Tesla to Hold Shareholder Vote on Incorporating in Texas, Following Delaware Pay Package Setback

Elon Musk Initiates Vote Amid Delaware Pay Package Void, Proposes Texas Incorporation for Tesla


1. Elon Musk’s Decision:
– Elon Musk announced via X (formerly Twitter) that Tesla will conduct a shareholder vote to decide whether to transfer the company’s state of incorporation from Delaware to Texas.

2. Informal Straw Poll Results:
– Musk conducted an informal straw poll on X, asking followers if Tesla should change its state of incorporation to Texas. Over 80% of participants voted in favor of the move.

3. Move to Texas Imminent:
– Following the positive response, Musk stated that Tesla “will move immediately to hold a shareholder vote to transfer state of incorporation to Texas.” The process is likely to involve seeking approval from Tesla’s board, as the company is currently incorporated in Delaware.


4. Background – Delaware Pay Package Voided:
– The decision to seek relocation follows a recent ruling by a Delaware judge, invalidating Elon Musk’s $56 billion pay package granted in 2018. The judge cited the Tesla board’s failure to prove the fairness of the compensation plan and lack of evidence of negotiations with Musk.

5. Musk’s Dislike for Delaware:
– Musk expressed discontent with Delaware, advising against incorporating companies in the state. The voiding of his pay package has likely influenced Musk’s desire to explore alternative jurisdictions.

6. Potential Implications of Texas Incorporation:
– Professor Eric Talley of Columbia Law School suggests that Texas offers a more lenient environment for CEO compensation, potentially allowing Tesla’s board to grant Musk additional bonuses without stringent standards. However, reincorporating in Texas could face challenges from shareholders, questioning the decision’s motives.

7. Reincorporation Challenges:
– While Texas may provide certain advantages, shareholders could challenge the decision to reincorporate, viewing it as a move influenced by Musk’s self-interest and breaching fiduciary duty. The legal landscape and Tesla’s adherence to Delaware law during the process will be critical factors.

8. Tesla’s Response:
– Tesla has not provided an official response to Musk’s announcement or the plans for a shareholder vote. The company’s stance on the potential move to Texas remains undisclosed.

Elon Musk’s decision to shift Tesla’s state of incorporation to Texas unfolds against the backdrop of legal setbacks in Delaware and Musk’s expressed dissatisfaction with the state. The upcoming shareholder vote and potential relocation carry implications for Tesla’s corporate governance and legal considerations. Stay informed as developments unfold in this strategic move by Tesla.