Elon Musk, the CEO of SpaceX, X (formerly known as Twitter), and Tesla, recently made an announcement that has caught the attention of many. He revealed that Tesla will be holding a shareholder vote to decide whether to transfer the company’s state of incorporation to Texas. This move comes after Musk conducted a straw poll on X, where he asked his followers if they believed Tesla should change its state of incorporation to Texas, where its physical headquarters are located. Surprisingly, over 80% of those who voted said yes.
It is important to note that polls conducted on social media platforms like X are informal and cannot be compared to professional public opinion research. However, Musk’s decision to hold a shareholder vote indicates that he is taking this matter seriously. In his X post, Musk stated that Tesla will “move immediately to hold a shareholder vote to transfer state of incorporation to Texas.” However, it is crucial for Musk to seek approval from the Tesla board before enacting such a move, as the company is currently incorporated in Delaware.
This announcement comes in the wake of a recent ruling by a judge in Delaware. The judge voided the $56 billion pay package that was granted to Musk in 2018, which happened to be the largest compensation plan in public corporate history. The ruling stated that Tesla’s board of directors failed to prove the fairness of the compensation plan or provide sufficient evidence of negotiations with Musk. Following this ruling, Musk expressed his dissatisfaction with the state of Delaware, posting on X, “Never incorporate your company in the state of Delaware.”
To understand why Musk and shareholders might prefer Tesla to reincorporate in Texas, CNBC reached out to Columbia Law School professor Eric Talley for insights. According to Talley, one reason could be that Texas has more lenient regulations when it comes to paying large sums to CEOs without liability. If Tesla were to reincorporate in Texas, the board could potentially grant Musk a “gratitude” bonus without having to adhere to Delaware’s fiduciary standards. These standards were the basis for the court ruling that called for the rescinding of Musk’s 2018 pay package.
However, Talley also pointed out that shareholders could challenge the decision to reincorporate as a breach of fiduciary duty, claiming that it was made for Musk’s selfish reasons. This highlights the potential risks and legal complexities involved in such a move, especially while Tesla is still subject to Delaware law.
It remains to be seen how the shareholder vote will unfold and what the implications of transferring Tesla’s state of incorporation to Texas will be. This decision could have significant consequences for both Musk and the company as a whole. As the electric car industry continues to evolve, Tesla’s actions and choices will undoubtedly shape its future trajectory.
In conclusion, Elon Musk’s announcement regarding a shareholder vote on Tesla’s incorporation transfer to Texas has sparked intrigue and speculation. While the poll on X showed overwhelming support for the move, it is essential to remember that it was an informal poll and not a professional public opinion survey. The decision to reincorporate in Texas could provide certain advantages for Musk and Tesla, but it may also face challenges from shareholders. As this story unfolds, it will be interesting to see how Tesla’s future unfolds and whether this move will have a lasting impact on the company’s operations and governance.
