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Tesla shareholders to vote on moving incorporation to Texas, says Elon Musk

Move comes after billionaire chief executive’s record pay package was voided by a Delaware judge

Elon Musk: he has said Tesla will hold an investor vote on whether to move the carmaker’s corporate registration to Texas. Photograph: Kirsty Wigglesworth/PA

William Sandlund and Peter Campbell
Thu Feb 1 2024 - 11:15

Elon Musk has said Tesla will hold an investor vote on whether to move the carmaker’s corporate registration to Texas after a court judgment in Delaware that voided his $56 billion (€52.8bn) pay package.

Tesla will “immediately” hold a shareholder vote on whether to transfer its incorporation from Delaware to Texas, the billionaire wrote in a post on his social media platform X on Wednesday night. Mr Musk cited an earlier poll he posted on X asking: “Should Tesla change its state of incorporation to Texas, home of its physical headquarters?” The result showed 87.1 per cent of 1.1 million voters thought the electric-car maker should change its state of incorporation.

The intervention from Musk comes after Kathaleen McCormick, a judge in the Delaware court of chancery, ruled that a record remuneration package for Tesla’s chief executive was improperly approved by the company’s board and had short-changed shareholders.

Tesla already has strong ties to Texas having moved its headquarters to Austin from Silicon Valley as Musk railed against California’s lockdowns during the coronavirus pandemic.

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Ms McCormick shot down Mr Musk’s proposed pay package despite the company hitting 12 out of 16 ambitious financial targets approved by the carmaker’s board in 2018. Some Tesla shareholders sued, claiming the award was excessive.

[ Judge strikes down Elon Musk’s $56bn pay package after shareholder challenges it as excessive ]

Musk has previously canvassed his followers on X for their opinion on significant business decisions. In 2021 he asked whether he should sell more of his Tesla shares, while a year later he sought their views on whether to step down as head of Twitter, now renamed X, following his purchase of the platform.

Hours after the ruling, which Tesla can still appeal, Musk wrote on X: “Never incorporate your company in the state of Delaware.”

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The ruling comes at a difficult juncture for Tesla, which last month warned that sales growth would slow as consumers cut back and competition, particularly from China’s BYD, intensifies. Tesla’s share price is down about a quarter this year.

When the targets for Mr Musk’s compensation were set in 2018 they were judged to be extremely exacting as Tesla struggled to increase production. The plan was intended to lock him into the business at a time when the board was concerned that he might leave to focus on other interests. – Copyright The Financial Times Limited 2024

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