Insights Article
In November 2025, Tesla stockholders approved a compensation arrangement for Elon Musk potentially valued at one trillion dollars over the next decade, a figure unmatched in the history of public-company executive compensation.¹ The vote drew more than seventy-five percent support from voting shares, despite the contrary recommendations of both major proxy advisory firms.¹ The outcome would have appeared, on its face, to be merely the second installment of a saga that began with the 2018 award of stock options ultimately valued at approximately fifty-six billion dollars, the rescission of that award by the Delaware Court of Chancery in January 2024, the rejection of a subsequent stockholder ratification in December 2024, and the reversal of the rescission by the Delaware Supreme Court in December 2025.² ³ ⁴ But the November 2025 vote was not, in any meaningful sense, taking place inside the same governance system that produced the 2018 award. By the time stockholders cast their ballots, the company had ceased to be a Delaware corporation. Tesla had reincorporated in Texas in June 2024, more than a year before the Delaware Supreme Court ever spoke on the rescission appeal.⁵
That sequence is the most public manifestation of a broader development that institutional investors are still weighing. Between 2023 and the first quarter of 2026, an unusual concentration of public-company boards has moved their entities out of Delaware. TripAdvisor and its parent Liberty TripAdvisor secured stockholder approval to reincorporate in Nevada in 2023 and, after a contested process that ultimately reached the Delaware Supreme Court, completed the conversion in April 2025.⁶ Cannae Holdings completed its move to Nevada in June 2024, P.A.M. Transportation in 2024, and The Trade Desk in late 2024.⁷ Dropbox followed in early 2025.⁸ Andreessen Horowitz, Pershing Square Capital Management, Roblox, Sphere Entertainment, AMC Networks, Madison Square Garden Entertainment, Madison Square Garden Sports, Tempus AI, and XOMA Royalty either announced or executed Nevada moves through the same period.⁹ SpaceX selected Texas; Neuralink selected Nevada.¹⁰ MercadoLibre, the Latin American e-commerce giant, filed for Texas re-domiciliation in April 2025, although the company subsequently withdrew the proposal before its annual meeting.¹¹ Together, the names compose the most concentrated corporate migration from Delaware in living memory.
The phenomenon has acquired a name—"DExit"—but the label undersells what is at stake. Re-domiciliation is not a corporate equivalent of changing offices. It is the wholesale substitution of the legal regime that defines the bundle of rights stockholders bargained for when they bought the shares. In a number of cases, that substitution is being carried out with limited disclosure of what is actually being traded.
Delaware's reputation as the dominant forum for public-company incorporation rests on three pillars: a specialized judiciary, a developed body of case law, and a fiduciary-duty framework that, while deferential to good-faith business judgment, will impose entire-fairness review on transactions in which directors or controlling stockholders have a non-pro-rata interest. The Tornetta v. Musk litigation illustrates the Delaware regime at its outer edge: the Court of Chancery, after a five-day trial that produced more than one thousand seven hundred trial exhibits and testimony from more than forty witnesses, concluded that Mr. Musk had effectively controlled the board's process for negotiating the 2018 award, that the disclosure made to stockholders was materially deficient, and that the package therefore failed entire-fairness review.²
Nevada's regime, by statute, is meaningfully different. Nevada Revised Statutes Section 78.138(7) provides the sole mechanism for holding a director or officer individually liable, and it requires the claimant to both rebut a statutory presumption of good faith and establish that the breach involved "intentional misconduct, fraud or a knowing violation of law."¹² The Nevada Supreme Court has clarified that even gross negligence is insufficient to satisfy the second prong; the claimant must establish that the fiduciary had actual knowledge that the conduct was wrongful.¹³ The court has further held that Section 78.138 forecloses the application of an "inherent fairness" test as a basis for shifting the burden to the defendant, even where the transaction is with a controlling stockholder.¹⁴ The practical effect is that conduct that would draw entire-fairness scrutiny in Delaware is, in Nevada, frequently insulated by a statutory business-judgment presumption that demands fraud or knowing illegality to overcome.
