

Texas and the internal affairs doctrine
11 snips May 28, 2025
This discussion dives into Texas's evolving corporate governance landscape, challenging Delaware's dominance. Recent legislative changes may reshape shareholder rights and corporate operations. The hosts explore the implications of new laws affecting shareholder proposals, raising engagement hurdles. They also critique the complex regulations surrounding proxy advisors and the attention on ESG factors. The episode highlights Texas's attempts to navigate intricate governance issues, including conflicts with federal laws and the effects on out-of-state corporations.
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Understanding Internal Affairs Doctrine
- The internal affairs doctrine means that a company's state of incorporation governs its corporate governance regardless of where the business operates.
- This unique legal norm centralizes governance law to a single state, simplifying shareholder rights across state lines.
Federal Law vs. Internal Affairs Doctrine
- Federal securities law usually respects the internal affairs doctrine but can preempt state law when conflicts arise.
- Corporate governance is primarily a state issue, with federal law carefully limiting its interference.
Texas Raises Shareholder Proposal Bar
- Texas's new shareholder proposal law lets companies block shareholder proposals unless the shareholder owns an extremely high percentage of stock.
- This law applies to companies headquartered in Texas or listed on the new Texas Stock Exchange, affecting many major firms like Tesla and Exxon.