Elon Musk said late Wednesday that Tesla will hold a shareholder vote on whether to transfer the electric carmaker’s state of incorporation to Texas.
The billionaire asked his followers via a straw poll on X, formerly Twitter, whether Tesla should change the state where it is incorporated to Texas, where its physical headquarters are. More than 80% of those who voted said yes. Polls on the social media platform are informal and not comparable to professional public opinion research.
After the poll, Musk said Tesla will “will move immediately to hold a shareholder vote to transfer state of incorporation to Texas.” Musk will likely have to seek approval from the Tesla board to enact such a move. Tesla is currently incorporated in Delaware.
Musk’s X post comes after a judge in Delaware voided the $56 billion pay package for the Tesla CEO granted in 2018, the largest compensation plan in public corporate history. Chancery Court Chancellor Kathaleen McCormick ruled that the company’s board of directors failed to prove “that the compensation plan was fair” or show much evidence that they had even negotiated with Musk.
Musk subsequently expressed dislike for the state.
“Never incorporate your company in the state of Delaware,” Musk posted on X this week.
CNBC asked Columbia Law School professor Eric Talley why would Musk want to, and why would shareholders prefer if Tesla reincorporated in Texas.
The professor said, for one thing, Texas is more lax about paying large sums to CEOs without liability. If Tesla reincorporates there, the board could decide to give Musk a “gratitude” bonus potentially, without having to abide by Delaware fiduciary standards. Those standards resulted in the court ruling that the company should rescind Musk’s 2018 pay package.
But Talley noted that a decision to reincorporate could itself be challenged by shareholders as “a choice made for Musk-selfish reasons,” and thus as a breach of fiduciary duty while Tesla is still subject to Delaware law.
— CNBC’s Dan Mangan contributed to this report.