Texas's regime, refashioned in May 2025 through Senate Bill 29, now codifies a comparable statutory business-judgment rule. The bill added Section 21.419 to the Texas Business Organizations Code, providing that a director or officer of a publicly traded Texas corporation, or of any private corporation that affirmatively elects the rule, is presumed to act in good faith, on an informed basis, in the interests of the corporation, and in obedience to law; to sustain a claim, a plaintiff must rebut one of those presumptions and establish that the breach involved "fraud, intentional misconduct, an ultra vires act, or a knowing violation of law."¹⁵ Senate Bill 29 also authorizes qualifying corporations to impose a minimum equity threshold of up to three percent for stockholders seeking to bring derivative actions, narrows the books-and-records that stockholders may demand by excluding electronic communications, and authorizes corporations to adopt enforceable jury-trial waivers and exclusive-forum provisions that route internal-affairs disputes to the Texas Business Court.¹⁶ That court, established by House Bill 19, began hearing matters on September 1, 2024, and was further expanded by House Bill 40 in 2025, which lowered the amount-in-controversy threshold for many internal-affairs disputes to five million dollars.¹⁷ ¹⁸
The translation from Delaware to either Nevada or Texas therefore carries three substantive changes that no stockholder can adequately evaluate without reading the relevant statutes side by side: a heightened pleading standard for fiduciary-duty claims, statutory restrictions on derivative-action standing and books-and-records access, and the redirection of internal-affairs litigation to courts whose corporate-governance precedent is, by any honest measure, comparatively undeveloped. None of these changes is necessarily improper. Each is, however, materially adverse to the position of a stockholder who acquired the equity on the assumption of a Delaware-trained governance baseline.
Delaware has responded. On March 25, 2025, Governor Matt Meyer signed Senate Bill 21, which amended Sections 144 and 220 of the Delaware General Corporation Law.¹⁹ Section 144 was rewritten to provide a statutory safe harbor under which controlling-stockholder transactions—other than going-private transactions—qualify for business-judgment review if approved by an independent committee or, in the alternative, ratified by a fully informed and uncoerced majority of disinterested stockholders, and the amended statute bars actions for both equitable relief and damages once the safe harbor is satisfied.²⁰ Section 220 was narrowed in parallel: the universe of "books and records" subject to stockholder inspection was statutorily defined; communications such as director and officer emails and text messages were excluded; and the threshold for demonstrating a "proper purpose" was elevated.²¹
The Delaware Supreme Court has likewise recalibrated. In Maffei v. Palkon, decided February 4, 2025, the court reversed the Court of Chancery and held unanimously that a board's decision to re-domicile to another state, taken on a "clear day" before any specific or threatened litigation, is reviewed under the deferential business-judgment rule rather than the entire-fairness standard.⁶ The court reasoned that the speculative reduction in future fiduciary liability that may follow from a change of state is not, without more, a "material, non-ratable benefit" capable of triggering entire fairness.⁶ The decision was followed, ten months later, by In re Tesla, Inc. Derivative Litigation, in which the Delaware Supreme Court, in a per curiam opinion, reversed the Court of Chancery's rescission of Mr. Musk's 2018 award and entered an award of one dollar in nominal damages, holding that even where defendants bear the burden of proving entire fairness, the burden of demonstrating entitlement to a particular remedy remains with the plaintiff.⁴
The combined effect is that Delaware has substantially reduced its own scrutiny of conflicted-controller transactions and re-domiciliations, and has done so faster than the migration to Nevada and Texas itself has unfolded. The state's incentive to retain incorporations is intelligible: corporate franchise taxes and related fees account for roughly twenty-five to thirty percent of Delaware's general fund revenue, totaling approximately 1.8 billion to 1.9 billion dollars annually, the second-largest revenue source after personal income tax.²²
For institutional investors, the practical consequence is that the rights bundle attached to a share of a Delaware corporation is not a constant. It can be altered, sometimes materially, through a board-recommended re-domiciliation reviewable only under the business-judgment rule when presented on a "clear day." The Maffei v. Palkon framework places the burden of vigilance squarely on stockholders. Once a re-domiciliation has been completed, any subsequent self-dealing or controller transaction will be evaluated under the receiving state's law, not Delaware's.
