April 3, 2025
American businesses have long favored the state of Delaware for incorporation, due in large part to its expert corporate bench and bar, and its business-friendly tax benefits. Delaware is the official home to more than 2 million businesses, including over two-thirds of all Fortune 500 companies. In recent months, however, the state’s reputation as the dominant place for incorporation has taken a few blows, sparking changes to its influential General Corporations Law.
The threat of corporations leaving Delaware has become such a trend over recent months that it’s earned its own portmanteau: “DExit.” This development concerned politicians in Delaware so much that it led to the creation of S.B. 21, a major bill that alters the existing balance between shareholders and corporations.
The legislation, which was passed last week and promptly signed into law by Democratic Governor Matt Meyer, includes new safe harbor protections for insiders and limits stockholder inspection rights. For transactions involving a controlling shareholder, the bill also requires controlling shareholders to obtain minority shareholder approval OR independent board approval, but not both, as was the previous standard.
On March 25, 2025, at the Richard H. Walker lecture at Temple Law, Greg Varallo (LAW ’83), one of the nation’s leading corporate litigators, spoke about his distinguished career in Delaware’s courtrooms. Varallo referred to the now-enacted S.B. 21 as the “Billionaire’s Bill,” stating it would be catastrophic for Delaware to enact changes to well-established precedent simply because special interests were unhappy with outcomes in court.
These “special interests” that Varallo referenced are, among others, controllers of Delaware corporations who directly benefit from the bill. Although Elon Musk has reincorporated his companies out of state, he was found to be at least a “situational” controller in recent litigation in Delaware, in Tornetta v. Musk.
In January 2024, Chancellor Kathaleen McCormick of the Delaware Court of Chancery blocked Musk’s attempts to secure a $56 billion performance-based compensation plan. The judge sided with a group of Tesla shareholders who initiated a derivative lawsuit against Tesla’s board over the executive compensation award, stating that the pay scheme must be voided because of what she referred to as “extensive ties” between Musk and those negotiating the package, among other reasons.
McCormick’s ruling infuriated Musk. Shortly after, he wrote on X, “Never incorporate your company in the state of Delaware.” Musk later announced he would move the site of incorporation for Tesla and his other companies to Texas and encouraged his peers to do the same. Musk’s posturing against Delaware as being “too regulated” struck a chord with other powerful CEOs. Billionaire Bill Ackman stated his company, Pershing Square, would move to Nevada. Meta’s Mark Zuckerberg also sounded the alarm, reportedly considering moving Meta to Texas.
S.B. 21 has been highly controversial since it was first introduced in the Delaware Senate. Proponents claim the changes are necessary for Delaware to maintain its competitive edge as the best home for American corporations. Governor Meyer apparently agrees, as he told reporters that Delaware would work to win back any company that left. “It’s really important that we get it right for Elon Musk or whoever the litigants are in Delaware courts. . . . There may be some things that need to change.” Meyer’s office worked directly with lawyers from Tesla and Meta in crafting S.B. 21, according to documents released by CNBC.
Opponents believe the bill undermines corporate governance and will shield tech billionaires from a wide array of potential misconduct claims. It also raises questions about the intersection of extreme power and legal precedent. If a corporation wields enough power to directly shape new laws—especially those that contradict the most established precedent set by the nation’s most respected corporate courts—is there a deeper imbalance at play? Have tech billionaires amassed such influence that the rule of law no longer constrains them—or, if it does, only until the laws can be rewritten in their favor?
Varallo’s parting words to his audience raised his own concerns about recent attacks on the independence of the nation’s judiciary and on major law firms throughout the country, and he left with a call to action: “We as lawyers will have the responsibility to stand up and ensure the continuing independence of our judiciary, but—more importantly—the rule of law itself.”
Allegra Abramson, Esq. (LAW ’24) is the Postdoctoral Fellow at Temple Law’s Center for Compliance and Ethics.
The Richard H. Walker ’75 Chair in Business Law Lecture brings leaders in corporate, securities, and other fields within business law to Temple to share their insights and expertise. The Lecture is made possible through the generosity of Richard H. Walker ’75 and hosted by the holder of the Richard H. Walker ’75 Chair in Business Law, currently held by Professor Harwell Wells.
The 2025 Walker Lecture was presented by Greg Varallo (LAW ’83), a partner at Bernstein, Litowitz, Berger & Grossman. Most recently, Varallo gained national attention as co-lead counsel in Tornetta v. Musk, representing Tesla shareholders challenging Elon Musk’s unprecedented $55 billion pay package in a landmark decision striking down the pay plan.