Question 1: Should the contingency-fee plaintiffs' firms be regarded as part of internal governance?
If the answer is yes — that they supply an enforcement function the classical model would not otherwise produce — then the policy task is to constrain their fee-share-of-recovery economics so that the enforcement work is performed on terms shareholders would themselves choose ex ante. The Texas legislative answer (the 3% threshold of SB 29, codified at TBOC § 21.552(a)(3), plus codified business-judgment rule with particularity pleading at TBOC § 21.419, plus the 45-day demand-review-panel procedure at TBOC § 21.554) is one such answer. Delaware's continued close attention to fee proportions under Sugarland — visible in the Court of Chancery's Dell Class V opinion and the Delaware Supreme Court's en banc affirmance — is another. Both responses preserve the enforcement channel while attempting to reduce its rent-seeking dimension.
If the answer is no — that plaintiffs' firms are external actors whose interests are not coextensive with shareholder interests — then their incentives should be evaluated like those of any other external agent (auditors, lenders, insurers, exchanges, proxy advisers), and the framework for evaluating them should be agency-cost analysis applied to their contracted role, not internal-governance theory.11
Question 2: What is the appropriate governance role of the adjudicating courts?
Even if plaintiffs' firms are external, the courts that hear their cases are not. Courts decide demand-futility, approve settlements, allocate fees, set fiduciary standards, and issue prospective conduct rules in the form of judicial opinions that bind future boards. In contested corporate cases — from Delaware to Texas to federal district court — the choice of forum and the standard of review are doing substantial governance work.
The author's analytic view is that courts that hear derivative and representative actions are not neutral umpires of external dispute; they are gating actors with substantive governance authority. That authority is highest in jurisdictions where fiduciary doctrine is judge-made (Delaware) and is being consciously rebuilt in jurisdictions where the legislature has begun moving doctrine into statute (Texas). The post-Tornetta wave below — anchored at one end by the rescission and ultimate reversal of Elon Musk's Tesla compensation package12 and bracketed by the Delaware Supreme Court's clear-day business-judgment-rule treatment of TripAdvisor's Delaware → Nevada conversion in Maffei v. Palkon13 — shows the institutional traffic this question is generating.
The framework matters because the empirical work this Initiative produces is calibrated to it. Cohort firms in the Reincorporation Index are evaluated against the classical model's expectations about how each external force should reach the corporation — and where they don't, against the substitute mechanisms the alternative incorporation state provides. The Index's Day-0 announcement results are the empirical anchor for whether the substitutions are wealth-affecting at the moment of corporate action.
Across the 49-firm post-Tornetta cohort lock, the Day-0 abnormal return to a public-company reincorporation announcement is +0.02%, with a 95% placebo-rank confidence interval that crosses zero by more than a percentage point in each direction. The data do not support a "Delaware premium" or "Texas penalty" of any economically meaningful magnitude at announcement.
Why this matters for the questions above: where the observed market reaction to a firm's adoption of the 3% derivative-standing threshold or its redomestication to Texas is statistically indistinguishable from zero under the reported specification, the data fail to provide empirical support for the wealth-protection rationale for keeping contingency-fee plaintiffs' firms inside the internal-governance circle. (Failure to reject the null does not prove the null; the wide confidence interval signals limited statistical power, not affirmative evidence of no effect.) The full per-firm results, equivalence tests, and methodology specification are at the Reincorporation Index cohort event-study page.