Elon Musk says Tesla will hold a shareholder vote to incorporate in Texas after Delaware pay snub

SpaceX, X (previously generally known as Twitter), and Tesla CEO Elon Musk speaks throughout reside interview with Ben Shapiro on the symposium on preventing antisemitism on January 22, 2024 in Krakow, Poland.

Omar Marques | Getty Images

Elon Musk stated late Wednesday that Tesla will hold a shareholder vote on whether or not to switch the electrical carmaker’s state of incorporation to Texas.

The billionaire requested his followers through a straw ballot on X, previously Twitter, whether or not Tesla ought to change the state the place it’s integrated to Texas, the place its bodily headquarters are. More than 80% of those that voted stated sure. Polls on the social media platform are casual and never comparable to skilled public opinion analysis.

After the ballot, Musk stated Tesla will “will transfer instantly to hold a shareholder vote to switch state of incorporation to Texas.” Musk will seemingly have to search approval from the Tesla board to enact such a transfer. Tesla is presently integrated in Delaware.

Musk’s X submit comes after a decide in Delaware voided the $56 billion pay package deal for the Tesla CEO granted in 2018, the largest compensation plan in public company historical past. Chancery Court Chancellor Kathaleen McCormick ruled that the company’s board of directors failed to show “that the compensation plan was honest” or present a lot proof that that they had even negotiated with Musk.

Musk subsequently expressed dislike for the state.

“Never incorporate your organization in the state of Delaware,” Musk posted on X this week.

CNBC requested Columbia Law School professor Eric Talley why would Musk need to, and why would shareholders want if Tesla reincorporated in Texas.

The professor stated, for one factor, Texas is extra lax about paying giant sums to CEOs with out legal responsibility. If Tesla reincorporates there, the board might determine to give Musk a “gratitude” bonus doubtlessly, with out having to abide by Delaware fiduciary requirements. Those requirements resulted in the courtroom ruling that the corporate ought to rescind Musk’s 2018 pay package deal.

But Talley famous that a determination to reincorporate might itself be challenged by shareholders as “a alternative made for Musk-selfish causes,” and thus as a breach of fiduciary obligation whereas Tesla continues to be topic to Delaware legislation.

CNBC’s Dan Mangan contributed to this report.

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