The concern is not abstract. Some of the largest American public pensions and major sovereign-wealth funds have already begun engaging on the specific consequences of the migration. The California Public Employees' Retirement System, which holds approximately five million Tesla shares, voted against the November 2025 compensation package on governance grounds, warning that approval would further concentrate power in a single stockholder.²³ New York State Comptroller Thomas DiNapoli (for the New York State Common Retirement Fund), New York City Comptroller Brad Lander (for the New York City Employees', Teachers', and Board of Education Retirement Systems), and Massachusetts State Treasurer Deborah Goldberg co-filed a stockholder proposal at the same meeting seeking to repeal the three-percent derivative-suit ownership threshold that Tesla's board had adopted by bylaw on May 15, 2025—a measure imposed under Texas Senate Bill 29 only months after the company had assured stockholders, in connection with the reincorporation, that no area of Texas and Delaware law "meaningfully diverged on matters of substance."²⁴ Norges Bank Investment Management, manager of Norway's Government Pension Fund Global, opposed the compensation package on similar grounds.²⁵ The proposals failed in the vote, but the objection is now in the public record, and the pattern it identifies is generalizable: a re-domiciliation defended on a "clear day" can be followed, often within months, by bylaw amendments that draw down the precise stockholder protections whose loss the proxy statement had disclaimed.
In the view of Buxton Helmsley, three positions are warranted. First, every reincorporation proxy statement deserves to be read as a substantive disclosure of governance change, not as a procedural matter; the proxy should be expected to articulate, with specificity, the differential between the current and proposed regimes with respect to fiduciary-duty pleading standards, derivative-action standing, books-and-records access, exclusive-forum provisions, and any contemplated bylaw amendments operating under the new domicile. Where that articulation is absent or generic, a vote against re-domiciliation is the appropriate default. Second, where a re-domiciliation is approved, institutional investors should advocate for offsetting bylaw or charter provisions that retain, by private ordering, the protections being statutorily relinquished—for example, charter language preserving entire-fairness review of controlling-stockholder transactions, or bylaw language declining to impose ownership thresholds for derivative actions. Third, where the issuer is a controlled company, the heightened risk of re-domiciliation undertaken specifically to insulate the controller from existing or anticipated liability deserves to be priced into the equity itself, and engaged on, where the engagement would be meaningful.
These positions are not anti-management. They reflect the reality that stockholder rights are themselves an asset, that the value of the asset varies with the legal regime governing the issuer, and that the regime is now subject to alteration by a process that can be completed in a single calendar quarter. The migration of corporations from Delaware does not, in itself, demonstrate that Nevada or Texas governance is inferior; reasonable observers can disagree on the merits of either regime. What the migration demonstrates is that the choice of state has become, at long last, a contested question of corporate governance—one that institutional investors must regard with the same seriousness they bring to executive compensation, audit-committee composition, and capital allocation. Delaware's centrality was, for nearly a century, a settled fact. It is no longer. The next decade of governance will be shaped, more than most stockholders yet appreciate, by the courthouse to which their rights are sent.
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Footnotes
[1] CNBC, "Tesla says shareholders approve Musk's $1 trillion pay plan with over 75% voting in favor" (November 6, 2025), reporting that more than seventy-five percent of voting shares supported the 2025 CEO Performance Award at Tesla's annual stockholder meeting in Austin, Texas, and that proxy advisors Glass Lewis and Institutional Shareholder Services had each recommended votes against the package.
[2] Tornetta v. Musk, 310 A.3d 430 (Del. Ch. 2024) (the post-trial opinion of January 30, 2024, finding that Mr. Musk effectively controlled Tesla's board process for negotiating the 2018 award, that the disclosures made to stockholders were materially deficient, and that the award accordingly failed entire-fairness review on a record comprising one thousand seven hundred and four trial exhibits and live or deposition testimony from more than forty witnesses).
[3] Tornetta v. Musk, 326 A.3d 1203 (Del. Ch. 2024) (the December 2, 2024 opinion holding that the post-trial stockholder ratification did not cleanse the disclosure deficiencies identified in the prior opinion and that rescission therefore remained the appropriate remedy).
[4] In re Tesla, Inc. Derivative Litigation, No. 534, 2024 (Del. Dec. 19, 2025) (per curiam) (reversing the Court of Chancery's rescission remedy, awarding one dollar in nominal damages to the plaintiff, and reducing the prior fee award through a quantum-meruit calculation while holding that the burden of demonstrating entitlement to a particular remedy remains with the plaintiff even where defendants bear the burden of proving entire fairness).
