1
00:00:02,720 --> 00:00:15,840
Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.

2
00:00:18,520 --> 00:00:21,480
Speaker 2: Hello and welcome to another episode of the Authots podcast.

3
00:00:21,600 --> 00:00:23,200
Speaker 2: I'm Tracy Alloway and I'm Joe.

4
00:00:23,200 --> 00:00:24,280
Speaker 3: Why isn't thal Joe?

5
00:00:24,360 --> 00:00:27,760
Speaker 2: I have a fun fact for you? Go on? Are

6
00:00:27,760 --> 00:00:28,200
Speaker 2: you ready?

7
00:00:28,240 --> 00:00:28,520
Speaker 1: Yeah?

8
00:00:28,600 --> 00:00:32,159
Speaker 2: Okay, So Delaware has a population of about one point

9
00:00:32,440 --> 00:00:35,480
Speaker 2: h five million a little over a million. Okay, it's

10
00:00:35,479 --> 00:00:38,159
Speaker 2: one of the least populous states. Yeah, I think it

11
00:00:38,200 --> 00:00:40,839
Speaker 2: has fewer people than a lot of big cities in

12
00:00:40,880 --> 00:00:45,760
Speaker 2: the US for sure. However, Delaware has two point one

13
00:00:45,960 --> 00:00:50,520
Speaker 2: million businesses registered in the state, so basically two businesses

14
00:00:50,640 --> 00:00:51,400
Speaker 2: for every person.

15
00:00:51,479 --> 00:00:53,880
Speaker 3: This is a legit fun fact. This is like a

16
00:00:54,000 --> 00:00:56,040
Speaker 3: legit I did not know this. I mean, I knew

17
00:00:56,120 --> 00:00:58,320
Speaker 3: that it was not a very big state population wise.

18
00:00:58,480 --> 00:01:01,200
Speaker 3: I know that so many corporations or businesses or whatever

19
00:01:01,800 --> 00:01:04,479
Speaker 3: incorporate in Delaware, but there's sort of two to one ratio.

20
00:01:04,600 --> 00:01:06,080
Speaker 3: Excellent fun fact tracing.

21
00:01:06,280 --> 00:01:08,640
Speaker 2: Well done, Yes, for your next dinner party. You can

22
00:01:08,680 --> 00:01:11,840
Speaker 2: trot that one out. But I mean, obviously, maybe you

23
00:01:11,880 --> 00:01:15,800
Speaker 2: could argue that Delawareans are just phenomenally entrepreneurial. But as

24
00:01:15,840 --> 00:01:17,800
Speaker 2: you as you mentioned more.

25
00:01:17,720 --> 00:01:19,920
Speaker 3: Than I'm not dismissing them. I just know that that's

26
00:01:19,959 --> 00:01:21,240
Speaker 3: not really what's going on, right.

27
00:01:21,160 --> 00:01:23,319
Speaker 2: There's something else going on here, which is the Delaware

28
00:01:23,360 --> 00:01:27,880
Speaker 2: has become the de facto state for companies incorporating.

29
00:01:28,200 --> 00:01:30,240
Speaker 3: Yeah, this is like the main thing that we know

30
00:01:30,280 --> 00:01:34,120
Speaker 3: about Delaware, and we don't really I mean the chickens, right,

31
00:01:34,160 --> 00:01:37,400
Speaker 3: not the chickens. But you don't hear much about Delaware

32
00:01:37,600 --> 00:01:40,920
Speaker 3: except typically when there is some sort of corporate fight

33
00:01:40,959 --> 00:01:42,800
Speaker 3: playing out in its courts. And of course it has

34
00:01:42,920 --> 00:01:47,640
Speaker 3: a dedicated court system for corporate fights and so forth,

35
00:01:47,680 --> 00:01:50,680
Speaker 3: and there's some prominent examples over the years where we

36
00:01:50,760 --> 00:01:52,840
Speaker 3: learn about what the chancery is and then I forget

37
00:01:52,880 --> 00:01:55,080
Speaker 3: what the chancery is or where that word comes from.

38
00:01:55,440 --> 00:01:59,639
Speaker 3: But people seem to like their simplistic, streamlined legal system

39
00:01:59,680 --> 00:02:02,480
Speaker 3: for things, and it seems to have paid off reasonably well.

40
00:02:02,560 --> 00:02:05,520
Speaker 2: People seem to like it, but that might be changing.

41
00:02:05,680 --> 00:02:08,720
Speaker 2: So you mentioned corporate fights. We had a very prominent

42
00:02:08,880 --> 00:02:13,080
Speaker 2: example of this relatively recently when there was the court

43
00:02:13,120 --> 00:02:18,040
Speaker 2: fight over Elon Musk's compensation at Tesla, and eventually Elon

44
00:02:18,200 --> 00:02:20,280
Speaker 2: just said, you know, I'm going to pick up my

45
00:02:20,400 --> 00:02:23,160
Speaker 2: company and move it to Texas and incorporate there. And

46
00:02:23,200 --> 00:02:26,320
Speaker 2: in fact we are seeing a few examples of companies

47
00:02:26,400 --> 00:02:29,400
Speaker 2: choosing to move away from Delaware and two places like

48
00:02:29,440 --> 00:02:34,040
Speaker 2: Texas or Nevada. And I know this isn't maybe a

49
00:02:34,120 --> 00:02:37,880
Speaker 2: top of mind news development for many people right now.

50
00:02:37,880 --> 00:02:40,040
Speaker 2: There's a lot going on. Yeah, but I think it's

51
00:02:40,080 --> 00:02:42,560
Speaker 2: really interesting. It's kind of slow moving, and it does

52
00:02:42,639 --> 00:02:45,840
Speaker 2: have implications for shareholder rights totally.

53
00:02:45,919 --> 00:02:48,240
Speaker 3: I actually think it's a very important relevant topic. And

54
00:02:48,280 --> 00:02:50,440
Speaker 3: I'll say this is the reason why, which is that

55
00:02:50,560 --> 00:02:54,000
Speaker 3: in this sense, a legal system is this network effect,

56
00:02:54,000 --> 00:02:56,920
Speaker 3: and people respect the legal system, and even if maybe

57
00:02:56,960 --> 00:02:59,440
Speaker 3: there are decisions that go against them, like okay, this

58
00:02:59,480 --> 00:03:01,480
Speaker 3: is a high qualt a legal system, it is very

59
00:03:01,520 --> 00:03:04,880
Speaker 3: hard to rebuild that somewhere else. It also is the

60
00:03:04,919 --> 00:03:07,239
Speaker 3: sort of thing that if there is some pole elsewhere,

61
00:03:07,360 --> 00:03:09,920
Speaker 3: then it's interesting to see what does it take to

62
00:03:10,080 --> 00:03:13,240
Speaker 3: pry entities away from this network where there is years

63
00:03:13,280 --> 00:03:16,400
Speaker 3: and years and thousands and thousands of decisions upon which

64
00:03:16,680 --> 00:03:20,760
Speaker 3: to build something resembling a shared law. And so, you know,

65
00:03:20,919 --> 00:03:22,720
Speaker 3: when I think about the United States, when I think

66
00:03:22,760 --> 00:03:25,760
Speaker 3: about these bigger questions about how do you move dollars,

67
00:03:25,800 --> 00:03:29,200
Speaker 3: how do you move entities, industries to other jurisdictions that

68
00:03:29,360 --> 00:03:31,680
Speaker 3: are maybe younger and don't have the same level of

69
00:03:31,800 --> 00:03:36,320
Speaker 3: historical jurisprudence. Maybe there is a microcosm a story to

70
00:03:36,360 --> 00:03:39,520
Speaker 3: be told about the Delaware history, how it built up,

71
00:03:39,720 --> 00:03:41,560
Speaker 3: and if there are any threats to it over the

72
00:03:41,600 --> 00:03:42,200
Speaker 3: medium term.

73
00:03:42,320 --> 00:03:45,200
Speaker 2: Absolutely very well put. Thanks so I am happy to

74
00:03:45,240 --> 00:03:47,320
Speaker 2: say we have the perfect guest. We're going to be

75
00:03:47,320 --> 00:03:50,840
Speaker 2: speaking with professor Ann Lipton. She is a law professor

76
00:03:50,960 --> 00:03:54,880
Speaker 2: at the University of Colorado and Lawrence W. Dmouth Chair,

77
00:03:55,160 --> 00:03:57,160
Speaker 2: And thank you so much for joining us.

78
00:03:57,560 --> 00:03:59,120
Speaker 4: Thank you so much for the invite.

79
00:03:59,360 --> 00:04:02,920
Speaker 2: I'll start with the obvious question, which is how did

80
00:04:02,920 --> 00:04:05,280
Speaker 2: we end up with Delaware as the de facto place

81
00:04:05,400 --> 00:04:08,680
Speaker 2: for corporate incorporation? Why Delaware?

82
00:04:09,000 --> 00:04:13,640
Speaker 4: Because Delaware actually strategized that it wanted to attract incorporations.

83
00:04:13,640 --> 00:04:15,720
Speaker 4: And this was back in all the late eighteen hundred's

84
00:04:15,720 --> 00:04:19,400
Speaker 4: early nineteen hundreds, a number of states actually thought that

85
00:04:19,480 --> 00:04:23,080
Speaker 4: they could make money by having corporations incorporate in their

86
00:04:23,120 --> 00:04:25,760
Speaker 4: state and pay fees. You could actually open a newspaper

87
00:04:25,800 --> 00:04:28,920
Speaker 4: at that time and see advertisements for come incorporate in

88
00:04:29,279 --> 00:04:32,640
Speaker 4: X state. And Delaware made a conscious decision to make

89
00:04:32,680 --> 00:04:36,799
Speaker 4: its state and its law friendly to corporations that wanted

90
00:04:36,800 --> 00:04:39,320
Speaker 4: to incorporate there So, among other things. At the time,

91
00:04:39,839 --> 00:04:42,400
Speaker 4: one of the main concerns of businesses was that corporate

92
00:04:42,480 --> 00:04:45,680
Speaker 4: law would be used politically, that the rules would change

93
00:04:45,720 --> 00:04:49,480
Speaker 4: to effectuate some kind of political policy. So Delaware adopted

94
00:04:49,480 --> 00:04:51,880
Speaker 4: a constitutional amendment that its judges would have to be

95
00:04:51,920 --> 00:04:56,000
Speaker 4: politically balanced, so you couldn't have more than half more

96
00:04:56,040 --> 00:04:57,960
Speaker 4: than a bare majority of one party or the other.

