Tesla Shareholders Approve Landmark Musk Pay Package, Reincorporation in Texas Solidifies Management Control Amid Legal Shift

Tesla’s investors gave a big thumbs-up to Elon Musk’s pay deal – worth maybe a whole trillion bucks – while also backing a switch to base the company in Texas. This change shakes up how things are run, pulling Tesla out of Delaware, where lots of firms like to park their paperwork, and into a state seen by some as friendlier to top bosses when it comes to rules.

Over three out of four investors who voted said yes to the pay deal, just like they did with Musk’s earlier rewards. At Tesla’s yearly gathering in Austin, Texas, on November 6, 2025, people started yelling “Elon! Elon!” right after the news broke.

The green light came after Tesla, along with its leadership team, pushed hard behind the scenes. Despite typically staying quiet, chair Robyn Denholm stepped up – doing several interviews while the brand aired TV spots to rally support.

Delaware Ruling and Musk’s Push for Texas

Musk’s 2018 pay plan – worth around $56 billion – got tossed out by a Delaware judge near the end of 2023. He said the way it got approved had major issues, plus called the agreement unrealistically huge. It turned out board members weren’t truly independent, while investor documents gave a skewed picture.

This move sparked Musk’s effort to shift Tesla’s home base to Texas. After what happened in Delaware, he spoke out against it, saying people should skip incorporating there – instead go for Nevada or Texas if voting rights matter.

Musk asked people on X – once called Twitter – if companies should shift to Texas. Over 87% of 1.1 million votes said yes, so he replied, “People clearly want Texas!”

Reincorporation Process and Legal Strategy

Tesla handed in official documents to Texas officials in June 2024, aiming to shift its legal base there – just before big changes to business laws under Senate Bill 29. While it moved actual operations from California to Austin back in 2021, this step updates its corporate status; that earlier relocation came after Musk called out high taxes and tight rules in California.

The move to Texas is seen by lawyers as a way to use a friendlier court system. According to Aaron Klein from the Brookings Institution, though Delaware used to lead in supporting businesses, lately Texas has stepped up – giving stronger protections and lighter rules instead.

Delaware’s made a habit of helping businesses set up shop – about six out of ten top U.S. firms do it there. That’s because they’ve got special courts just for company disputes, where experienced judges rule fast without jury delays. No jury trials mean less chance of sky-high payouts from emotional verdicts.

Texas Legal Environment and SB 29

Folks say Texas – especially its Fifth Circuit – is tough on rules and skeptical of big government. Companies are now suing more often there to fight federal laws, betting the Supreme Court won’t always step in, Klein points out. Setting up shop legally in Texas might make it easier for courts to hear those cases.

Carliss Chatman, who teaches at SMU’s law school, pointed out that Texas lawmakers have essentially blocked fairness checks by passing SB 29. Instead of standard oversight, this law swaps it for set-in-stone procedures and contracts. Companies can now limit what shareholders usually decide – just by changing their internal rules.

Read more about: Tesla’s Mexican Gambit: How Giga Mexico’s Strategic Vision Unlocks the Path to a $25,000 EV and Reshapes Global Manufacturing

SB 29, passed in May 2025, puts the business-judgment rule into law, meaning leaders are presumed honest, informed, and acting for the company’s benefit. But if someone sues, they’ll need clear proof of fraud, deliberate wrongdoing, or breaking laws on purpose – much tougher than Delaware’s standard of gross negligence.

Tesla’s Bylaw Changes and Shareholder Barriers

Tesla saw the legal shift coming. Right after moving its incorporation to Texas in 2024, it changed the rules so only shareholders with at least 3% of shares – around 97 million, valued above $30 billion – could file a derivative lawsuit. Instead of allowing claims from anyone, they added clauses making Texas the sole venue for disputes while dropping the right to a jury trial. On top of that, raising the bar for shareholder suggestions became policy. Also, access to records was limited, leaving out private internal messages.

