In the aftermath of a significant setback in a Delaware court regarding a compensation package valued at approximately $55 billion, Tesla CEO Elon Musk is now considering the possibility of changing the state of incorporation for the electric vehicle giant.
The Delaware judge, Chancellor Kathaleen St. Jude McCormick, ruled against Elon Musk’s entitlement to a substantial compensation package that had been awarded by Tesla’s board of directors. This decision, which comes more than five years after a shareholder lawsuit targeted Musk and the company’s directors, alleges breaches of duties, including claims of corporate asset waste and unjust enrichment for Musk.
The lawsuit contends that Musk had dictated the compensation package, which resulted from what were described as simulated negotiations with non-independent directors. The legal team representing the plaintiff argued for the invalidation of the compensation package, claiming that shareholders had approved it based on misleading and incomplete disclosures in a proxy statement.
In response to the court’s ruling, Musk took to X, his social media platform, to express his disapproval. He advised entrepreneurs to “never incorporate your company in the state of Delaware” and recommended incorporating in Nevada or Texas for those who prefer shareholders to decide matters.
In a distinctive move, Musk initiated a poll on X, seeking input on whether Tesla should change its state of incorporation to Texas, where the company’s physical headquarters are located. The poll has garnered substantial engagement, with over 3.5 lakh votes and an overwhelming 90 percent expressing support for the proposal.
It is noteworthy that Chancellor Kathaleen St. Jude McCormick presided over a case in 2022 where Twitter compelled Musk to proceed with his acquisition of the company.
Inputs from wires