97
00:04:58,000 --> 00:04:59,960
Speaker 4: So for a seven member court, no more than four

98
00:05:00,080 --> 00:05:02,200
Speaker 4: can be a member of one party or another. They

99
00:05:02,320 --> 00:05:05,640
Speaker 4: also put a constitutional amendment that any change to the

100
00:05:05,640 --> 00:05:09,200
Speaker 4: corporate code required a two thirds vote of the legislature,

101
00:05:09,680 --> 00:05:13,160
Speaker 4: so trying to insulate their corporate law from political pressures.

102
00:05:13,160 --> 00:05:15,240
Speaker 4: And then they just made their corporate law very flexible

103
00:05:15,440 --> 00:05:17,520
Speaker 4: and very manager friendly. Managers could kind of do what

104
00:05:17,560 --> 00:05:19,920
Speaker 4: they wanted with it, and it just sort of took

105
00:05:19,920 --> 00:05:20,440
Speaker 4: off from there.

106
00:05:20,800 --> 00:05:24,680
Speaker 3: This is really fascinating, this idea of creating the corporate

107
00:05:24,760 --> 00:05:28,160
Speaker 3: legal system in this sort of glass enclosure through which

108
00:05:28,200 --> 00:05:31,400
Speaker 3: the political system cannot break. And this is a theme

109
00:05:31,440 --> 00:05:33,719
Speaker 3: that seems to come up over and over again. We

110
00:05:33,800 --> 00:05:35,800
Speaker 3: talk about it when we talk about the Federal Reserve

111
00:05:35,839 --> 00:05:39,720
Speaker 3: and its nominal or de facto independence. This came up

112
00:05:39,760 --> 00:05:43,360
Speaker 3: when we talked to the Alaska Sovereign Wealth Fund guys

113
00:05:43,400 --> 00:05:46,400
Speaker 3: and the difficulty that the political system has in accessing

114
00:05:46,839 --> 00:05:49,440
Speaker 3: the corn seed, so to speak. Talk to us a

115
00:05:49,440 --> 00:05:53,600
Speaker 3: little bit more about the structures in place and how

116
00:05:53,680 --> 00:05:57,719
Speaker 3: strong they are to insulate the core system from politics,

117
00:05:57,839 --> 00:05:59,960
Speaker 3: and how durable and thick those a glass wall.

118
00:06:00,839 --> 00:06:04,039
Speaker 4: Yeah, so they can't insulate the court from politics in

119
00:06:04,080 --> 00:06:06,560
Speaker 4: the sense of the legislature acting and so forth, and

120
00:06:06,600 --> 00:06:09,159
Speaker 4: that's actually what we've just been seeing, but they are

121
00:06:09,200 --> 00:06:12,640
Speaker 4: fairly insulated from partisan politics. Partisan politics doesn't play out

122
00:06:12,640 --> 00:06:14,560
Speaker 4: in the same way that we would understand it in

123
00:06:14,680 --> 00:06:18,240
Speaker 4: other parts of the country or other areas. But so

124
00:06:18,440 --> 00:06:20,160
Speaker 4: the idea here, well, first of all, I mean one

125
00:06:20,160 --> 00:06:22,080
Speaker 4: thing to note though, is that Delaware is obviously it's

126
00:06:22,160 --> 00:06:25,320
Speaker 4: very blue state voting behavior, and judges do things other

127
00:06:25,440 --> 00:06:27,600
Speaker 4: than decide corporate cases. We do forget that, but they

128
00:06:27,600 --> 00:06:30,119
Speaker 4: do in fact have other things to decide. But still

129
00:06:30,160 --> 00:06:33,680
Speaker 4: the judges are politically balanced in order to benefit this

130
00:06:33,800 --> 00:06:37,800
Speaker 4: corporate system. So what happens with the way laws made

131
00:06:38,080 --> 00:06:40,880
Speaker 4: in Delaware, corporate laws made, is that it actually doesn't

132
00:06:40,880 --> 00:06:43,160
Speaker 4: really come from the legislature, which really most of the

133
00:06:43,240 --> 00:06:46,760
Speaker 4: legislature isn't. They're not corporate experts, they don't know much

134
00:06:46,760 --> 00:06:49,560
Speaker 4: about corporate law necessarily, they're just legislators. So what happens

135
00:06:49,600 --> 00:06:53,080
Speaker 4: is there's the Delaware State Bar Association has a Corporation

136
00:06:53,160 --> 00:06:57,080
Speaker 4: Lost section and they actually generate the proposed statutes on

137
00:06:57,120 --> 00:06:58,960
Speaker 4: the theory that they can do it in a sort

138
00:06:58,960 --> 00:07:03,360
Speaker 4: of non partisan, very technocratic way, and then the legislature

139
00:07:03,480 --> 00:07:05,680
Speaker 4: tends to sort of rubber stamp the stuff that comes

140
00:07:05,680 --> 00:07:07,400
Speaker 4: out of the Corporation law section.

141
00:07:08,279 --> 00:07:12,640
Speaker 2: So, you know, Joe mentioned that sort of network effect earlier,

142
00:07:12,880 --> 00:07:16,080
Speaker 2: and I think this is really important in law, especially

143
00:07:16,200 --> 00:07:19,720
Speaker 2: because a lot of legal battles are based on precedent, right,

144
00:07:20,200 --> 00:07:23,760
Speaker 2: and so we have Delaware as the de facto incorporation

145
00:07:23,920 --> 00:07:28,080
Speaker 2: state and decades and decades of precedent for judges and

146
00:07:28,360 --> 00:07:32,000
Speaker 2: lawyers to actually look at, how does that sort of

147
00:07:32,320 --> 00:07:36,840
Speaker 2: I guess precedent or first mover advantage help Delaware.

148
00:07:37,400 --> 00:07:40,400
Speaker 4: Well, it's always been assumed that that would help Deltware

149
00:07:40,440 --> 00:07:42,240
Speaker 4: because you would have the statute and you have a

150
00:07:42,600 --> 00:07:45,480
Speaker 4: decades of precedent, so that companies would kind of know

151
00:07:45,960 --> 00:07:48,360
Speaker 4: how questions would be answered. If they came up. So

152
00:07:48,400 --> 00:07:51,400
Speaker 4: there are a lot of areas where other states you

153
00:07:51,520 --> 00:07:54,680
Speaker 4: just simply do not have information on, like how a

154
00:07:54,720 --> 00:07:57,480
Speaker 4: court would treat particular kinds of claims or particular kinds

155
00:07:57,480 --> 00:08:00,240
Speaker 4: of disputes. Some of the obvious things are things like

156
00:08:00,400 --> 00:08:05,360
Speaker 4: activist takeovers or our proxy contests and takeover defenses, because

157
00:08:06,160 --> 00:08:08,880
Speaker 4: we know how that looks in Delaware, because Delaware incorporates

158
00:08:08,920 --> 00:08:10,840
Speaker 4: most of the public companies where you have those kinds

159
00:08:10,880 --> 00:08:13,360
Speaker 4: of fights. We don't know how that looks in other

160
00:08:13,480 --> 00:08:16,679
Speaker 4: states because you don't tend to have as many activist

161
00:08:16,720 --> 00:08:19,360
Speaker 4: situations in those other states. So that's always thought to

162
00:08:19,400 --> 00:08:22,520
Speaker 4: be sort of an advantage of Delaware that everything plays

163
00:08:22,520 --> 00:08:26,280
Speaker 4: out there, and most other states they very often look

164
00:08:26,360 --> 00:08:29,679
Speaker 4: to Delaware when they're deciding their own corporate law. Sometimes

165
00:08:29,720 --> 00:08:32,040
Speaker 4: they contrast their corporate law with Delaware, but Delaware is

166
00:08:32,080 --> 00:08:34,520
Speaker 4: always kind of where they look to deal with these questions,

167
00:08:34,720 --> 00:08:37,160
Speaker 4: and that's always considered to be a real advantage of Delaware.

168
00:08:37,200 --> 00:08:40,000
Speaker 4: You at least know what's going to happen. But it

169
00:08:40,120 --> 00:08:43,440
Speaker 4: also means that because this is case law, it's mostly

170
00:08:43,480 --> 00:08:45,560
Speaker 4: not in the store, hasn't been mostly in the statute.

171
00:08:45,640 --> 00:08:49,360
Speaker 4: It's judged by judge decisions, and that can also mean

172
00:08:49,360 --> 00:08:51,880
Speaker 4: that sometimes it's sort of hard to penetrate because it's

173
00:08:51,880 --> 00:08:53,880
Speaker 4: really you've got to read this decision, well, don't forget

174
00:08:53,880 --> 00:08:56,720
Speaker 4: this other decision, and don't forget this decision too, and

175
00:08:56,720 --> 00:08:59,080
Speaker 4: that can be sort of hard to figure out if

176
00:08:59,120 --> 00:09:00,679
Speaker 4: you're just looking at it the first time.

