Elon Musk Has Triggered A Corporate Deregulation Bomb

A Delaware bill would award Elon Musk $56 billion, shield corporate executives from liability, and strip away voting power from shareholders.

By Luke Goldstein, The Lever

In an effort to appease Elon Musk, Delaware’s Democratic-controlled legislature is expected to vote on a bill this month that would not only award Musk the largest compensation package in history, but also shield many of the country’s most powerful corporate executives from accountability for their companies’ misbehavior.

If lawmakers don’t enact the law, which was written by Musk’s own lawyers, the billionaire mogul and his allies are threatening a mass exodus of companies out of the state. This pressure campaign is part of a long-running race to the bottom between states competing to attract businesses with offers to shield corporate executives from scrutiny by their companies’ own shareholders and workers.

Delaware, which has long been perceived as a billionaire playground and corporate tax haven, is the incorporation home to more than 60 percent of all Fortune 500 companies. That means, if enacted, the wide-ranging regulatory handouts in the bill will have sweeping consequences for corporate behavior across the country.

Shareholder lawsuits — used to hold corporations accountable for misconduct — would become much more difficult to bring to court. The law could wipe out many Delaware legal practices, a major state industry, and it could disempower company stakeholders including regular everyday stockholders and workers via their pension funds.

The law would set an extremely high bar for plaintiffs to obtain internal company documents, records, and communications — the core pieces of evidence needed to build a lawsuit against a company. Corporate executives and investors with a controlling stake in a firm would no longer be required to hold full shareholder votes on various transactions in which management has a direct conflict of interest.