Elon Musk announced on Wednesday that Tesla will undergo a shareholder vote to determine whether the electric car manufacturer should change its state of incorporation to Texas.
Musk conducted an informal straw poll on X (formerly Twitter) to gauge public opinion on the matter, with over 80% of respondents expressing support for the move.
While Musk’s polls on social media are not equivalent to professional public opinion research, he stated that Tesla will promptly organize a formal shareholder vote on the relocation.
Following the poll results, Musk emphasized the company’s intention to seek shareholder approval for the transfer of incorporation to Texas, where Tesla’s physical headquarters are located.
Elon Musk (Credits: Arise News)
Currently incorporated in Delaware, Musk is expected to consult with the Tesla board to proceed with this decision. This announcement follows a recent development in Delaware, where a judge nullified Elon Musk’s $56 billion compensation package from 2018, labeling it the largest in public corporate history.
The Chancery Court Chancellor ruled that the Tesla board had not adequately demonstrated the fairness of the compensation plan or engaged in sufficient negotiations with Musk.
Expressing dissatisfaction with Delaware, Musk cautioned against incorporating companies in the state. When questioned about the potential reasons for the relocation, Columbia Law School professor Eric Talley highlighted Texas’ lenient approach to substantial CEO compensation without strict liability.
If Tesla were to reincorporate in Texas, the board might have the flexibility to grant Musk a “gratitude” bonus without adhering to the fiduciary standards imposed by Delaware.
However, Talley cautioned that such a decision might face challenges from shareholders, who could view it as a self-serving move by Musk, potentially constituting a breach of fiduciary duty while the company is still subject to Delaware law. CNBC’s Dan Mangan contributed to the report.