177
00:09:01,160 --> 00:09:04,560
Speaker 3: Yeah, I'm really interested in this tension, right because in theory, okay,

178
00:09:04,640 --> 00:09:07,360
Speaker 3: you write down laws on paper and they're all visible

179
00:09:07,440 --> 00:09:09,760
Speaker 3: and say, okay, this is consistent. We know what's going

180
00:09:09,840 --> 00:09:12,679
Speaker 3: to happen. But also decisions are made by judges and

181
00:09:12,720 --> 00:09:15,400
Speaker 3: people dispute them. Otherwise they wouldn't have to have cases

182
00:09:15,440 --> 00:09:18,679
Speaker 3: in the first part, if if judges didn't have to

183
00:09:18,760 --> 00:09:22,959
Speaker 3: exercise some sort of agency, how do the judges feel

184
00:09:22,960 --> 00:09:28,160
Speaker 3: about their own responsibility when deciding these cases to think

185
00:09:28,200 --> 00:09:33,760
Speaker 3: about consistency or the underlying deep principles of Delaware corporate

186
00:09:33,840 --> 00:09:36,680
Speaker 3: law and the long term implications for the state of

187
00:09:36,720 --> 00:09:39,600
Speaker 3: Delaware and for the state when they make their decisions.

188
00:09:39,960 --> 00:09:42,319
Speaker 4: Yeah, so there's a tension there. So you just identified,

189
00:09:42,320 --> 00:09:46,360
Speaker 4: like attention, a tension between the state of Delaware versus

190
00:09:46,440 --> 00:09:48,480
Speaker 4: general corporate theory and corporate law and I think you

191
00:09:48,480 --> 00:09:49,960
Speaker 4: don't become a judge and you don't go into this

192
00:09:50,000 --> 00:09:52,880
Speaker 4: area unless you really do appreciate the law and enjoy it.

193
00:09:53,280 --> 00:09:56,520
Speaker 4: And I mean the Delaware judges are extremely thoughtful about

194
00:09:56,600 --> 00:09:58,920
Speaker 4: corporate law and what the right answer is and how

195
00:09:59,000 --> 00:10:02,000
Speaker 4: corporations should work. They don't always have exactly the same theories,

196
00:10:02,000 --> 00:10:05,640
Speaker 4: but they definitely have a point of view and they

197
00:10:05,679 --> 00:10:09,240
Speaker 4: care very much about how corporate law operates. But and

198
00:10:09,600 --> 00:10:11,920
Speaker 4: this is where some of the tension is today. If

199
00:10:11,920 --> 00:10:15,800
Speaker 4: corporate boards are unhappy with their decisions over and over

200
00:10:15,800 --> 00:10:19,480
Speaker 4: and over again, then Delaware may lose incorporations to other states.

201
00:10:19,480 --> 00:10:21,720
Speaker 4: And how that plays out between sort of fidelity to

202
00:10:22,120 --> 00:10:24,960
Speaker 4: a vision of what corporate law should be couple with

203
00:10:25,000 --> 00:10:28,240
Speaker 4: the straight up reality that if managers are unhappy and

204
00:10:28,280 --> 00:10:31,960
Speaker 4: incorporate elsewhere, Delaware doesn't have doesn't get to do much anymore.

205
00:10:32,240 --> 00:10:34,920
Speaker 4: That's a tension that's been playing out for just as

206
00:10:34,960 --> 00:10:37,240
Speaker 4: long as Delaware has been incorporating companies.

207
00:10:37,240 --> 00:10:37,920
Speaker 5: I mean, that's.

208
00:10:37,840 --> 00:10:41,760
Speaker 4: Always I don't think judges are usually consciously making that

209
00:10:41,920 --> 00:10:44,240
Speaker 4: decisions based on that, or they're certainly trying not to,

210
00:10:44,640 --> 00:10:46,880
Speaker 4: but that tension is always present and has been present

211
00:10:46,920 --> 00:10:47,440
Speaker 4: in the past.

212
00:10:48,240 --> 00:10:52,120
Speaker 2: Before we get to why companies some companies seem unhappy

213
00:10:52,160 --> 00:10:54,319
Speaker 2: with Delaware at the moment, I'm going to go ahead

214
00:10:54,400 --> 00:10:57,960
Speaker 2: and ask Joe's classic question whenever this comes up, which

215
00:10:58,040 --> 00:10:59,760
Speaker 2: is what is a chancery.

216
00:11:02,280 --> 00:11:04,960
Speaker 4: Well, it's just the name for the Delaware courts that

217
00:11:05,040 --> 00:11:07,600
Speaker 4: here corporate cases, So I mean the fun This is

218
00:11:07,600 --> 00:11:10,960
Speaker 4: a very technical legal point, but historically there were two

219
00:11:11,080 --> 00:11:13,679
Speaker 4: types of courts in the world. There were the courts

220
00:11:13,720 --> 00:11:16,120
Speaker 4: of law and the courts of equity. The courts of

221
00:11:16,240 --> 00:11:18,840
Speaker 4: law followed sort of these stringent rules, and the courts

222
00:11:18,840 --> 00:11:22,560
Speaker 4: of equity were literally sort of about fairness and dealing

223
00:11:22,600 --> 00:11:25,439
Speaker 4: with what's the right answer and doing justice as opposed

224
00:11:25,440 --> 00:11:28,360
Speaker 4: to according to technical rules that were laid down. And

225
00:11:28,400 --> 00:11:30,440
Speaker 4: so there was two separate courts, and that was from England,

226
00:11:30,440 --> 00:11:32,600
Speaker 4: and that was true in the United States, and then

227
00:11:32,640 --> 00:11:36,079
Speaker 4: the United States in the thirties or so melded the

228
00:11:36,120 --> 00:11:38,800
Speaker 4: two courts at the federal level, and most states did

229
00:11:38,840 --> 00:11:40,440
Speaker 4: the same, so there would just be one court that

230
00:11:40,520 --> 00:11:44,080
Speaker 4: heard all the cases law cases and equity cases. But

231
00:11:44,160 --> 00:11:47,880
Speaker 4: Delaware never did that, so it still has this separate

232
00:11:47,920 --> 00:11:49,960
Speaker 4: court of law and the Court of equity, which is

233
00:11:50,000 --> 00:11:54,400
Speaker 4: the chancery court. So its historical origins are essentially rooted

234
00:11:54,400 --> 00:11:58,400
Speaker 4: in this idea of fairness and commanding people to take

235
00:11:58,440 --> 00:12:01,520
Speaker 4: the proper actions. And it doesn't sit with a jury.

236
00:12:01,600 --> 00:12:04,520
Speaker 4: The cases are heard just by the judges. The judges

237
00:12:05,000 --> 00:12:07,800
Speaker 4: find facts. Would otherwise juries would do that, but the

238
00:12:07,840 --> 00:12:10,440
Speaker 4: judges find facts in the Delaware Court of Chancery, they're

239
00:12:10,559 --> 00:12:13,360
Speaker 4: very expert. They are, you know, they're all drawn from

240
00:12:13,480 --> 00:12:16,600
Speaker 4: corporate practice before they get on the bench, and that's

241
00:12:16,720 --> 00:12:18,760
Speaker 4: what they do. I mean, they hear other things besides

242
00:12:18,840 --> 00:12:22,160
Speaker 4: corporate cases. Other things fall into this category of equity.

243
00:12:22,559 --> 00:12:24,600
Speaker 4: But the main thing, obviously is the corporate cases.

244
00:12:40,280 --> 00:12:43,360
Speaker 3: So I want to eventually get into the Elon paid

245
00:12:43,440 --> 00:12:45,680
Speaker 3: case and maybe get you read on it, et cetera.

246
00:12:45,760 --> 00:12:48,040
Speaker 3: But before we do that, you mentioned that this is

247
00:12:48,080 --> 00:12:50,600
Speaker 3: nothing new. Some of these there are these long standing

248
00:12:50,760 --> 00:12:54,559
Speaker 3: questions about the Delaware and its persistence. Can you give

249
00:12:54,600 --> 00:12:56,400
Speaker 3: us a little history or what are you know? What

250
00:12:56,440 --> 00:13:00,560
Speaker 3: were the Elon cases pre the Elon cases that sort

251
00:13:00,600 --> 00:13:05,400
Speaker 3: of maybe had people questioning the sort of durability of

252
00:13:05,600 --> 00:13:06,840
Speaker 3: the Delaware system the.

253
00:13:06,920 --> 00:13:10,160
Speaker 2: Long, long, long ago before Elon Elon l.

254
00:13:10,280 --> 00:13:13,600
Speaker 4: Lepe It's in the eighties. It was that long ago.

255
00:13:13,679 --> 00:13:16,559
Speaker 4: It was the eighties. There were two big incidents. So

256
00:13:16,760 --> 00:13:19,360
Speaker 4: one case of like these are the basic law cases

257
00:13:19,360 --> 00:13:20,840
Speaker 4: that you learn if you're in any kind of basic

258
00:13:20,840 --> 00:13:24,120
Speaker 4: corporate law class. So one case was called Ben Gorkum. Basically,

259
00:13:24,160 --> 00:13:28,240
Speaker 4: a company was selling itself and they settled on a price,

260
00:13:28,360 --> 00:13:31,880
Speaker 4: and shareholders sued, claiming that the board didn't take proper

261
00:13:31,960 --> 00:13:34,840
Speaker 4: care and setting this price. Nobody suggested they were acting

262
00:13:34,840 --> 00:13:37,440
Speaker 4: in bad faith, but they just didn't take the time

263
00:13:37,559 --> 00:13:39,480
Speaker 4: to make sure that they got the best price. And

264
00:13:39,520 --> 00:13:41,880
Speaker 4: the Delaware Supreme Court agreed, and it held that the

265
00:13:41,920 --> 00:13:45,120
Speaker 4: directors could be held personally liable for damages for essentially

266
00:13:45,160 --> 00:13:48,000
Speaker 4: not getting the right price for the company. And that

267
00:13:48,200 --> 00:13:51,520
Speaker 4: terrified boards because these boards could be acting in good

268
00:13:51,559 --> 00:13:54,560
Speaker 4: faith and still could be I mean, not selling the

269
00:13:54,600 --> 00:13:59,400
Speaker 4: company for enough. That's serious money damages. So Delaware amended

