Exxon Planned Texas Move Shows Delaware No Longer Corporate King

New Jersey-based Exxon Mobil Corp.’s proposed plan to reincorporate in Texas, announced Tuesday, is an inflection point in the state’s bid to dethrone Delaware as the nation’s hub for corporate registrations.

Texas’ comprehensive overhaul of its corporate laws pulled the company to the Lone Star State. Unlike high-profile movers such as Tesla Inc. and Zynga Inc., Exxon wasn’t driven out of its home state by a protracted legal battle or another push factor.

The outcome of Exxon’s shareholder vote on the reincorporation proposal will send an important signal to other non-controlled public companies considering whether to take advantage of Texas’ business-friendly legal environment.

Prior to Exxon’s announcement, several public companies switched their legal residency to Texas or announced plans to do so. But previous corporate moves typically involved companies controlled by a few shareholders or other unique factors that prevented them from becoming case studies for a broader swath of large public companies.

By contrast, Exxon is asking its institutional and retail shareholders to approve the move at the company’s May 27 annual stockholder meeting. The opportunity for retail shareholders, large asset managers, and proxy advisers to weigh in on the company’s proposal distinguishes Exxon’s redomicile from the moves of other public companies such as Dillard’s Inc. and Coinbase Global Inc., which needed only the blessing of a small handful of controlling shareholders to reincorporate in Texas.

Like Exxon, Tesla needed approval from both institutional and retail shareholders to redomicile—the Musk family reportedly owns just 13% of the company. But Tesla’s move was driven by a legal dumpster fire that Delaware ignited when its courts invalidated Elon Musk’s pay package despite the hundreds of billions of dollars of shareholder value that he created. (The pay package was later reinstated.)

Delaware’s legal actions over Musk’s compensation were widely credited with kick-starting the “DExit” movement. They also made it hard to envision a long-term path forward for Tesla in Delaware.

Investors viewed Musk as critical to the company’s success. If the Delaware courts were going to second guess their judgment, the company would have to find another home. The nail in the coffin came when the trial lawyers that upended Musk’s pay package demanded $5.6 billion in legal fees.

Exxon’s move represents a more widely applicable blueprint for other big public companies considering a new domicile. The company had no active disputes with New Jersey courts. Alignment between Exxon’s business operations and Texas’ hospitable legal ecosystem drove the decision-making. The company’s proposal for shareholder approval cites the recent amendments to the state’s corporations law and its establishment of specialized business courts among other pull factors.

If shareholders ratify Exxon’s move, it will represent a major vote of confidence in these business law reforms. Texas recently codified the business judgment rule, creating a legal presumption that directors and officers acted in good faith and on an informed basis when making business decisions. This contrasts with Delaware, where judges have ample discretion in their application of the business judgment principle.

Exxon’s decision also validates the early rulings of the Texas Business Court, which the state legislature established in 2024 to challenge the Delaware Chancery Court’s long-held dominance as the forum of choice by offering businesses a venue for informed and expedient resolution of commercial litigation. A year after creating these courts, the legislature expanded their jurisdiction. Exxon cites the new business court system as a key part of the “legal construct” that Texas has built to protect shareholder value.

Critics have claimed the Lone Star State’s corporate law reforms erode shareholder rights. But the Exxon announcement shows why major US corporations don’t have to worry about rocking the boat with shareholders under the new provision of Texas law permitting companies domiciled in the state to increase the ownership threshold required to file shareholder proposals and derivative lawsuits to 3% of the voting shares.

These rules simply present options. Companies are permitted but not required to change ownership thresholds up to the statutory limit. The guiding principle behind the state’s corporate governance policy is that management and shareholders can be trusted to agree on what’s best for their businesses.

The range of company responses to Texas’ new shareholder rules shows how the system is working. After it was reincorporated in Texas, Tesla proposed amendments to its bylaws to establish a 3% ownership threshold to file derivative lawsuits. The move followed the epic battle in Delaware over Musk’s pay package, which was initiated by a shareholder owning just nine Tesla shares.

Given that experience, it’s not hard to see why Tesla’s board and its shareholders saw value in protecting the company against similar suits in the future. Dillard’s also elected to adopt ownership requirements for shareholder proposals and the increased derivative lawsuit ownership threshold.

Exxon’s decision to move to Texas isn’t a response to a shareholder action that’s caused it to look for a new venue where it can avoid similar disputes in the future. And it isn’t proposing any of the shareholder threshold changes allowed under Texas law.

To the contrary, Exxon is staying “as is”—but under Texas’ more predictable, statutory-based legal system, which doesn’t impose a one-size-fits all system for businesses.

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

Michael Toth is director of research at the Civitas Institute at the University of Texas at Austin.

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