The US state of Delaware, known for its business-friendly laws, is facing challenges in regulating Tesla’s governance structure due to investors’ disregard for corporate oversight. Despite being incorporated in Delaware, Tesla has struggled to maintain a unified board of directors and comply with the state’s corporate governance laws.
Tesla’s complex shareholding structure, which includes various class shares and voting rights, has led to disagreements among investors on key issues such as executive compensation and mergers and acquisitions. The lack of a clear majority shareholder has contributed to the company’s struggles in making decisions and addressing concerns from various stakeholders.
In recent years, Delaware’s courts have been called upon to interpret Tesla’s corporate governance laws, with some ruling that certain investor groups have too much influence over the company’s management. This has raised questions about the effectiveness of Delaware’s regulatory framework in ensuring that investors adhere to best practices for corporate governance.
Delaware’s experience with Tesla highlights the need for clearer guidelines and more stringent oversight to ensure that investors prioritize long-term value creation over short-term gains.
Source: https://www.ft.com/content/b741b967-42c4-4078-9992-4dcea91cb4cc