Faculty Affiliate Carliss Chatman, Professor at SMU Dedman School of Law, wrote a column on how Tesla’s move to Texas is testing just how far modern corporate law will lean in favor of management.
In 2024, Tesla strategically moved its legal home from Delaware to Texas. A move that positioned the company to benefit from Texas’ recent corporate law changes, which give significantly more power to CEOs and boards while reducing the rights and oversight of shareholders.
Under Tesla’s new governance rules, which was on full display at their annual meeting in Austin earlier this month, shareholders must now own at least 3% of all outstanding shares to file a lawsuit. Additionally, shareholders face narrowed inspection rights and encounter higher barriers to submitting shareholder proposals. And, all corporate lawsuits are now restricted to Texas courts, where recent changes make the law far more deferential to management.
If more founder-led companies follow Tesla’s lead, the next corporate competition among states won’t be over tax rates or filing fees—it will be over how completely they can subordinate shareholders to management.”
Read more here: Tesla Shareholders Show How Far Law Will Go to Protect the Board