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Should Tesla change state? Elon Musk launches poll after $56bn pay deal setback
Elon Musk is not entitled to the landmark compensation package valued at over $55 billion at Tesla, a Delaware court said.
Following a setback in a Delaware court regarding a compensation package valued at around $55 billion, Elon Musk issued a warning to entrepreneurs on Wednesday, advising them to "never incorporate your company in the state of Delaware." In his unique style of decision-making, Musk started a poll on X, pondering whether to consider changing Tesla's state of incorporation to Texas, where its physical headquarters are located.
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The ruling by Delaware judge Chancellor Kathaleen St. Jude McCormick on Tuesday denied Elon Musk entitlement to the significant compensation package awarded by Tesla’s board of directors, a decision that emerged more than five years after a shareholder lawsuit targeted Musk and the company's directors. The lawsuit alleged breaches of duties to the electric vehicle and solar panel manufacturer, involving claims of corporate asset waste and unjust enrichment for Musk.
The plaintiff's legal team argued for the invalidation of the compensation package, contending that Musk had dictated it and that it resulted from simulated negotiations with non-independent directors. They also asserted that shareholders had approved it based on misleading and incomplete disclosures in a proxy statement.
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In response, defence attorneys maintained that the pay plan had been fairly negotiated by an independent compensation committee, featured lofty performance milestones, and obtained shareholder approval, even though not required under Delaware law. They also emphasised that Musk, owning less than one-third of the company at the time, was not a controlling shareholder.
After the ruling, Tesla chief took to X, to show his disapproval. “I recommend incorporating in Nevada or Texas if you prefer shareholders to decide matters.” he wrote on his social media platform.
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In a subsequent post, Musk started a poll on X, asking whether Tesla should alter its state of incorporation to Texas, where its physical headquarters is located. The poll has garnered over 3.5 lakh votes, with an overwhelming 90 per cent expressing support for the proposal.
Notably, in 2022, the same judge presided over the case where Twitter ultimately compelled Musk to proceed with his acquisition of the company.
(Inputs from wires)
