Elon Musk is in a full propaganda campaign to gain Tesla shareholder support against the court’s decision to rescind his CEO compensation plan and now announced that he is going to move for a shareholder vote on moving Tesla’s state of incorporation to Texas.
Earlier this week, a judge in Delaware, where Tesla is incorporated, sided with a Tesla shareholder who filed a lawsuit that claimed Tesla’s board misled investors when presenting its 2018 CEO compensation plan.
The judge found irregularities in the way that the plan came about, with board members on the compensation committee having close personal relationships and financial dealings outside of Tesla with Musk and also due to the involvement of Musk and his attorney, who also happened to be Tesla’s General Counsel, in the process.
Therefore, the judge ruled that Tesla misled shareholders when presenting the package for a vote. In short, the judge highlighted some clear governance issues at Tesla in her decision.
Tesla would have to recraft the compensation package while following the rules of a public company and present it in a more transparent way to shareholders for a vote.
Instead of addressing any of the governance issues highlighted in the decision, Musk went into propaganda mode and decided to go on a tweetstorm about how Delaware and the judge are politically motivated, without any serious evidence other than the judge once working for a law firm that gave some money to Joe Biden’s campaign, and that she “took away the shareholder’s right to decide for themselves”.
Musk decided to hold a Twitter poll to ask if Tesla should move its state of incorporation to Texas:
The poll came after Musk made several tweets trashing Delaware and boosting Texas as a pro-corporate state. It’s unsurprising that the poll, which can be voted on by anyone, not just Tesla shareholders, was overwhelmingly in favor of moving the incorporation.
Musk announced that Tesla will quickly hold a shareholder vote on 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.”
Why was Tesla in Delaware in the first place? Tesla has nothing to do with Delaware. It was founded in California and now has its headquarters in Texas, but like many other companies, it has incorporated in Delaware.
Many companies decide to do that because of its tax law and unique court system, which is ironically favorable to companies in corporate legal cases.
I think we can let go of our little hope that this court decision would have forced Tesla and Elon to address the governance issues at Tesla.
Elon decided not to address those concerns whatsoever, and instead, he frames this entire conflict as being politically motivated and about removing shareholders’ right to decide for themselves.
First of all, this is completely wrong. The judge’s decision only forces shareholders to vote again on a comp package but one that is crafted following the rules of a public company and not presented to shareholders in a misleading way.
That’s all it does. Who would be against that? Shareholders guiding a public company through voting their shares only works if the company is transparent and doesn’t mislead them. It’s as simple as that. I haven’t seen Elon address any of the clear concerns highlighted in the decision. Instead, he is in full propaganda mode, rallying his troops.
Now, I know it’s frustrating for Musk. He had an incredible performance-based package and delivered on the performance. I’ll be the first to admit that. It has to be frustrating. However, his reaction to the judge’s decision is proving her point.
He completely ignores the governance issue and misleads Tesla shareholders about the nature of the decision ahead of a shareholder vote that stems from her decision. Most of his fans are simply listening to everything he says without even reading the judge’s decision. It’s sad.