Elon Musk's Pay Package and the Threat to the Delaware Corporation
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Hello and welcome to another episode of the All Thoughts Podcast. I'm Tracy Alloway.
And I'm Joe Weisenthal.
Joe, I have a fun fact for you. Go
on. Are
you ready? Yeah. Okay, so Delaware has a population of about 1.05 million, a little over a million. Okay. It's one of the least populous states. Yeah. I think it has fewer people than a lot of big cities in the US.
For sure.
However, Delaware has two point one million businesses registered in the state. So basically two businesses for every person.
This is a legit fun fact. This is like a legit I did not know this. I mean, I knew that it was not a very big state population wise. I know that so many corporations or businesses or whatever uh incorporate in Delaware, but this sort of two to one ratio, excellent fun fact, Tracy. Well done.
Yes, for your next dinner party you can trout that one out. But I mean, obviously maybe you could argue that Delawareans are just phenomenally entrepreneurial. But as you mentioned, no, as you mentioned. No more
than any I'm not dismissing them. I just know that that's not really what's going on.
Right. There's something else going on here, which is that Delaware has become the de facto state for companies incorporating.
Yeah, this is like the main thing that we know about Delaware. And we don't really I mean Matt and chicken farms. The chickens, right. Not the the chickens. But you don't hear much about Delaware except typically when there is some sort of corporate fight playing out in its courts, and of course it has a dedicated court system for corporate fights and so forth. And there's some been prominent examples over the years where we learn about what the chancery is, and then I forget what the chancer is. Chancery is or where that word comes from, but people seem to like their uh simplistic, streamlined legal system for corporate things, and it seems to have paid off reasonably well.
People seem to like it, but that might be changing. So you mentioned corporate fights. We had a very prominent example of this relatively recently when there was the court fight over Elon Musk's compensation at Tesla. And eventually Elon just said, you know, I'm gonna pick up my company and move it to Texas and incorporate there. And in fact, we are seeing a few examples of companies choosing to move away from from Delaware and two places like Texas or Nevada. And I know this isn't maybe a top of mind news development for many people right now. There's a lot going on.
Yeah.
But I think it's really interesting. It's kind of slow moving and it does have implications for shareholder rights.
Totally. I actually think it's a very important, relevant topic. And I'll say this is the reason why, which is that in a sense, a legal system is this network effect. And people respect the legal system. And even if maybe there are decisions that go against them, they're like, okay, this is a high-quality legal system. It is very hard to rebuild that somewhere else. It also is the sort of thing that if there is some pull elsewhere, then it's interesting to see what does it take to pry
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