Novel Corporate Rulings Fuel Charged Debate on Delaware’s Role

A landmark court ruling that upended a popular corporate governance strategy without offering companies a clear path forward is amplifying concerns—spurred by Elon Musk—about Delaware’s place as America’s corporate capital.

It’s rare for judges on the state’s elite business court to strike down the status quo without signing off on a replacement. But “the seemingly irresistible force of market practice” must yield to “the traditionally immovable object of statutory law,” Vice Chancellor J. Travis Laster said in the ruling last month.

Laster, writing for Delaware’s Chancery Court, stopped short of drawing the types of bright lines the state’s corporations ...