Tesla will hold a shareholder vote to incorporate in Texas

Elon Musk said Wednesday night Tesla A shareholder vote will be held on whether to transfer the electric car maker’s domicile to Texas.

The billionaire asked his followers via a poll on X (formerly Twitter) whether Tesla should change its domicile to Texas, where its physical headquarters is. More than 80% of voters agreed. Opinion polls on social media platforms are informal and cannot be compared with professional public opinion research.

After the vote, Musk said Tesla would “take immediate action to hold a shareholder vote to transfer the company’s registration to Texas.” Musk may have to seek approval from Tesla’s board of directors to implement the measure. Tesla is currently incorporated in Delaware.

Musk’s X post came after a Delaware judge struck down a $56 billion compensation plan awarded to Tesla’s chief executive in 2018, the largest in the history of a public company. Lord Chancellor Catherine McCormick ruled that the company’s board had failed to prove “the remuneration plan was fair” and failed to provide substantial evidence that they had even negotiated with Musk.

Musk then expressed his distaste for the country.

“Never register your company in Delaware,” Musk posted on X this week.

CNBC asked Columbia Law School professor Eric Talley why Musk is willing to do this and why shareholders would prefer Tesla to re-incorporate in Texas.

For one thing, Texas is more lenient in paying CEOs large sums of money without taking responsibility, the professor said. If Tesla were to re-incorporate there, the board might decide to give Musk a “thank you” bonus without having to comply with Delaware’s fiduciary standards. Those standards led the court to rule that the company should cancel Musk’s 2018 salary package.

But Talley noted that the reorganization decision itself could be challenged by shareholders as a “choice made for Musk’s selfish reasons” and therefore a breach of fiduciary duty, while Tesla remains subject to Delaware law. constraint.

— CNBC’s Dan Mangan contributed to this report.