New York state officials are urging Tesla to revoke a recent bylaw change that limits shareholders from filing derivative lawsuits unless they own at least 3% of the company’s stock, roughly US$30 billion in shares.

The amendment was adopted by Tesla’s board on May 15, 2025, one day after Texas changed its laws to allow companies to impose such thresholds.

The New York State Common Retirement Fund, which holds about 0.1% of Tesla shares, submitted a formal proxy proposal and letter on July 11 opposing the change.

The letter was signed by Gianna McCarthy, a director of corporate governance with the retirement fund, on behalf of the fund and New York State Comptroller Thomas DiNapoli.

It called the decision “egregious” and said it undermines shareholder accountability.

“Derivative actions are the last resort for shareholders to enforce their rights,” the letter emphasized.

🔗 Source: CNBC

🧠 Food for thought

1️⃣ Corporate migration signals intensifying competition between states for business-friendly governance

Tesla’s move from Delaware to Texas represents a broader trend of corporate relocations driven by governance considerations, not just tax benefits.

This shift follows other high-profile companies, including SpaceX, TripAdvisor, and Dropbox, that have cited more favorable regulatory environments in states like Texas and Nevada 1.

Delaware’s historical dominance as the preferred incorporation state is being challenged as companies react to court rulings perceived as unfavorable to management interests, such as the decision voiding Musk’s compensation package 1.

Texas has become a leader in corporate relocations, gaining over 25,000 establishments from other states between 2010 and 2019, which added 281,000 jobs to the state economy 2.

This competition between states creates a potential dynamic where jurisdictions may weaken shareholder protections to attract corporate headquarters and tax revenue.

2️⃣ Tesla’s bylaw change highlights the longstanding tension between shareholder rights and managerial control

The requirement for shareholders to own 3% of Tesla (approximately $30 billion) to file derivative lawsuits represents a significant restriction on a governance mechanism that dates back decades.

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