In her view, S.B. 21 was proof that Delaware has been dragged into a race to the bottom with its two rivals. Additional proof arguably came in December, when Delaware’s Supreme Court restored Musk’s pay package. The justices didn’t take issue with McCormick’s findings; in fact, they awarded Richard Tornetta $1 in damages, a token sum that nevertheless signified that his claims had merit. Likewise, while they reduced the fee for his attorneys, they still granted them more than $50 million. The court simply said that rescinding the entire compensation plan was too extreme a remedy and that because it couldn’t figure out a way to properly value Musk’s services, he had to be paid the full amount.
In the nearly two years between the Court of Chancery’s initial ruling, in January 2024, and the Supreme Court’s decision, the stock options due to be awarded to Musk almost tripled in value, to $139 billion. With his victory, Musk’s net worth now exceeded $700 billion. On X, he greeted the news with a one-word message: “Vindicated.” It was a triumphant period for Musk: A few weeks earlier, Tesla shareholders had approved a new compensation plan that could pay him close to $1 trillion.
One obvious conclusion from Tornetta is that America’s second-smallest state was no match for the world’s richest person. But the case also invited a question: Constitutional prerogatives aside, in an age of trillion-dollar companies and centibillionaires, should the job of policing corporate insiders really be left to any state, no matter how large or small? Shouldn’t that be a federal function? It is an idea that has been debated in political and legal circles going back more than a century, and Washington has, in fact, been steadily encroaching on the power given to the states. For instance, the regulation of securities markets was once a matter for the states; that changed after the 1929 stock-market crash, which led to the creation of the S.E.C.
More recently, following the accounting scandals at Enron and WorldCom, Congress enacted the Sarbanes-Oxley Act, which brought several aspects of corporate governance under federal oversight. It imposed stricter disclosure requirements on publicly traded companies and mandated that corporate boards be composed primarily of independent directors, standards further tightened by the Dodd-Frank act of 2010. Major stock exchanges have also promulgated corporate governance standards that listed companies must comply with.
In 2018, Senator Elizabeth Warren proposed establishing a federal charter for corporations with annual revenue in excess of $1 billion. Her bill never came to a vote, however, and in the current political environment, it is hard to imagine full federalization happening anytime soon. And as a practical matter, federalizing corporate law would be challenging. It would almost certainly require a new, specialized court system. Plus, there’s no guarantee that it would actually solve the problem it was meant to address: Regulatory capture would be a very real possibility. Musk and other tech oligarchs wield as much power in Washington as they do in state capitals, and perhaps even more.