A law firm representing Tesla and Elon Musk has drafted a proposed bill that could significantly impact Delaware’s corporate law, potentially reinstating Musk’s massive 2018 CEO pay package. The bill, authored by Richards, Layton & Finger (RLF), aims to amend Delaware General Corporation Law, potentially reversing the Delaware Court of Chancery’s decision to void Musk’s compensation plan.
RLF confirmed its role in drafting the legislation, though a spokesperson stated that the firm was not acting on behalf of any specific client. Lisa Schmidt, RLF’s president, emphasized the importance of statutory changes to maintain Delaware’s status as the leading jurisdiction for corporate incorporation.
The bill, introduced in the Delaware General Assembly on Monday, must pass both legislative chambers and receive approval from Governor Matt Meyer to become law. However, concerns have been raised about the bill’s drafting process. Traditionally, corporate law amendments in Delaware undergo review by the Delaware State Bar Association’s Corporation Law Council, but this bill bypassed that step.
Professor Brian JM Quinn of Boston College noted that if the law is enacted, Musk may no longer be classified as a “controller” of Tesla, as the new law would set a higher threshold for such a designation. This change could reduce judicial oversight of corporate decisions, including executive compensation and mergers.
Critics argue that the bill weakens protections for minority shareholders by limiting their ability to access corporate records. Musk, who has been vocal in his criticism of Delaware’s legal system, moved his businesses’ incorporation sites out of the state following the court’s ruling.
The proposed legislation has sparked debate, with some viewing it as a necessary correction, while others see it as a way to shield powerful executives from legal scrutiny.