270
00:13:59,400 --> 00:14:02,679
Speaker 4: its corporated so that companies can now add a provision

271
00:14:02,679 --> 00:14:05,760
Speaker 4: to their charter that says directors will not be held

272
00:14:06,080 --> 00:14:11,120
Speaker 4: liable for monetary damages for negligence, and that really also

273
00:14:11,240 --> 00:14:14,959
Speaker 4: boosted companies incorporating in Delaware after that, and by now

274
00:14:15,000 --> 00:14:16,880
Speaker 4: every state has adopted a similar thing. But at the

275
00:14:16,920 --> 00:14:19,440
Speaker 4: time that was done essentially because they knew that they

276
00:14:19,440 --> 00:14:22,720
Speaker 4: had just scared the Jesus out of boards. And another

277
00:14:22,840 --> 00:14:24,560
Speaker 4: issue that came up, this is also in the eighties,

278
00:14:24,560 --> 00:14:26,840
Speaker 4: was during the hostile takeover era. This was like you know,

279
00:14:26,880 --> 00:14:29,320
Speaker 4: the deal decade. There were lots and lots of hostile

280
00:14:29,360 --> 00:14:33,120
Speaker 4: takeover attempts, and when there's a hostile takeover attempt, boards

281
00:14:33,680 --> 00:14:36,760
Speaker 4: put up barriers, usually shareholder rights plants poison pills to

282
00:14:36,880 --> 00:14:40,640
Speaker 4: prevent hostile takeovers. And there was a real question as

283
00:14:40,680 --> 00:14:43,400
Speaker 4: to how far boards could go to fend off a

284
00:14:43,400 --> 00:14:47,840
Speaker 4: hostile acquirer, even if the shareholders wanted this deal. And

285
00:14:48,320 --> 00:14:50,520
Speaker 4: at first the Delaware courts were pretty strict about it.

286
00:14:50,560 --> 00:14:52,160
Speaker 4: They after a certain point they were saying, look, you

287
00:14:52,240 --> 00:14:55,000
Speaker 4: got to let shareholders decide. The board can't just block

288
00:14:55,720 --> 00:14:59,120
Speaker 4: beneficial proposals to buy the company if the shareholders want it.

289
00:14:59,640 --> 00:15:03,600
Speaker 4: And once again there were threats to that companies would leave,

290
00:15:03,640 --> 00:15:06,440
Speaker 4: they would leave Delaware so that they could protect against

291
00:15:06,440 --> 00:15:09,280
Speaker 4: hostile takeover attempts, and at that point the Delaware Supreme

292
00:15:09,320 --> 00:15:13,320
Speaker 4: Court backed off. It adopted new standards that allow much

293
00:15:13,360 --> 00:15:16,320
Speaker 4: more deference to boards when they are fighting off hostile

294
00:15:16,360 --> 00:15:17,720
Speaker 4: takeover attempts.

295
00:15:17,680 --> 00:15:20,280
Speaker 2: So fast forward to today. I just want to make

296
00:15:20,320 --> 00:15:22,480
Speaker 2: sure we have our priors correct.

297
00:15:22,760 --> 00:15:26,120
Speaker 6: We love, we love establishing our priors on this podcast,

298
00:15:26,160 --> 00:15:28,800
Speaker 6: but you know those examples aside, does it feel like

299
00:15:28,920 --> 00:15:33,720
Speaker 6: nowadays there is perhaps more discussion of alternatives to Delaware

300
00:15:33,840 --> 00:15:35,920
Speaker 6: or more companies that seem to be moving away.

301
00:15:36,320 --> 00:15:39,480
Speaker 4: Yeah, so I don't know if statistically the numbers really

302
00:15:39,480 --> 00:15:42,880
Speaker 4: move the needle. We've seen definitely some high profile announcements

303
00:15:42,880 --> 00:15:45,200
Speaker 4: of companies planning to move, but we just don't have

304
00:15:45,320 --> 00:15:47,160
Speaker 4: enough data right now to see whether this is a

305
00:15:47,200 --> 00:15:52,080
Speaker 4: serious like actual exodus. But there's definitely a lot more discussion,

306
00:15:52,200 --> 00:15:56,400
Speaker 4: and there's definitely a lot more boards thinking, our lawyers

307
00:15:56,400 --> 00:15:58,480
Speaker 4: thinking they have to counsel boards whether you want to

308
00:15:58,480 --> 00:16:00,720
Speaker 4: incorporate in Delaware, when before that one wouldn't even have

309
00:16:00,760 --> 00:16:03,440
Speaker 4: been a question. So that's definitely something that's happening.

310
00:16:03,720 --> 00:16:06,320
Speaker 3: Well, why so, what is it if a lawyer is

311
00:16:06,400 --> 00:16:10,280
Speaker 3: counseling boards? Don't just because you know, I've known people

312
00:16:10,320 --> 00:16:13,880
Speaker 3: who have launched startups at times and the idea of

313
00:16:13,880 --> 00:16:16,240
Speaker 3: incorporation in Delaware that was just obviously what you did

314
00:16:16,360 --> 00:16:18,920
Speaker 3: right You just did it right away. So what is

315
00:16:18,960 --> 00:16:21,360
Speaker 3: it that a lawyer might say, well, maybe take a

316
00:16:21,400 --> 00:16:24,160
Speaker 3: few beats and think about this. What has actually changed

317
00:16:24,200 --> 00:16:24,720
Speaker 3: that's caused that.

318
00:16:25,040 --> 00:16:27,920
Speaker 4: Well, Delaware understands fought back, and it's changed its law

319
00:16:28,000 --> 00:16:30,320
Speaker 4: very recently to sort of fight this off. But essentially

320
00:16:30,400 --> 00:16:33,640
Speaker 4: the issue, most of the issue is shareholder liability or

321
00:16:33,760 --> 00:16:37,880
Speaker 4: liability to shareholders and vulnerability to a shareholder lawsuit. And

322
00:16:38,680 --> 00:16:42,720
Speaker 4: most of that vulnerability is vulnerability to a shareholder lawsuit

323
00:16:42,760 --> 00:16:46,160
Speaker 4: over conflicted transactions. That's the main headline thing. There are

324
00:16:46,200 --> 00:16:48,240
Speaker 4: a few other issues that have come up, but the

325
00:16:48,280 --> 00:16:52,200
Speaker 4: main headline thing is boards feeling as though Delaware has

326
00:16:52,200 --> 00:16:57,160
Speaker 4: made it too easy for shareholders to sue over conflicted transaction.

327
00:16:57,320 --> 00:17:00,000
Speaker 3: What's a conflicted transaction? Just so we know these terms.

328
00:17:00,040 --> 00:17:03,400
Speaker 3: What is an example of one, either figurative or actual.

329
00:17:03,720 --> 00:17:07,240
Speaker 4: Actual Tesla buying Solar City. Elon Musk was on both

330
00:17:07,240 --> 00:17:09,440
Speaker 4: sides of that transaction. He's on the board of Tesla

331
00:17:09,520 --> 00:17:11,919
Speaker 4: and he's on the board of and running Solar City,

332
00:17:12,240 --> 00:17:14,840
Speaker 4: and so Tesla is using its resources to buy out

333
00:17:14,880 --> 00:17:18,400
Speaker 4: Elon Musk company. So that's a classic conflict transaction.

334
00:17:18,280 --> 00:17:21,200
Speaker 2: That actually reminds me just speaking of Elon, but how

335
00:17:21,240 --> 00:17:24,720
Speaker 2: big a deal was Tesla moving from Delaware to Texas

336
00:17:24,720 --> 00:17:27,199
Speaker 2: because we talk about this network effect. Is it the

337
00:17:27,240 --> 00:17:31,200
Speaker 2: case that one high profile company moves and suddenly all

338
00:17:31,240 --> 00:17:33,840
Speaker 2: these other companies are like, we're going to do that too.

339
00:17:34,359 --> 00:17:34,600
Speaker 5: Yeah.

340
00:17:34,600 --> 00:17:36,680
Speaker 4: I think it's a big deal. I mean, first of all,

341
00:17:36,760 --> 00:17:38,199
Speaker 4: you know, we all know that it was inspired by

342
00:17:38,200 --> 00:17:40,560
Speaker 4: the that move was inspired by the pay package case.

343
00:17:40,600 --> 00:17:43,160
Speaker 4: But I think some of the grumblings about Delaware are broader.

344
00:17:43,240 --> 00:17:45,840
Speaker 4: But I think that was a big deal. If for

345
00:17:45,880 --> 00:17:48,760
Speaker 4: no other reason, then Elon Musk is very admired by

346
00:17:48,920 --> 00:17:52,040
Speaker 4: a lot of CEOs, a lot of venture capitalists, a

347
00:17:52,080 --> 00:17:54,000
Speaker 4: lot of Silicon Valley. They look to him as a

348
00:17:54,000 --> 00:17:57,040
Speaker 4: real role model. And so when he publicly announces that

349
00:17:57,080 --> 00:17:59,440
Speaker 4: he's had it with Delaware and shows that it's possible

350
00:17:59,480 --> 00:18:02,000
Speaker 4: to take a pub company and gets shareholder support for

351
00:18:02,160 --> 00:18:04,520
Speaker 4: moving out of Delaware, even if he is as special

352
00:18:04,520 --> 00:18:06,520
Speaker 4: and he has a particular relationship with the shareholders that

353
00:18:06,560 --> 00:18:08,720
Speaker 4: may not be shared by other companies, I think that's

354
00:18:08,760 --> 00:18:10,879
Speaker 4: the kind of thing that has boards thinking putting it

355
00:18:10,920 --> 00:18:11,560
Speaker 4: on the table.

