Dell, Exxon Moves Reveal Texas Corporate Law Isn’t Cut and Paste

The easiest story to tell about Dell Technologies Inc.’s pending shareholder vote to redomesticate is that another major company wants to leave Delaware for Texas. That story isn’t wrong, but it’s incomplete.

The better story is that Texas corporate law isn’t a single package, it’s a menu. And the two most important companies now testing that menu—Exxon Mobil Corporation and Dell—are ordering very different things.

Exxon’s shareholders approved a New Jersey-to-Texas redomiciliation on May 27, with 71.2% of votes cast supporting the move. Dell’s Delaware-to-Texas redomestication is scheduled for a June 25 stockholder vote.

That distinction matters for boards and investors. The right question isn’t “Texas or Delaware?” It is: Which Texas provisions is the company adopting, why, and for whose shareholder base?

Boards considering Texas shouldn’t just “copy Exxon” or “copy Dell.” They should disclose their governance structure clearly: which provisions are automatic (or elective), which the company is adopting now (and which it is leaving alone), and how those choices connect to its ownership and litigation profile.

For investors, the takeaway is equally simple. Vote on the package, not just the state name.

Texas Built Optionality

Texas’ corporate law reforms didn’t require every Texas corporation to adopt the same governance structure. Some provisions apply by statute to listed or electing corporations; others require a charter or bylaw choice.

Texas law now offers a wider set of tools: a statutory business-judgment framework, a derivative-standing ownership threshold that can be adopted up to a 3% cap with grouping permitted, a shareholder-proposal threshold for electing nationally listed corporations, internal-entity forum provisions, jury-waiver authority, expanded officer exculpation, and a specialized business court for high-stakes disputes.

But a tool isn’t a mandate. A board still has to decide what to put in the charter or bylaws, and investors can evaluate that decision.

Dell Chose Specificity

Dell’s proxy doesn’t simply say “Texas”; it itemizes the provisions it expects to use. The proxy describes the Texas Business Organizations Code amendments and explains that the company expects them to provide advantages in areas such as director and officer protection and transactional certainty.

Dell’s proposed Texas charter includes a 3% ownership threshold for derivative proceedings, and its board intends to adopt a Texas bylaw election for shareholder proposals under Section 21.373. The package also addresses jury waiver, officer exculpation, forum selection, and Texas’ codified business-judgment framework.

That choice makes sense only when read against Dell’s own history. Dell’s 2018 Class V transaction generated major Delaware stockholder litigation. Dell’s proxy points to that history, noting that the company paid $1 billion in cash to stockholders, including $266.7 million in attorneys’ fees, in settlement of Class V claims.

Moving to Texas doesn’t rewrite that history. But it does change the procedural rules for the next governance dispute. The provisions Dell highlights map onto channels that mattered in Class V: derivative standing, forum, officer and director liability, and review of conflicted transactions.

Exxon Chose Reassurance

Exxon was the test case for a widely held, globally watched company. It faced formal opposition from ISS and Glass Lewis, plus a simple shareholder concern: Would moving to Texas quietly import new restrictions on shareholder litigation or proposals?

Exxon answered by doing almost the opposite of what critics expected. Its proxy said the company wasn’t adopting elective Texas provisions that could be viewed as weakening shareholder rights compared with New Jersey law. The vote then overwhelmingly passed.

That wasn’t a blanket endorsement of every Texas option. It was a shareholder-approved move built around continuity: Texas is our operating home and our preferred legal home, and we aren’t using the move to add the most controversial elective provisions.

A widely held company can make a Texas case even when proxy advisers oppose it—but the price is explaining exactly what the move doesn’t do.

Two Different Thresholds

One reason the Texas debate gets distorted is that two very different thresholds are often discussed as if they were the same. One filters access to litigation; the other filters access to the ballot. Investors should evaluate each on its own terms.

The derivative-standing threshold is about who can bring or maintain a lawsuit on behalf of the corporation. Texas permits an elected ownership threshold, capped at 3% of outstanding shares, with grouping permitted.

The shareholder-proposal threshold, on the other hand, concerns who can submit a proposal for a shareholder vote at an electing nationally listed Texas corporation. It requires satisfying either a $1 million market-value test or a 3%-of-voting-shares test—whichever is easier to meet—plus a six-month holding period and solicitation of holders representing at least 67% of the voting power.

Those aren’t the same rules. Both are election, but they bind in opposite directions at scale. At a very large company, a $1 million proposal threshold isn’t economically comparable to a 3% derivative-suit threshold. The reason they’re not comparable at a large company is that the two thresholds are measured differently: The proposal threshold is the lesser of $1 million or 3%, so the $1 million prong binds and the bar is low. If elected, the derivative threshold may be up to 3% of outstanding shares with no dollar alternative, so at a multibillion-dollar company, that is a far more demanding hurdle, although shareholders may aggregate their holdings to meet it.

That is why the two are not economically comparable, and why discussing them as a single “3% rule” misleads. One is a lower bar that a small-holder can satisfy alone; the other is a high bar that may require a coalition.

The Broader Lesson

Texas is winning companies by offering a menu of statutory choices, a specialized court, and a distinct state-law identity. Companies then make different elections based on ownership structure, litigation experience, and investor relations needs.

That is why Exxon and Dell are more useful side by side than as points on one trend line. Exxon had to persuade a dispersed shareholder base that Texas wouldn’t mean a stealth reduction in rights. Dell is asking shareholders to approve a more specific governance architecture for a company with a different ownership structure and a litigation history.

The same destination can carry different legal content—and that is the point.

This article does not necessarily reflect the opinion of Bloomberg Industry Group Inc., the publisher of Bloomberg Law, Bloomberg Tax, and Bloomberg Government, or its owners.

Author Information

Shane Goodwin is a professor of practice at the SMU Cox School of Business and adjunct professor of law at the SMU Dedman School of Law.

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