The News
Venture capital giant Sequoia is backing Elon Musk in his fight against Delaware, adding Silicon Valley muscle to a brawl that has captivated and split the corporate community.
Sequoia said in a court filing Tuesday evening a Delaware judge’s decision last year to invalidate Musk’s $56 billion pay package from Tesla threatens the ability of “superstar CEOs” to innovate. It’s a shot across the bow as the state’s legislature takes up debate on a key piece of corporate-friendly legislation in response to Musk moving Tesla’s legal home to Texas after his bonus was nixed.
The freedom to reward executives who deliver outsized profits is “essential to optimizing the incentives necessary to propel founder-led companies to the heights Sequoia aspires to,” the firm wrote in a friend-of-the-court brief. The ruling, which Musk has appealed, will make it hard for board members and shareholders like Sequoia to keep “visionary leaders.”
Sequoia, which has backed many of Musk’s companies including SpaceX and xAI, echoed Tesla’s own arguments in the case that Musk is a rockstar who could have done anything, but chose to build an $800 billion company that has enriched shareholders and deserved to share in those gains. “Delaware law should not subject founders to heightened scrutiny for being an asset and benefit to all stockholders,” Sequoia wrote.
Delaware is scrambling to avoid a corporate exodus that was triggered by Musk but has ridden broader social backlash to diversity efforts and perceived judicial activism. The state is legal home to the vast majority of America’s startups and listed companies, whose annual fees pay for more than a quarter of its budget.
Delaware is under pressure from corporate advisors, including Walmart’s, to course correct on perceived judicial overreach, Semafor reported earlier this month. The exit has so far been limited to tech companies— Meta has considered following to Texas and Dropbox, run by founder and Mark Zuckerberg’s close friend Drew Houston, is moving to Nevada — but concerns that it could spread to blue chip companies spurred Delaware to introduce a package of founder-friendly rules.