Is Elon Musk a threat to Delaware's core business?

After a Delaware judge struck down Elon Musk’s $56 billion Tesla compensation package, Musk put the state in his crosshairs with a series of posts encouraging companies to flee America’s corporate kingdom, as he hopes to do with Tesla. Given Musk’s influence, are his actions a real threat to Delaware?

Around 2 million companies are incorporated in Delaware, including 68% of Fortune 500 companies. Incorporated businesses outnumber people in Delaware by a ratio of 2-to-1.

“The business of this state is corporate regulation; a good chunk of our tax revenue comes from that. It’s in the state’s interest to get the answer right,” said Charles Elson, a leading authority on corporate governance and founding director of the Weinberg Center for Corporate Governance at the University of Delaware.

The big reason so many companies choose to incorporate in Delaware is the Court of Chancery, Musk’s latest target.

Striking down Musk’s record-breaking compensation

Elson said Chancellor Kathaleen McCormick’s decision to void Musk’s CEO pay package is unusual and surprising but not unfounded.

“The judge’s concern was that the disclosure to the shareholders about this package was inadequate, that there are serious flaws she felt in the process, the independence of the directors, how the thing came together,” Elson said. “And she felt that had disclosure been more accurate, the shareholders may not have approved it.”

In 2018, 73% of shareholders approved the CEO’s pay package, excluding votes by Musk and his family. After hitting set targets in the coming years, the deal’s value hit around $56 billion, which McCormick called “an unfathomable sum.” That’s roughly the market cap of all of Tesla back when shareholders first approved the compensation plan. Tesla’s market cap is now more than 10 times that.

Read more at: https://san.com/cc/is-elon-musk-a-threat-to-delawares-core-business/