Tesla, led by CEO Elon Musk, is set to conduct a shareholder vote on the potential relocation of its state of incorporation to Texas. This decision comes after Musk initiated a public poll on social media platform X, which garnered significant attention with over 1.1 million votes.
The poll, launched on January 30, posed the question, “Should Tesla change its state of incorporation to Texas, home of its physical headquarters?” The response was overwhelmingly in favor, with 87% of voters supporting the move to Texas, while only 13% opposed it.
The public vote is unequivocally in favor of Texas!
Tesla will move immediately to hold a shareholder vote to transfer state of incorporation to Texas. https://t.co/ParwqQvS3d
— Elon Musk (@elonmusk) February 1, 2024
The positive response has prompted Tesla to take immediate action towards organizing a shareholder vote, which will determine the future state of incorporation for the company. Tesla’s headquarters are currently at Giga Texas in Austin, after moving away from California.
What’s the reason behind this shift from Delaware to Texas? It comes after a judge in Delaware nixed Musk’s $56 billion pay package, based on a lawsuit filed by a shareholder, alleging it was overpayment.
Musk reacted to Judge Kathaleen McCormick’s decision to say, “Never incorporate your company in the state of Delaware.” This ended up triggering his poll on X above and now the next move to put this to a shareholder vote.
In a recent discussion with CNBC, Eric Talley, a professor at Columbia Law School, shed light on the possible motivations behind Elon Musk’s consideration to reincorporate Tesla in Texas. According to Talley, Texas offers more lenient regulations regarding executive compensation, which could be a significant factor in this decision.
Talley pointed out that in Texas, the rules around paying large sums to CEOs are less stringent, potentially allowing Tesla’s board more freedom in awarding compensation. This could include the possibility of granting Musk a “gratitude” bonus without the constraints imposed by Delaware’s fiduciary standards.
What do you think? Yay or nay for moving Tesla’s incorporation to Texas?