[5] Tesla, Inc., Press Release, "Tesla Releases Results of 2024 Annual Meeting of Stockholders" (June 13, 2024), confirming stockholder approval of the redomestication of Tesla from Delaware to Texas, with the conversion effective as of June 13, 2024 pursuant to a plan of conversion filed with the Texas Secretary of State.
[6] Maffei v. Palkon, 2025 WL 384054 (Del. Feb. 4, 2025) (en banc) (Valihura, J.), the Delaware Supreme Court's decision reversing the Court of Chancery and holding that the business-judgment rule, rather than the entire-fairness standard, governs a board's decision to re-domicile from Delaware to another state when made on a "clear day" before any pending or threatened litigation. TripAdvisor, Inc. subsequently finalized its conversion from Delaware to Nevada effective April 29, 2025, as approved by stockholders in June 2023. See Tripadvisor, Inc., Press Release, "Tripadvisor Announces Closing of Merger with Liberty TripAdvisor and Finalizes Conversion to a Nevada Corporation" (April 29, 2025).
[7] Cannae Holdings, Inc., Form 8-K (June 20, 2024), reporting completion of the company's redomestication from Delaware to Nevada following stockholder approval at the company's June 19, 2024 Annual Meeting; The Trade Desk, Inc. (stockholder approval at special meeting held November 14, 2024 to convert from Delaware to Nevada); P.A.M. Transportation Services, Inc. (Nevada conversion in 2024). Compilations of public-company reincorporations from Delaware since January 1, 2023, including those maintained by Robert Anderson (April 2025) and Harvard Law School Forum on Corporate Governance, "Is 'DExit' real?" (January 29, 2026), corroborate the dates and identities of the reincorporations described herein.
[8] Dropbox, Inc., Preliminary Information Statement on Schedule 14C (January 31, 2025), reporting stockholder approval by written consent of the company's reincorporation from Delaware to Nevada, with the conversion subsequently completed in March 2025.
[9] Harvard Law School Forum on Corporate Governance, "Is 'DExit' real?" (January 29, 2026), and TheCorporateCounsel.net, "DExit: The Hype v. The Reality" (December 17, 2025), each of which together identify completed or proposed Nevada reincorporations including those of Andreessen Horowitz (announced July 9, 2025, with respect to AH Capital Management), Pershing Square Capital Management (announced February 1, 2025), Roblox, Sphere Entertainment, AMC Networks, Madison Square Garden Entertainment, Madison Square Garden Sports, Tempus AI, and XOMA Royalty.
[10] The Nevada Independent, "Nevada lawmakers aim to lure business incorporations amid Delaware's 'Dexit' concern" (June 2025), reporting that Tesla and SpaceX relocated to Texas and that Neuralink relocated to Nevada.
[11] MercadoLibre, Inc., Definitive Proxy Statement on Schedule 14A (April 28, 2025), proposing redomestication from Delaware to Texas in advance of the company's June 17, 2025 Annual Meeting of Stockholders. The company subsequently filed Supplement No. 2 to the Proxy Statement (June 9, 2025) withdrawing Proposal Four prior to the meeting.
[12] Nev. Rev. Stat. § 78.138(7) (2025), establishing that no director or officer is individually liable to the corporation, its stockholders, or its creditors unless the statutory presumption of good faith has been rebutted and the conduct constituted a breach of fiduciary duty involving "intentional misconduct, fraud or a knowing violation of law."
[13] Chur v. Eighth Judicial District Court of Nevada, 458 P.3d 336 (Nev. 2020), holding that gross negligence is insufficient to satisfy NRS 78.138(7)(b)(2) and that the claimant must establish that the director or officer had knowledge that the alleged conduct was wrongful in order to demonstrate "intentional misconduct" or a "knowing violation of law."
[14] Guzman v. Johnson, 483 P.3d 531 (Nev. 2021), holding that NRS 78.138 provides the sole method for holding individual directors liable for corporate decisions and that an "inherent fairness" framework cannot be used to rebut the statutory business-judgment presumption, even with respect to controlling-stockholder transactions.
[15] Senate Bill 29, 89th Texas Legislature, Regular Session, signed by Governor Greg Abbott on May 14, 2025 (effective immediately), adding Section 21.419 to the Texas Business Organizations Code and codifying a statutory business-judgment rule for publicly traded corporations and electing private corporations.