356
00:18:12,000 --> 00:18:15,880
Speaker 3: Let's talk about the pay package deal. I don't know, Like, look,

357
00:18:15,920 --> 00:18:19,720
Speaker 3: I really don't know much about the law or anything

358
00:18:19,800 --> 00:18:23,280
Speaker 3: about this stuff at all. But I say when I say, hey,

359
00:18:23,520 --> 00:18:26,520
Speaker 3: this was the compensation package she agreed to. Who is

360
00:18:26,560 --> 00:18:30,160
Speaker 3: this judge to say that he can't get paid? Intuitively,

361
00:18:30,240 --> 00:18:32,280
Speaker 3: to me, it's he was outrageous. Why is this judge

362
00:18:32,280 --> 00:18:35,600
Speaker 3: canceling his pay package? But this is my dumb guy

363
00:18:36,119 --> 00:18:38,520
Speaker 3: just reading ahead. I didn't even read the article probably,

364
00:18:38,680 --> 00:18:40,959
Speaker 3: so what I'm being honest here? So why don't you

365
00:18:41,000 --> 00:18:44,240
Speaker 3: tell me, as someone who actually understands this stuff, how

366
00:18:44,280 --> 00:18:46,160
Speaker 3: we should read what that case was all about?

367
00:18:46,600 --> 00:18:50,920
Speaker 4: Okay, So remember the issue here is conflicted transactions. Yeah,

368
00:18:51,040 --> 00:18:54,560
Speaker 4: Musk's pay was a standard conflicted transaction in the sense

369
00:18:54,600 --> 00:18:57,600
Speaker 4: that the board was deciding what it was going to

370
00:18:57,600 --> 00:18:59,920
Speaker 4: pay at CEO, which is very much well with the

371
00:19:00,080 --> 00:19:04,160
Speaker 4: the board discretion. But the board included Elon Musk and

372
00:19:04,280 --> 00:19:08,800
Speaker 4: his brother, So therefore this was your classic conflict transaction.

373
00:19:08,920 --> 00:19:10,520
Speaker 3: It was a board, but a lot of CEOs are

374
00:19:10,560 --> 00:19:11,040
Speaker 3: on their board.

375
00:19:11,200 --> 00:19:15,679
Speaker 4: Yes, okay, So under Delaware law, the general rule is

376
00:19:15,720 --> 00:19:19,200
Speaker 4: a conflicted transaction will get close scrutiny by a court

377
00:19:19,680 --> 00:19:22,679
Speaker 4: unless it's cleansed. And how do you cleanse it? You

378
00:19:22,720 --> 00:19:25,239
Speaker 4: put an independent decision maker in the mix, and then

379
00:19:25,280 --> 00:19:26,760
Speaker 4: the court will say, well, I'll just defer to the

380
00:19:26,800 --> 00:19:29,040
Speaker 4: independent decision maker. And you have two options for an

381
00:19:29,040 --> 00:19:33,960
Speaker 4: independent decision maker, the unconflicted board members or the shareholders.

382
00:19:34,520 --> 00:19:36,680
Speaker 4: And usually, I mean, this doesn't happen. You have to

383
00:19:36,720 --> 00:19:40,639
Speaker 4: understand how unusual a case was. Usually that's more than sufficient.

384
00:19:41,080 --> 00:19:44,400
Speaker 4: You have the unconflicted board members decide the pay, or

385
00:19:44,440 --> 00:19:47,080
Speaker 4: you have the disinterested shareholders vote on the pay. And

386
00:19:47,160 --> 00:19:51,479
Speaker 4: at that point Delaware says, I'm out, you guys, god bless.

387
00:19:52,200 --> 00:19:55,560
Speaker 4: The problem here was that the unconflicted board members were

388
00:19:55,560 --> 00:19:59,400
Speaker 4: not unconflicted. So they were all like he stocks Tesla's

389
00:19:59,400 --> 00:20:02,560
Speaker 4: board with people who were basically his bestest buds. And

390
00:20:02,880 --> 00:20:05,280
Speaker 4: they created a committee that was supposed to be the

391
00:20:05,320 --> 00:20:08,280
Speaker 4: independent members of the committee, and the committee still had

392
00:20:08,320 --> 00:20:10,399
Speaker 4: close ties to Musk. And then the committee formed a

393
00:20:10,440 --> 00:20:13,000
Speaker 4: working group that would really do the compensation package, and

394
00:20:13,040 --> 00:20:15,160
Speaker 4: they picked the people with the closest ties to Musk

395
00:20:15,200 --> 00:20:17,560
Speaker 4: to put in the working group. And there were all

396
00:20:17,640 --> 00:20:20,240
Speaker 4: these facts about how he interfered with the committee's deliberations

397
00:20:20,280 --> 00:20:22,919
Speaker 4: and they just deferred to him. So given that the

398
00:20:22,960 --> 00:20:26,560
Speaker 4: court felt that like they didn't put actual independent decision

399
00:20:26,560 --> 00:20:28,399
Speaker 4: makers at the board level, so then they took it

400
00:20:28,400 --> 00:20:30,560
Speaker 4: to the shareholders and the mayde a shareholder vote, but

401
00:20:30,800 --> 00:20:33,440
Speaker 4: there was not full disclosure in the proxy statement. The

402
00:20:33,480 --> 00:20:36,960
Speaker 4: shareholders were not fully informed, and for obvious reasons, shareholders

403
00:20:37,040 --> 00:20:40,280
Speaker 4: can't cleanse anything unless they have full information. So left

404
00:20:40,280 --> 00:20:44,240
Speaker 4: with the situation where the board was not independent of

405
00:20:44,320 --> 00:20:48,359
Speaker 4: Musk and the shareholders were not fully informed. That's why

406
00:20:48,400 --> 00:20:50,840
Speaker 4: the court felt, well, I have to evaluate the pay

407
00:20:50,840 --> 00:20:54,200
Speaker 4: package because no independent decision maker was put in the mix,

408
00:20:54,600 --> 00:20:57,639
Speaker 4: and then from there she decided it was too much.

409
00:20:58,320 --> 00:21:01,080
Speaker 2: So this might be a tough question ask. But since

410
00:21:01,080 --> 00:21:04,480
Speaker 2: we're talking, you know, this discussion or debate centers on

411
00:21:04,720 --> 00:21:08,159
Speaker 2: shareholder liability. As you've laid out, do we have any

412
00:21:08,400 --> 00:21:12,960
Speaker 2: research that actually tells us what happens to share prices

413
00:21:13,040 --> 00:21:17,000
Speaker 2: and stocks when a company's signals that it's going to

414
00:21:17,040 --> 00:21:19,320
Speaker 2: move away from Delaware or when it actually does it.

415
00:21:20,040 --> 00:21:23,480
Speaker 4: We have incredibly mixed evidence. The fact is that scholars

416
00:21:23,480 --> 00:21:26,320
Speaker 4: have been fighting about this forever whether it makes a difference,

417
00:21:26,680 --> 00:21:30,119
Speaker 4: and some have found that maybe it's beneficial depending on

418
00:21:30,160 --> 00:21:32,600
Speaker 4: the type of company, Like, I mean, Delaware is expensive.

419
00:21:32,600 --> 00:21:35,359
Speaker 4: I mean the whole point of Delaware having this chartering

420
00:21:35,359 --> 00:21:37,520
Speaker 4: business is that's how the state funds itself. It gets

421
00:21:37,520 --> 00:21:40,760
Speaker 4: twenty five percent of revenues from incorporation fees. No other

422
00:21:40,760 --> 00:21:44,520
Speaker 4: state does anything like that. So for smaller companies with

423
00:21:44,640 --> 00:21:47,560
Speaker 4: less resources, it can be beneficial to move away from Delaware.

424
00:21:47,720 --> 00:21:51,119
Speaker 4: But mostly this is something where different scholars will come

425
00:21:51,160 --> 00:21:52,840
Speaker 4: up with different things. We just don't know for sure,

426
00:21:52,840 --> 00:21:55,480
Speaker 4: and that's probably because Delaware has been dominating for so long,

427
00:21:55,760 --> 00:21:58,360
Speaker 4: at least for public companies, that it's hard to tell

428
00:21:58,400 --> 00:21:59,760
Speaker 4: if there's a serious movement away.

429
00:21:59,800 --> 00:22:01,160
Speaker 5: Now now it's.

430
00:22:00,960 --> 00:22:05,320
Speaker 3: Interesting, so let's talk about the allure of, say, reincorporating

431
00:22:05,440 --> 00:22:07,800
Speaker 3: in Texas. You know, I could see just sort of

432
00:22:07,880 --> 00:22:12,760
Speaker 3: for vibes in vague ideological things. Elon wants to go

433
00:22:12,760 --> 00:22:15,960
Speaker 3: to Texas. I'm not surprised, and they're probably the politicians

434
00:22:16,040 --> 00:22:18,560
Speaker 3: or yeah, Elon, come on down. The shareholders are like,

435
00:22:18,680 --> 00:22:22,080
Speaker 3: we're going to get away from those blue states that

436
00:22:22,640 --> 00:22:25,600
Speaker 3: impost communism on you by not letting you get your

437
00:22:26,160 --> 00:22:29,359
Speaker 3: billion dollar pay package or whatever. All that being said,

438
00:22:30,400 --> 00:22:32,480
Speaker 3: the goal, it seems to me, or why people like

439
00:22:32,760 --> 00:22:35,640
Speaker 3: Delaware is right, this idea of balance, because while there

440
00:22:35,640 --> 00:22:38,520
Speaker 3: may be an Elon must cult that loves to hand

441
00:22:38,600 --> 00:22:42,399
Speaker 3: him money, and not every shareholder wants to have that

442
00:22:42,480 --> 00:22:45,000
Speaker 3: relationship with their CEO where they're just working over a

443
00:22:45,040 --> 00:22:47,400
Speaker 3: lot of money. And so it seems to me that Okay,

444
00:22:47,480 --> 00:22:50,960
Speaker 3: maybe Texas is a good fit for Elon and his shareholders,

445
00:22:51,119 --> 00:22:54,240
Speaker 3: but that's still in many cases, some sort of court

446
00:22:54,240 --> 00:22:58,280
Speaker 3: system that imposes maintains a balance of power between the CEO,

447
00:22:58,440 --> 00:23:01,240
Speaker 3: the board and the outside share holders is still what's

448
00:23:01,240 --> 00:23:02,840
Speaker 3: going to be desirable for most companies.

