When Elon Musk wants to load up on arguments, he mounts a plebiscite on X, the social network he bought with his profits from Tesla.
Now, a Delaware judge has annulled the unprecedented multimillion-dollar compensation plan with which the company awarded him up to $55 billion.
Musk's response has been to consider moving Tesla's registered office from Delaware to Texas.
He set up an informal vote in
“Should Tesla change its registered office to Texas, where it has its physical headquarters?” was the question posed in a tweet by the company's first shareholder, who controls approximately 13% of the capital.
The participation was 1.1 million tweeters, the equivalent of 0.6% of Musk's followers on the network, but after 87.1% support for the transfer, the tycoon has taken it as an authoritative argument.
Delaware is the domicile where Tesla is incorporated and registered, like the vast majority of large American companies, as it is considered to have the most flexible and useful legislation for companies, which is accompanied by tax advantages and an entire pro-business ecosystem, including regulation and dispute resolution mechanisms.
For Musk and his unorthodox way of doing business, a jurisdiction like Delaware is not always the most convenient.
For example, when he signed the agreement to buy Twitter and then wanted to back out with excuses that did not hold up, the company's lawsuit against him to enforce what was signed had all the signs of succeeding.
Finally, Musk gave up and went ahead with the operation.
After purchasing the company, he moved the corporate headquarters to Nevada.
After the ruling that annulled his compensation, Musk charged against that jurisdiction: “Never establish your company in the State of Delaware.
“I recommend incorporating in Nevada or Texas if you prefer shareholders to decide matters,” he tweeted.
Elon Musk's compensation plan was approved by shareholders at the board by a majority of 80%.
After the vote on the social network, Musk announced the next step: “The public vote is unequivocally in favor of Texas!
“Tesla will immediately move to hold a shareholder vote to transfer the state of incorporation to Texas,” he announced without respecting any corporate procedure, as if the board of directors had nothing to say in the matter.
It is in part this dependence that the board has on Musk himself that has caused Judge Kathaleen McCormick to annul the record remuneration of 55,000 million challenged by a minority shareholder.
“The process that led to the approval of Musk's compensation plan was deeply flawed.
“Musk had extensive ties to the people in charge of negotiating on behalf of Tesla,” the judge wrote in a 201-page ruling.
“She had a 15-year relationship with the compensation committee chairman, Ira Ehrenpreis.
The other member of the remuneration committee who was part of the working group, Antonio Gracias, had maintained business relations with Musk for more than 20 years, as well as the type of personal relationship that led him to spend vacations with Musk's family with regularity.
"The working group included members of management who were indebted to Musk, such as general counsel Todd Maron, who was Musk's attorney in his divorce and whose admiration for Musk made him cry during his testimony," the judge wrote to demonstrate. that Tesla's board lacked independence from Musk.
His lawyers said the package had to be large to incentivize Musk not to leave, a reasoning McCormick rejected.
“Carried away by the 'everything's up' rhetoric, or perhaps its eyes lit up by Musk's superstar appeal, the board never asked the $55.8 billion question: 'Was the plan even necessary for Tesla to "retain Musk and achieve his objectives?" the judge wrote in her ruling.
In 2018, Tesla estimated the value of Musk's compensation package at $2.28 billion, already a record, but the actual amount increased as the stock appreciated.
Under the plan, Musk received a portion of the stock options each time Tesla's market value increased by $50 billion.
Ultimately, he would have the opportunity to buy nearly 304 million shares for $23.34 each.
Tesla has met all performance targets since being awarded the package.
Its shares are trading at about $191, down from $21 at the beginning of 2018.
The judge called the package “the largest potential compensation opportunity ever seen in the public markets by multiple orders of magnitude.”
“In short, Musk launched a self-driving process, recalibrating speed and direction along the road as suited him.
The process came at an unfair price,” he stated.
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