[16] Senate Bill 29, supra, additionally amending the Texas Business Organizations Code to (i) authorize publicly traded corporations and certain private corporations with at least 500 owners to impose minimum equity-ownership thresholds of up to three percent for derivative actions, (ii) narrow the categories of "books and records" subject to stockholder inspection by excluding electronic communications such as emails and text messages absent the effectuation of an official entity action, and (iii) authorize jury-trial waivers and exclusive-forum provisions for internal-entity claims.
[17] House Bill 19, 88th Texas Legislature, Regular Session, signed June 9, 2023 (effective September 1, 2023), establishing the Texas Business Court with concurrent jurisdiction over specified internal-affairs and complex commercial disputes, with the court beginning to receive cases on September 1, 2024.
[18] House Bill 40, 89th Texas Legislature, Regular Session, signed June 20, 2025 (effective September 1, 2025), lowering certain Texas Business Court amount-in-controversy thresholds from ten million dollars to five million dollars and expanding subject-matter jurisdiction.
[19] Senate Substitute 1 to Senate Bill 21, 153rd Delaware General Assembly, signed by Governor Matt Meyer on March 25, 2025, amending Sections 144 and 220 of Title 8 of the Delaware Code, applying retroactively to all acts and transactions other than those that were the subject of court proceedings pending or inspection demands made on or before February 17, 2025.
[20] 8 Del. C. § 144 (as amended by SB 21), establishing safe-harbor procedures for transactions involving conflicted directors, officers, controlling stockholders, and control groups, including (subject to specified procedural conditions) the protection of controlling-stockholder transactions other than going-private transactions from both equitable relief and damages liability where approved by an independent committee or by a fully informed and uncoerced majority of disinterested stockholders.
[21] 8 Del. C. § 220 (as amended by SB 21), redefining the categories of corporate "books and records" subject to stockholder inspection, expressly excluding director, officer, and manager communications such as emails and text messages absent the effectuation of an official corporate action, and elevating the standard of particularity that a stockholder must satisfy in articulating a "proper purpose."
[22] Spotlight Delaware, "Civics 101: How corporate franchise taxes power Delaware's State Budget" (February 9, 2026), reporting that Delaware's corporate franchise taxes and related filing fees typically generate twenty-five to thirty percent of the State's General Fund revenue, totaling approximately 1.8 billion to 1.9 billion dollars in recent fiscal years, and that the State is home to more than 1.8 million active business entities, including more than sixty percent of Fortune 500 companies.
[23] Bloomberg, "Musk's $1 Trillion Tesla Pay Package Opposed by Calpers" (October 30, 2025), reporting that the California Public Employees' Retirement System, which held approximately five million shares of Tesla, Inc., publicly announced its intention to vote against the company's 2025 CEO Performance Award on governance grounds, characterizing the proposed package as many orders of magnitude larger than peer chief-executive compensation and warning that approval would further concentrate power in a single stockholder.
[24] Office of the New York State Comptroller, "DiNapoli: Tesla Investors Should Vote Against Musk's Trillion Dollar Pay and Director Nominees" (October 27, 2025); Tesla, Inc., Notice of Exempt Solicitation on Schedule PX14A6G (October 28, 2025), filed by the Office of the New York State Comptroller for the New York State Common Retirement Fund, with co-filers and signatories including New York City Comptroller Brad Lander (for the New York City Employees' Retirement System, the New York City Teachers' Retirement System, and the New York City Board of Education Retirement System) and Massachusetts State Treasurer and Receiver General Deborah Goldberg, urging stockholder support for a proposal to repeal the three-percent ownership threshold for derivative actions adopted by Tesla's board on May 15, 2025 under Texas Senate Bill 29; Tesla, Inc., Definitive Proxy Statement on Schedule 14A (April 2024), in which the Special Committee stated that it had "identified no areas in which Texas and Delaware law meaningfully diverged on matters of substance." Tesla, Inc., Form 8-K (May 16, 2025), reporting the Board's adoption, effective May 15, 2025, of bylaw amendments establishing the three-percent ownership threshold pursuant to Texas SB 29.
[25] Bloomberg, "Norway Wealth Fund to Vote Against Musk's Record Tesla Pay Plan" (November 4, 2025), reporting that Norges Bank Investment Management, manager of Norway's Government Pension Fund Global, voted against Tesla's 2025 CEO Performance Award, citing concerns over award size, dilution, and "lack of mitigation of key person risk."
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