449
00:23:02,960 --> 00:23:06,440
Speaker 4: Yeah, so this is a complicated question. That is exactly

450
00:23:06,520 --> 00:23:10,639
Speaker 4: how Delaware has sold itself. Essentially that it maintained a balance,

451
00:23:10,640 --> 00:23:13,560
Speaker 4: that it mostly gave boards incredible amounts of flexibility and

452
00:23:13,600 --> 00:23:17,520
Speaker 4: incredible amounts of deference, but ultimately there was some basic

453
00:23:17,560 --> 00:23:21,199
Speaker 4: floor of protections for shareholders. The issue, well, there are

454
00:23:21,200 --> 00:23:24,960
Speaker 4: twofold issues. The first is that ultimately corporate managers are

455
00:23:24,960 --> 00:23:26,919
Speaker 4: the ones who make decisions about where to incorporate when

456
00:23:26,960 --> 00:23:29,240
Speaker 4: they do a startup. I mean, once you're actually publicly traded,

457
00:23:29,440 --> 00:23:31,800
Speaker 4: if you want to move, you need a shareholder vote,

458
00:23:31,920 --> 00:23:33,920
Speaker 4: But before then, you can pick any company you want

459
00:23:33,960 --> 00:23:35,880
Speaker 4: to And even if you need a shareholder vote once

460
00:23:35,880 --> 00:23:38,440
Speaker 4: you're publicly traded, as we saw with Tesla, if you're

461
00:23:38,560 --> 00:23:41,320
Speaker 4: a meta or where you have a controlling shareholder, the

462
00:23:41,359 --> 00:23:44,160
Speaker 4: shareholder vot'ess really easy. It's just what the controlling shareholder wants.

463
00:23:44,280 --> 00:23:47,119
Speaker 4: So moving is not hard, and so the only reason

464
00:23:47,200 --> 00:23:49,000
Speaker 4: essentially that you wouldn't do it is if you really

465
00:23:49,000 --> 00:23:52,040
Speaker 4: thought you were going to pay a price with shareholders.

466
00:23:52,359 --> 00:23:55,320
Speaker 4: It's not clear how much of a price shareholders are

467
00:23:55,359 --> 00:23:59,000
Speaker 4: going to inflict for being in a state with fewer protections.

468
00:23:59,040 --> 00:24:02,080
Speaker 4: So the theory is always been the cost of capital

469
00:24:02,080 --> 00:24:05,000
Speaker 4: will be higher if you're in a state with fewer protections,

470
00:24:05,160 --> 00:24:07,840
Speaker 4: but it's not clear how much that plays in. As

471
00:24:07,920 --> 00:24:10,200
Speaker 4: you just asked, like, is there really a shareholder of

472
00:24:10,320 --> 00:24:12,960
Speaker 4: value price for moving to a different state. It's not

473
00:24:13,000 --> 00:24:16,320
Speaker 4: clear shareholders really have the power to push back, and

474
00:24:16,560 --> 00:24:19,679
Speaker 4: Delaware also seeing this move, weakened a lot of the

475
00:24:19,680 --> 00:24:22,920
Speaker 4: shareholder protections that led to verdicts like the Musk pay

476
00:24:23,000 --> 00:24:25,320
Speaker 4: package case. So now we really don't know if there's

477
00:24:25,320 --> 00:24:25,800
Speaker 4: a difference.

478
00:24:41,440 --> 00:24:45,399
Speaker 2: Why would a minority shareholder actually approve to move to

479
00:24:45,720 --> 00:24:49,280
Speaker 2: a jurisdiction where ostensibly they have fewer rights.

480
00:24:49,760 --> 00:24:53,360
Speaker 4: Because remember ninety percent of this is about shareholder litigation.

481
00:24:53,440 --> 00:24:56,280
Speaker 4: There may be are and conflict transactions and suing over

482
00:24:56,280 --> 00:24:58,800
Speaker 4: conflict transactions. That is most of what this.

483
00:24:58,720 --> 00:24:59,200
Speaker 5: Fight is about.

484
00:24:59,200 --> 00:25:01,200
Speaker 4: It's not the only thing that's most of it. There

485
00:25:01,240 --> 00:25:05,160
Speaker 4: is a huge debate about whether shareholder litigation is in

486
00:25:05,200 --> 00:25:07,760
Speaker 4: fact the best way to handle this problem. I mean,

487
00:25:08,000 --> 00:25:10,800
Speaker 4: there are all kinds of concerns about strike suits. There

488
00:25:10,840 --> 00:25:14,399
Speaker 4: are concerns that this is just lawyer driven litigation. In

489
00:25:14,440 --> 00:25:16,840
Speaker 4: the Tornetti case that Elon must pay package. Remember the

490
00:25:16,880 --> 00:25:22,200
Speaker 4: shareholder there held nine shares, literally nine shares of Tesla stock.

491
00:25:22,720 --> 00:25:27,760
Speaker 4: So there's a real question about whether shareholder litigation is

492
00:25:27,840 --> 00:25:31,640
Speaker 4: in fact a game that's worth the candle. Unquestionably, there

493
00:25:31,680 --> 00:25:37,000
Speaker 4: are real problematic transactions, and shareholder litigation can win very

494
00:25:37,119 --> 00:25:40,720
Speaker 4: huge payouts for shareholders, but usually those payouts come from

495
00:25:40,720 --> 00:25:44,520
Speaker 4: the insurance that the company itself paid for in these settlements.

496
00:25:44,560 --> 00:25:47,840
Speaker 4: And whether or not that ultimately is the best way

497
00:25:47,880 --> 00:25:51,960
Speaker 4: to handle a conflict transaction situation is a very debated question.

498
00:25:52,040 --> 00:25:54,040
Speaker 4: So shareholders may very well think they can move to

499
00:25:54,080 --> 00:25:57,480
Speaker 4: a jurisdiction with fewer protections on the theory that ultimately

500
00:25:57,800 --> 00:25:59,960
Speaker 4: less litigation is better for the company.

501
00:26:00,119 --> 00:26:03,280
Speaker 3: It is a very strange situation because essentially, again you

502
00:26:03,359 --> 00:26:07,400
Speaker 3: have this situation in which the shareholders were upset at

503
00:26:07,440 --> 00:26:10,199
Speaker 3: the state for not allowing more shareholder money to go

504
00:26:10,280 --> 00:26:14,520
Speaker 3: into the pocket of one person. That's a very strange situation,

505
00:26:14,600 --> 00:26:18,040
Speaker 3: et cetera. Shareholder lawsuits always strike me as a little

506
00:26:18,040 --> 00:26:21,480
Speaker 3: bit interesting field in general. I remember back twenty five

507
00:26:21,560 --> 00:26:23,680
Speaker 3: years ago and I sometimes used to buy and trade

508
00:26:23,720 --> 00:26:26,800
Speaker 3: individual stocks and a stock would miss earnings and then

509
00:26:26,880 --> 00:26:28,919
Speaker 3: suddenly you get an email it's like, this company is

510
00:26:28,960 --> 00:26:31,000
Speaker 3: filing suit. It's like, why do I want to take

511
00:26:31,000 --> 00:26:33,399
Speaker 3: a part in a lawsuit against this company that I

512
00:26:33,440 --> 00:26:36,159
Speaker 3: am a co owner of? Does this actually benefit me

513
00:26:36,280 --> 00:26:39,720
Speaker 3: or does this benefit anyone other than the lawyer. I've

514
00:26:39,760 --> 00:26:43,240
Speaker 3: never been totally clear on that either, just in general,

515
00:26:43,320 --> 00:26:45,760
Speaker 3: even setting aside sort of these conflict questions.

516
00:26:46,000 --> 00:26:48,480
Speaker 4: Yeah, I mean that's it's a very debated question. But

517
00:26:48,560 --> 00:26:50,399
Speaker 4: for most of these suits, I mean, there is a

518
00:26:50,400 --> 00:26:53,600
Speaker 4: difference between a suit for fraud under the federal securities

519
00:26:53,640 --> 00:26:56,800
Speaker 4: laws and a state law suit for breach of fiduciary duty,

520
00:26:56,840 --> 00:27:00,280
Speaker 4: which is what Delaware handles. And there, I mean, when

521
00:27:00,280 --> 00:27:03,800
Speaker 4: there's a lawsuit like that, any payment is supposed to

522
00:27:03,840 --> 00:27:07,000
Speaker 4: come from the directors to the shareholders or to the company.

523
00:27:07,080 --> 00:27:11,119
Speaker 4: So that's that's the theoretical monitor benefit. But directors usually

524
00:27:11,119 --> 00:27:13,000
Speaker 4: don't pay out a pocket that got insurance, so if

525
00:27:13,000 --> 00:27:14,920
Speaker 4: they pay, it's the insurance. And guess who pays for

526
00:27:14,960 --> 00:27:16,720
Speaker 4: the insurance corporation does.

527
00:27:17,080 --> 00:27:20,520
Speaker 2: Now you're going to think about shareholder lawsuits differently, Joe, or.

528
00:27:20,560 --> 00:27:24,160
Speaker 3: Just yeah, I still don't Okay, keep going.

529
00:27:24,240 --> 00:27:26,919
Speaker 2: All right, So you touched on this earlier, but Delaware

530
00:27:27,080 --> 00:27:32,000
Speaker 2: isn't exactly standing still while it sees companies move elsewhere.