These changes mean just a few shareholders – like Musk or big global investment firms – could actually file a lawsuit on behalf of the company. Since those players usually back the choices they already signed off on, the board stays protected from most legal action.

The new pay plan for Musk ties big rewards to tough targets over ten years. It aims to grow Tesla’s value from $1.5 trillion up to $8.5 trillion. Instead of just hoping, it sets clear numbers – like shipping 20 million cars. At the same time, getting 10 million paying users on FSD matters a lot. On top of that, launching 1 million robotaxis must happen. Also part of the deal? Delivering 1 million Optimus bots ready for work.

Structure of Musk’s Compensation Plan

Musk gets paid in 12 chunks of stock, each handed out only when Tesla hits certain targets. One chunk arrives once the company’s value hits $2 trillion. After that, more unlock every half-trillion dollars in growth – going step by step until $6.5 trillion. From there, they keep coming but now jump by a full trillion each time, all the way to $8.5 trillion total. If all goals are met, his share rises from roughly 13% to nearly 25%. That means he’d have much stronger say in decisions.

Board members pushed for shareholder approval of the plan launched back in September 2024. Still, major proxy reviewers like Glass Lewis and ISS urged a no vote – worried the payout was too big and could weaken existing shares.

Even though some advised otherwise, investors at the Austin gathering backed company leaders once again. Just a single proposal from an investor passed, letting Tesla put money into Musk’s independent AI project, xAI – boosting his reach even more.

ESG Failures and Support/Opposition

On the flip side, every ESG-related proposal got knocked down or left out because Tesla made its process stricter. One such measure focused on possible child labor issues in cobalt sourcing – it just couldn’t break through the strong hold managers have over decisions, Chatman said.

Some people who didn’t like the pay deal – like Thomas DiNapoli, New York’s money watchdog – said it was basically cash for too much control, piling up way too much money on just one individual. Norway’s state investment arm, which handles their huge oil fund and owns a lot of Tesla stock, rejected it too; they were worried the payout was bloated, could water down shares, plus relying so heavily on Musk felt risky.

Still, backers like the Florida State Board of Administration and Cathie Wood from Ark Invest said the deal pushed Musk to hit bold goals – creating next-gen tech. Because when he wins financially, so do shareholders, just way bigger.

Musk’s Broader Claims and Political Freedom

Musk personally brought up bigger social issues, saying Optimus bots might wipe out poverty while offering top-tier healthcare to all. Still, he hinted they could help reduce crime down the line – yet none are available today, plus clear timelines for any of this remain missing.

The National Bureau of Economic Research dropped a study suggesting Tesla’s U.S. sales between late 2022 and early 2024 could’ve jumped 67% to 83% if Musk hadn’t made controversial political moves. The fresh executive pay deal? It doesn’t cap his political involvement – nor requires him to spend any set hours at Tesla.

This shift to Texas, Chatman says, does what a decade of court fights in Delaware failed to do – swaps out Delaware’s “total fairness” rule for a legal trust in leadership. It ends up shielding top managers, giving them stability and safety, yet turns shareholder control, particularly small everyday investors’, into little more than watching from the sidelines.

Long-Term Corporate Implications

Some say when founders copy Tesla, states might stop cutting taxes and start seeing who gives bosses more power over investors. This kind of battle worries people – courts could get too soft on companies just to stay competitive, even if rules don’t get enforced the same way everywhere.

Even though Musk’s huge paycheck might turn him into the planet’s first trillionaire – showing how uneven money is spread – the real story is about changing how companies are run. Tesla’s move points to a legal change, meaning company leaders now have more freedom to decide things their way, which could shake up who really calls the shots at big corporations.

The long-term effects of this fresh business approach will likely draw attention from investors, law experts, plus companies thinking about moving jurisdictions. While some see risks, others spot opportunities in how it might reshape regulations over time. As debate grows, real-world outcomes could shift strategies across industries without warning. Since early movers may gain an edge, hesitation might lead rivals to act faster under uncertain conditions.