are running Dropbox. Do you want to spend your time navigating legal uncertainty—or focusing on your business? This

Put yourself in Drew Houstons position. You are running Dropbox. Do you want to spend your time navigating legal uncertainty—or focusing on your business? This isn’t just one case. First, it was Musk’s pay package. Now, it’s TripAdvisor. What comes next? Each ruling seems to reshape long-standing corporate governance norms. And when that happens, how long will it take Delaware to provide clarity? How much will companies and shareholders spend on legal fees while they wait? Also who does this all benefit except for plaintiff-litigation attorneys?

JumpCrisscross 2y ago
> Do you want to spend your time navigating legal uncertainty Texas is arguably more legally volatile than Delaware. Just look at statutory volume. Put another way, Texan lawmakers make headlines in ways Delaware lawmakers do not. > who does this all benefit except for plaintiff-litigation attorneys? Texan courts are slower than Delaware’s. Also, there is now a multi-billion dollar incentive to find the areas of law Texas hasn’t patched that Delaware has. Would be shocked if we don’t see a massive boom in Texan corporate litigation in the coming years. The proximate cause was the pay package. The root cause is these leaders don’t have influence in Delaware. They do in Texas, and they want to wield that. For their companies’ shareholders, that might wind up a win-win.
- patrickhogan1 2y ago
  I agree with your point about the Musk case. I believe it will be litigated again. Regardless of the corporation's domicile or either of our opinions on that issue, there is ambiguity and a scale factor that will likely result in further litigation. The case that bothers me is the Moelis case. The West Palm Beach Firefighters' Pension Fund v. Moelis & Company case is troubling, because it’s a classic example of a Delaware court looking at a company’s governance structure and saying, “Wait a second, this seems bad,” even though it’s exactly what everyone signed up for. On February 23, 2024, the Delaware Court of Chancery ruled in favor of a minority shareholder against Ken Moelis. Yes, that Ken Moelis <https://en.wikipedia.org/wiki/Ken_Moelis https://en.wikipedia.org/wiki/Ken_Moelis>, the well-known investment banker whose name is literally the brand. Analysis of the case is located here: <https://clsbluesky.law.columbia.edu/2024/06/10/does-the-moelis-decision-warrant-a-quick-legislative-fix/?utm_source=chatgpt.com https://clsbluesky.law.columbia.edu/2024/06/10/does-the-moel...>. The court found that Moelis & Company’s governance structure—where Moelis, through his majority voting power, essentially controls the board—violated Delaware corporate law. Now, imagine you’re a minority shareholder. You buy stock in Moelis & Company, a firm run by a guy named Moelis, with a governance structure designed to keep him in charge. Then, at some point, you look around and say, “Hey, wait a minute, this Moelis guy has too much control over the board!” Yes. That’s the whole point. That’s why this company was set up in Delaware. And yet, the Delaware court said no, this arrangement is not okay. Which is interesting because Delaware is supposed to be the place where companies go for predictable, business-friendly rules. The whole appeal of Delaware incorporation is that it streamlines governance and makes it easier to run a company. If the court begins second-guessing these structures, is Delaware still the best place to incorporate? It also raises the question of who is the court protecting. Is it protecting minority shareholders, or is it creating ambiguity that fuels the plaintiffs' bar and leads to more litigation?

JumpCrisscross 2y ago

> Do you want to spend your time navigating legal uncertainty Texas is arguably more legally volatile than Delaware. Just look at statutory volume. Put another way, Texan lawmakers make headlines in ways Delaware lawmakers do not. > who does this all benefit except for plaintiff-litigation attorneys? Texan courts are slower than Delaware’s. Also, there is now a multi-billion dollar incentive to find the areas of law Texas hasn’t patched that Delaware has. Would be shocked if we don’t see a massive boom in Texan corporate litigation in the coming years. The proximate cause was the pay package. The root cause is these leaders don’t have influence in Delaware. They do in Texas, and they want to wield that. For their companies’ shareholders, that might wind up a win-win.

patrickhogan1 2y ago
I agree with your point about the Musk case. I believe it will be litigated again. Regardless of the corporation's domicile or either of our opinions on that issue, there is ambiguity and a scale factor that will likely result in further litigation. The case that bothers me is the Moelis case. The West Palm Beach Firefighters' Pension Fund v. Moelis & Company case is troubling, because it’s a classic example of a Delaware court looking at a company’s governance structure and saying, “Wait a second, this seems bad,” even though it’s exactly what everyone signed up for. On February 23, 2024, the Delaware Court of Chancery ruled in favor of a minority shareholder against Ken Moelis. Yes, that Ken Moelis <https://en.wikipedia.org/wiki/Ken_Moelis https://en.wikipedia.org/wiki/Ken_Moelis>, the well-known investment banker whose name is literally the brand. Analysis of the case is located here: <https://clsbluesky.law.columbia.edu/2024/06/10/does-the-moelis-decision-warrant-a-quick-legislative-fix/?utm_source=chatgpt.com https://clsbluesky.law.columbia.edu/2024/06/10/does-the-moel...>. The court found that Moelis & Company’s governance structure—where Moelis, through his majority voting power, essentially controls the board—violated Delaware corporate law. Now, imagine you’re a minority shareholder. You buy stock in Moelis & Company, a firm run by a guy named Moelis, with a governance structure designed to keep him in charge. Then, at some point, you look around and say, “Hey, wait a minute, this Moelis guy has too much control over the board!” Yes. That’s the whole point. That’s why this company was set up in Delaware. And yet, the Delaware court said no, this arrangement is not okay. Which is interesting because Delaware is supposed to be the place where companies go for predictable, business-friendly rules. The whole appeal of Delaware incorporation is that it streamlines governance and makes it easier to run a company. If the court begins second-guessing these structures, is Delaware still the best place to incorporate? It also raises the question of who is the court protecting. Is it protecting minority shareholders, or is it creating ambiguity that fuels the plaintiffs' bar and leads to more litigation?