531
00:27:32,280 --> 00:27:33,920
Speaker 2: Is this just going to result in a sort of

532
00:27:34,040 --> 00:27:36,920
Speaker 2: race to the bottom in terms of shareholder rights where

533
00:27:37,040 --> 00:27:40,560
Speaker 2: states are just like, well, if you drop your standards

534
00:27:40,840 --> 00:27:43,879
Speaker 2: or if you alter the balance here, I'm going to

535
00:27:43,960 --> 00:27:47,119
Speaker 2: do the same thing, and everyone just kind of races

536
00:27:47,160 --> 00:27:47,720
Speaker 2: to the bottom.

537
00:27:48,119 --> 00:27:51,359
Speaker 4: I think that's what we're absolutely seeing. I mean, Nevada

538
00:27:51,400 --> 00:27:55,760
Speaker 4: and Texas are essentially selling their law as creating barriers

539
00:27:55,760 --> 00:27:58,680
Speaker 4: to shareholder lawsuits. And that's what Delaware did. It changed

540
00:27:58,680 --> 00:28:00,600
Speaker 4: its law to put up more barriers. Now it did

541
00:28:00,600 --> 00:28:03,720
Speaker 4: some more subtlely, which is exactly why I think they're

542
00:28:03,800 --> 00:28:06,119
Speaker 4: still like this race. Because Delaware didn't want to like

543
00:28:06,160 --> 00:28:09,400
Speaker 4: openly say now that's it, we're just barring shareholder lawsuits.

544
00:28:09,400 --> 00:28:12,280
Speaker 4: So they wrote a lot of words and their complex words,

545
00:28:12,280 --> 00:28:14,560
Speaker 4: but ultimately they may all come out to the same thing.

546
00:28:14,960 --> 00:28:17,359
Speaker 4: All three stays have made it much much harder, if

547
00:28:17,400 --> 00:28:20,560
Speaker 4: not virtually impossible, for anything, but in the most fraudulent

548
00:28:20,560 --> 00:28:23,320
Speaker 4: circumstances shareholders to bring claims. So I think we're at

549
00:28:23,359 --> 00:28:24,960
Speaker 4: that race. We're watching it right now.

550
00:28:25,200 --> 00:28:28,800
Speaker 3: I could understand why a public company board or a

551
00:28:28,880 --> 00:28:31,320
Speaker 3: public company would say, Okay, we want to be in

552
00:28:31,400 --> 00:28:34,560
Speaker 3: a jurisdiction where it's much harder for shareholders to bring lawsuits,

553
00:28:34,560 --> 00:28:38,240
Speaker 3: et cetera. Is the calculus different depending on the maturity

554
00:28:38,600 --> 00:28:41,240
Speaker 3: of the company, And could you say, like an early

555
00:28:41,320 --> 00:28:43,920
Speaker 3: stage startup, like I said, I've known people in the

556
00:28:43,960 --> 00:28:46,040
Speaker 3: startup space, first, one of the first things they do

557
00:28:46,080 --> 00:28:50,560
Speaker 3: is incorporate in Delaware. In those situations, maybe from the

558
00:28:50,760 --> 00:28:55,320
Speaker 3: legal perspective, did the vcs own the company in a

559
00:28:55,320 --> 00:28:58,920
Speaker 3: more deep way than public company shareholders do, even though

560
00:28:59,000 --> 00:29:02,160
Speaker 3: nominally they're all just shareholders and there's a separate board.

561
00:29:02,600 --> 00:29:05,840
Speaker 4: Yes, and a shareholder litigation. This kind of shareholder litigation

562
00:29:06,000 --> 00:29:09,840
Speaker 4: is extremely rare in VC back or smaller companies, and

563
00:29:09,880 --> 00:29:11,800
Speaker 4: that's because who the shareholders are. I mean, the shareholders

564
00:29:11,840 --> 00:29:15,080
Speaker 4: are largely insiders or friends of VC they don't want

565
00:29:15,120 --> 00:29:18,480
Speaker 4: to anger them. They may have signed arbitration agreements that

566
00:29:18,640 --> 00:29:22,280
Speaker 4: would prevent any kind of lawsuit anyway. So this issue

567
00:29:22,320 --> 00:29:27,640
Speaker 4: of litigation is much more of a public company problem.

568
00:29:28,120 --> 00:29:30,920
Speaker 4: That said, there were some issues that were really bugging

569
00:29:30,920 --> 00:29:34,720
Speaker 4: the startup community that Delaware fixed as well. For example,

570
00:29:34,960 --> 00:29:38,560
Speaker 4: a lot of startups like to have shareholder agreements where

571
00:29:38,560 --> 00:29:41,560
Speaker 4: one shareholder is given essentially governance rights, not because they're

572
00:29:41,600 --> 00:29:44,040
Speaker 4: a shareholder and they can vote their shares, but because

573
00:29:44,080 --> 00:29:46,200
Speaker 4: they have a contractual right to say, board, you're not

574
00:29:46,200 --> 00:29:49,080
Speaker 4: allowed to merge unless I approve. Board you're not allowed

575
00:29:49,080 --> 00:29:52,120
Speaker 4: to take on debt unless I approve. And Delaware a

576
00:29:52,200 --> 00:29:54,480
Speaker 4: couple of years ago a court decision, i think very

577
00:29:54,480 --> 00:29:56,760
Speaker 4: correctly under Delaware law at the time, said well, you

578
00:29:56,760 --> 00:29:59,200
Speaker 4: can't do that in a corporation. The board has to

579
00:29:59,240 --> 00:30:01,720
Speaker 4: run the company. You can't just hand over governance rights

580
00:30:01,720 --> 00:30:03,880
Speaker 4: to a shareholder by saying, well, here's your contract, you

581
00:30:03,920 --> 00:30:06,720
Speaker 4: get to approve all board decisions. That really scared the

582
00:30:06,800 --> 00:30:11,040
Speaker 4: VC community, and Delaware reacted immediately by authorizing those kinds

583
00:30:11,080 --> 00:30:12,200
Speaker 4: of shareholder agreements.

584
00:30:12,520 --> 00:30:15,400
Speaker 3: Tracy, I think there's gonna be some very interesting questions

585
00:30:15,400 --> 00:30:17,360
Speaker 3: of corporate governance that come up. You know some of

586
00:30:17,400 --> 00:30:21,360
Speaker 3: these episodes that we've discussed where AI startups the company

587
00:30:21,440 --> 00:30:24,080
Speaker 3: gets ACQUI hired, and not all the value gets accrued

588
00:30:24,160 --> 00:30:27,720
Speaker 3: to shareholders or different class of shareholders depending on what

589
00:30:27,800 --> 00:30:29,920
Speaker 3: employee are. I bet there will be some very interesting

590
00:30:29,920 --> 00:30:32,120
Speaker 3: corporate governance law that comes out of this, for sure.

591
00:30:32,160 --> 00:30:33,720
Speaker 2: And you know there's going to be some state that

592
00:30:33,840 --> 00:30:36,800
Speaker 2: tries to pitch itself as like the place to incorporate

593
00:30:36,880 --> 00:30:40,640
Speaker 2: AI start Yeah, okay, So speaking of startups, if Joe

594
00:30:40,680 --> 00:30:44,520
Speaker 2: and I were going to incorporate and become odd Lots,

595
00:30:44,800 --> 00:30:46,240
Speaker 2: I guess we'd be in LLC.

596
00:30:46,320 --> 00:30:48,960
Speaker 5: Maybe not LAN, it probably would be yeah, okay.

597
00:30:48,800 --> 00:30:53,200
Speaker 2: Odd Lots LLC. And you were our lawyer, our hypothetical

598
00:30:53,280 --> 00:30:57,600
Speaker 2: lawyer giving us legal advice, hypothetical what would you advise

599
00:30:57,680 --> 00:30:59,920
Speaker 2: us to do here? Where should we incorporate?

600
00:31:00,400 --> 00:31:02,880
Speaker 4: Well, so, first of all, in LLC is not a corporation,

601
00:31:02,960 --> 00:31:04,720
Speaker 4: So I just want to you would not be incorporated,

602
00:31:04,760 --> 00:31:07,400
Speaker 4: you would be organizing in LLC. But actually I would

603
00:31:07,400 --> 00:31:10,360
Speaker 4: tell you not to go to Delaware, Nevada, Oro, or

604
00:31:10,440 --> 00:31:16,560
Speaker 4: Texas because Delaware dominates in public companies and these seedback

605
00:31:16,600 --> 00:31:20,840
Speaker 4: companies like professionalized startups, but it doesn't dominate in small

606
00:31:20,960 --> 00:31:24,880
Speaker 4: like you know, your average family business, your average local business.

607
00:31:24,960 --> 00:31:26,920
Speaker 4: It does not dominate there at all. And it's it's

608
00:31:26,960 --> 00:31:30,200
Speaker 4: not designed for that. So if you, I mean, you

609
00:31:30,240 --> 00:31:33,160
Speaker 4: guys are professionals, but you know, in a small relationship

610
00:31:33,200 --> 00:31:37,320
Speaker 4: back company, Delaware laws in some ways too ruthless. The

611
00:31:37,560 --> 00:31:41,800
Speaker 4: other states have a lot more protections for essentially non lawyer,

612
00:31:41,920 --> 00:31:45,400
Speaker 4: family ish friendish businesses. That might be more appropriate.

613
00:31:45,520 --> 00:31:46,080
Speaker 1: Well, I don't know.

614
00:31:46,320 --> 00:31:48,640
Speaker 3: We might, it might be we could be big, it

615
00:31:48,720 --> 00:31:50,800
Speaker 3: might be a professional operation. I guess have one more question.

616
00:31:51,040 --> 00:31:54,840
Speaker 3: How rare is the US for having this patchwork of

617
00:31:55,520 --> 00:31:59,200
Speaker 3: corporate systems, Like if we went to another country, is

618
00:31:59,240 --> 00:32:01,800
Speaker 3: there jurisdiction shopping the same way?

