In May, Tesla revised its corporate bylaws, introducing a new rule that requires shareholders to hold at least 3% of the company’s stock—currently valued at around $30 billion—to file a derivative lawsuit for alleged breaches of fiduciary duty. This move has drawn strong opposition from officials in New York State, who are now formally urging the company to reverse the decision.
The New York State Common Retirement Fund, which holds roughly 0.1% of Tesla shares, submitted a proxy proposal and formal letter to Tesla on July 11. According to the fund, the company misled investors during its June 2024 bid to shift incorporation from Delaware to Texas. At the time, Tesla assured shareholders that their rights would remain “substantially equivalent” under Texas law.
However, on May 14—nearly a year after the move—Texas introduced a new law allowing companies to mandate 3% ownership as a prerequisite for filing such lawsuits. Tesla amended its bylaws the very next day to adopt the highest possible threshold under the new regulation, a move the retirement fund says shields executives from accountability.
The letter, signed by Gianna McCarthy on behalf of Comptroller Thomas DiNapoli and the retirement fund, criticizes the company’s decision as an “egregious” step that undermines investor rights. It also points out that only three institutions currently meet the 3% ownership mark, effectively sidelining most shareholders from legal recourse.
Comptroller DiNapoli condemned the move, calling it deceptive and a violation of basic principles of corporate governance, and is demanding that Tesla rescind the policy to protect shareholder rights.
