One of the most prominent US corporate governance experts has said that reforms under way in Delaware to business law, in part prompted by Elon Musk’s Tesla pay debacle, would be “severely detrimental to shareholder protection”.

Lucian Bebchuk, professor of law, economic and finance at Harvard Law School, took aim at the proposals that are designed to assuage leading executives such as Musk who have moved their corporate registrations from Delaware, until now the pre-eminent location for incorporation.

Musk moved the Tesla registration to Texas after a Delaware court controversially ruled that he could not have his $56bn pay check for running the EV company.

In a post on the Harvard Law school blog, Bebchuk writes the reforms are problematic for a number of reasons.

He concludes the changes raise serious concerns, and “adoption would have considerable detrimental effects on public company shareholders”.

The Delaware proposals are expected to have a significant impact on corporate governance in the US, with many observing that they will upend the balance of power between shareholders, boards and “controllers”—those with influence over company decision making.

Bebchuk is a well-known figure in US corporate governance and attracted attention when his research concluded that efforts by US corporates to become “stakeholder” businesses after 2019 had resulted in no discernable change.

The researche followed a decision by the Business Roundtable, a club for CEOs at the biggest US corporates to issue statement saying they would “redefine corporate purpose” to recognise “each of our stakeholders is essential”. The statement made headlines around the world and was widely seen as a tectonic shift away from a wholly shareholder-focused form of governance.

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Musk’s remuneration deal was first nullified in January last year. A shareholder vote in June supported his claim but, in December, a court refused it once again.

Musk has already moved the registrations of Tesla and SpaceX. Other companies have followed suit, including the hedge fund of fellow billionaire Bill Ackman.

More importantly, press reports suggest companies such as Meta are weighing a move. Newsweek recently reported that Delaware faces an “exodus”.

In a statement on moving its registration to Nevada, pharmaceutical company Aerovate Therapeutics says the move “may help the combined company attract and retain qualified management by reducing the risk of lawsuits being filed against the combined company, its directors and officers.”

Corporate governance has long been caught up in the political polarisation of the US. Delaware is in a fight to retain its reputation, but its reform may be pushing through a significant governance evolution. The changes are not yet law, it remains unclear how the law will take shape. Bebchuk’s intervention may yet influence the outcome. But it looks like a permanent change is under way.