619
00:32:02,440 --> 00:32:05,240
Speaker 4: No? Well, see, I understand we're like fifty different countries

620
00:32:05,240 --> 00:32:09,040
Speaker 4: in Europe. It's like, you know, so Europe, you used

621
00:32:09,120 --> 00:32:12,680
Speaker 4: to be that you couldn't do what we do in

622
00:32:12,720 --> 00:32:15,400
Speaker 4: the United States, where you incorporate in Delaware, but all

623
00:32:15,400 --> 00:32:17,880
Speaker 4: your business operations are somewhere else. It used to be

624
00:32:18,000 --> 00:32:21,240
Speaker 4: in Europe that essentially it was, but as country by country,

625
00:32:21,520 --> 00:32:24,800
Speaker 4: if you had your headquarters in a country, you were

626
00:32:24,840 --> 00:32:27,880
Speaker 4: supposed to organize in that country. And you couldn't mix

627
00:32:27,960 --> 00:32:30,800
Speaker 4: and match. Europe changed the law, but it's still so

628
00:32:30,840 --> 00:32:34,080
Speaker 4: that you could theoretically jurisdiction shop among European countries, you know,

629
00:32:34,200 --> 00:32:35,880
Speaker 4: or going to have your headquarters and all your operations

630
00:32:35,920 --> 00:32:39,280
Speaker 4: in one place and organized in another place, another country.

631
00:32:39,600 --> 00:32:42,960
Speaker 4: But they don't. They don't really have that norm. It's

632
00:32:43,000 --> 00:32:45,920
Speaker 4: just viewed as sort of weird. So for them, where

633
00:32:45,960 --> 00:32:49,640
Speaker 4: your operations are are largely going to be with the law,

634
00:32:49,720 --> 00:32:51,680
Speaker 4: the corporate law that governs your entity.

635
00:32:51,960 --> 00:32:55,640
Speaker 2: Is there transnational jurisdiction shopping? Could you get you know,

636
00:32:55,760 --> 00:32:58,320
Speaker 2: like a foreign company that wants to incorporate in the US.

637
00:32:58,680 --> 00:33:01,280
Speaker 4: Well, yes, but it's much more lucky that a US

638
00:33:01,320 --> 00:33:04,720
Speaker 4: company wants to incorporate outside the country in Ireland. Yes,

639
00:33:05,160 --> 00:33:07,320
Speaker 4: for other kinds of you know, tat that used to

640
00:33:07,320 --> 00:33:09,640
Speaker 4: be a big deal for tax reasons and so forth.

641
00:33:10,120 --> 00:33:12,960
Speaker 2: All right, and Lifton, thank you so much for coming on.

642
00:33:13,000 --> 00:33:15,280
Speaker 2: Odd lots really appreciate it. That was great.

643
00:33:15,600 --> 00:33:30,040
Speaker 5: Thank you for having me, Joe.

644
00:33:30,280 --> 00:33:33,320
Speaker 2: That was so interesting. I really think I think business

645
00:33:33,400 --> 00:33:38,600
Speaker 2: journalism in general or financial journalism doesn't cover legal stuff enough.

646
00:33:38,800 --> 00:33:41,080
Speaker 3: Well, Matt Levine has proved it, because there's a huge

647
00:33:41,080 --> 00:33:43,400
Speaker 3: demand for his newsletter precisely because he's one of the

648
00:33:43,400 --> 00:33:46,479
Speaker 3: few destinations that actually talks about the chancery and all

649
00:33:46,480 --> 00:33:48,600
Speaker 3: this stuff. But to your point, right, this proves the point.

650
00:33:48,720 --> 00:33:51,560
Speaker 2: He's the exception that proves the point the entire point,

651
00:33:52,240 --> 00:33:55,920
Speaker 2: and accounting as well, and insurance insurance. Okay, wait, I'm

652
00:33:55,920 --> 00:33:59,480
Speaker 2: not going to just criticize our colleagues in financial journalism. No,

653
00:33:59,600 --> 00:34:02,920
Speaker 2: that was fascinating. I do find the whole race to

654
00:34:02,960 --> 00:34:08,040
Speaker 2: the bottom idea a little bit concerning for obvious reasons.

655
00:34:08,200 --> 00:34:11,320
Speaker 2: And I guess like it's sort of that network effect

656
00:34:11,320 --> 00:34:15,080
Speaker 2: that you were discussing earlier, But once the ball gets

657
00:34:15,200 --> 00:34:19,240
Speaker 2: rolling in that direction, it just seems really hard to stop.

658
00:34:19,400 --> 00:34:22,400
Speaker 3: It's just I agree, and I think this is something

659
00:34:22,880 --> 00:34:26,840
Speaker 3: very The sheer influence that Elon has and all the

660
00:34:26,840 --> 00:34:28,560
Speaker 3: people who look to him and see him as the

661
00:34:28,600 --> 00:34:32,200
Speaker 3: model is very interesting. On the other hand, you know,

662
00:34:32,239 --> 00:34:35,840
Speaker 3: there are not many CEOs out there for whom the

663
00:34:35,920 --> 00:34:39,480
Speaker 3: cult is so strong that people thirst to give him money.

664
00:34:40,040 --> 00:34:43,759
Speaker 3: And so the question of whether shareholders of other companies

665
00:34:44,080 --> 00:34:47,720
Speaker 3: want to be incorporated in states, whether they would actually,

666
00:34:47,960 --> 00:34:50,799
Speaker 3: unlike the current research, inflict some sort of cost of

667
00:34:50,840 --> 00:34:55,000
Speaker 3: capital penalty for non Delaware Incorporated States is going to

668
00:34:55,000 --> 00:34:57,799
Speaker 3: be an interesting question. But the ball is rolling, that's

669
00:34:57,800 --> 00:34:58,800
Speaker 3: going to be so interesting.

670
00:34:58,840 --> 00:35:01,640
Speaker 2: Once the sample size it's a little bigger and you

671
00:35:01,680 --> 00:35:04,600
Speaker 2: can see like the actual impact on stock prices. So

672
00:35:04,719 --> 00:35:08,080
Speaker 2: I take your point, But there are shareholders who potentially

673
00:35:08,120 --> 00:35:10,600
Speaker 2: would say, well, if a company doesn't have to deal

674
00:35:10,680 --> 00:35:15,720
Speaker 2: with a lawsuit from like a shareholder who has nine shares,

675
00:35:15,880 --> 00:35:17,800
Speaker 2: maybe that's a good thing, and that's like a trade

676
00:35:17,800 --> 00:35:18,960
Speaker 2: off worth making.

677
00:35:19,320 --> 00:35:23,000
Speaker 3: Yeah, I don't know. I mean nine shares and he

678
00:35:23,080 --> 00:35:27,279
Speaker 3: had this pay package. She was like, he signed a deal.

679
00:35:28,200 --> 00:35:31,239
Speaker 3: Could you imagine? Could you imagine how annoyed you would

680
00:35:31,239 --> 00:35:33,279
Speaker 3: be if your pay package got canceled because of some

681
00:35:33,400 --> 00:35:35,200
Speaker 3: shareholder with nine shares.

682
00:35:36,200 --> 00:35:38,920
Speaker 2: I can't pay package of millions. I would be annoyed.

683
00:35:39,080 --> 00:35:41,360
Speaker 3: It doesn't matter how rich I am. I would cannot

684
00:35:41,400 --> 00:35:44,279
Speaker 3: imagine my fury. I would be the richest person of

685
00:35:44,280 --> 00:35:45,839
Speaker 3: the world. I would be so annoyed by that.

686
00:35:45,920 --> 00:35:48,400
Speaker 2: Okay, So now that we've annoyed Joe, shall we leave

687
00:35:48,400 --> 00:35:48,640
Speaker 2: it there?

688
00:35:48,680 --> 00:35:49,319
Speaker 3: Let's leave it there.

689
00:35:49,400 --> 00:35:49,680
Speaker 5: Okay.

690
00:35:49,719 --> 00:35:52,240
Speaker 2: This has been another episode of the All Thoughts podcast.

691
00:35:52,280 --> 00:35:55,480
Speaker 2: I'm Tracy Alloway. You can follow me at Tracy Alloway.

692
00:35:55,280 --> 00:35:58,040
Speaker 3: And I'm Joe Wisenthal. You can follow me at the Stalwart,

693
00:35:58,320 --> 00:36:01,479
Speaker 3: follow our producers Kerman rode Is at Carman armand dash

694
00:36:01,520 --> 00:36:04,759
Speaker 3: Ol Bennett at dashbot at, Kilee Brooks at Kilbrooks. From

695
00:36:04,760 --> 00:36:07,200
Speaker 3: our Odd Lots content, go to Bloomberg dot com slash

696
00:36:07,200 --> 00:36:10,239
Speaker 3: odd Loads were a daily newsletter, and all of our episodes,

697
00:36:10,480 --> 00:36:12,479
Speaker 3: and you can chat about all of these topics twenty

698
00:36:12,520 --> 00:36:16,400
Speaker 3: four to seven in our discord Discord dot gg slash odd.

699
00:36:16,239 --> 00:36:18,880
Speaker 2: Lots And if you enjoy odd Lots, if you like

700
00:36:18,920 --> 00:36:22,880
Speaker 2: it when we dig into legalities in the US legal system,

701
00:36:22,920 --> 00:36:25,400
Speaker 2: then please leave us a positive review on your favorite

702
00:36:25,440 --> 00:36:29,080
Speaker 2: podcast platform. And remember, if you are a Bloomberg subscriber,

703
00:36:29,160 --> 00:36:32,480
Speaker 2: you can listen to all of our episodes absolutely ad free.

704
00:36:32,840 --> 00:36:35,000
Speaker 2: All you need to do is find the Bloomberg channel

705
00:36:35,040 --> 00:36:39,080
Speaker 2: on Apple Podcasts and follow the instructions there. Thanks for listening.

706
00:37:04,800 --> 00:37:04,840
Speaker 4: E