After a controversial Delaware court ruling that voided Tesla CEO Elon Musk’s $56 billion compensation package, Texas lawmakers are seizing the moment to challenge Delaware’s long-standing dominance as the nation’s top corporate headquarters destination.
A pair of bills—Senate Bill (SB) 29 by Sen. Bryan Hughes (R-Mineola) and its companion House Bill (HB) 15 by Rep. Morgan Meyer (R-Dallas)—aim to make Texas a more appealing home for major corporations by strengthening legal protections for businesses and limiting judicial interference in corporate decisions.
On Monday, SB 29 was heard in the Senate Committee on State Affairs, and its counterpart, HB 15, will go before a House committee on Wednesday. The legislation is gaining momentum as Texas seeks to position itself as the new preferred state for corporate incorporation—a move that could bring significant economic benefits to the state.
Musk’s Fallout with Delaware Sparks Corporate Relocation Debate
In 2018, Tesla’s board and shareholders approved a performance-based compensation package for Musk, tied to the company meeting ambitious growth targets. As Tesla soared in value, the package reached a staggering $56 billion. However, a single shareholder’s lawsuit led to a Delaware judge blocking the payout, citing conflicts of interest and excessive compensation.
The ruling rattled the corporate world, raising concerns about Delaware’s judicial intervention in business decisions. In response, Musk took drastic action—moving all of his companies out of Delaware to Texas.
This bold decision has ignited speculation over whether other major corporations may follow suit, prompting Texas lawmakers to introduce SB 29 and HB 15 as a clear signal that the state welcomes businesses looking for a more predictable legal environment.
How SB 29 and HB 15 Aim to Reshape Corporate Law in Texas
Sen. Hughes, the bill’s author, emphasized that the legislation is designed to create legal certainty for companies, making Texas a stable and attractive alternative to Delaware.
“This is about a common sense approach to give companies certainty, and we want them to come to Texas,” Hughes stated.
“More business in Texas means more jobs. It means more growth.”
The bill introduces several key reforms, including:
Codifying the business judgment rule: Courts cannot second-guess corporate decisions unless fraud or intentional misconduct is involved.
Raising the threshold for derivative lawsuits: Shareholders must own at least 3% of a company’s stock to file lawsuits on behalf of the company, reducing frivolous claims.
Ensuring stock exchanges receive legal protections, including the newly established Texas Stock Exchange and a Texas branch of the New York Stock Exchange.
Allowing businesses to select state business courts as the venue for internal corporate disputes, providing legal predictability.
Restricting shareholder access to corporate communications, preventing them from inspecting emails or text messages unless they directly impact company decisions.
Legal Experts Weigh In
Corporate attorney Christopher Babcock, president of the Alliance for Corporate Excellence, testified in favor of the bill, arguing that business leaders need stable legal protections to make strategic decisions.
“A basic premise of corporate governance is that decision makers need to operate under laws that are predictable, stable, and knowable, so they can deploy capital without fear of being second-guessed after the fact,” Babcock stated.
He also noted that Delaware was once the gold standard for corporate governance, but recent rulings—such as the one against Musk—have cast doubt on its reliability as a corporate hub.
“Recent decisions in that state have challenged the assumption as to whether Delaware remains the right home for corporate decision making,” he added.
“SB 29 makes Texas the right home for corporate decision makers.”
Support and Opposition: Business vs. Public Concerns
The bills have garnered strong support from business groups, with 11 organizations registering in favor of the legislation. However, six Austin residents formally opposed the bill, citing concerns that it prioritizes corporate interests over workers, consumers, and local communities.
Sen. Judith Zaffirini (D-Laredo), while indicating she would vote for the bill, pressed its supporters to address criticisms that the legislation favors businesses at the expense of broader public interests.
Babcock countered that the bill strictly addresses internal corporate governance and does not impact workers’ rights or consumer protections.
“This bill clarifies internal corporate decisions; it does not affect the rights of workers, or communities,” Babcock explained.
“Those aren't claims between a company and its workers, those aren't claims between the company and its communities, and the rights of those other constituents are preserved and not hindered at all by this bill.”
What’s Next? Texas’ Corporate Gambit Moves Forward
As SB 29 and HB 15 advance through the Texas Legislature, the battle to redefine America’s corporate headquarters landscape is heating up. With Musk already leading the charge in shifting high-profile businesses to Texas, lawmakers are hoping these reforms will entice even more companies to make the move.
