A Tesla Inc. shareholder has initiated legal action to challenge an upcoming proxy vote regarding the company’s potential move to Texas and the re-approval of a $56 billion pay package for co-founder Elon Musk. Donald Ball, the shareholder, owns more than 28,000 Tesla shares and argues that the company is breaching its corporate charter by claiming it only needs a simple majority of shareholder votes to relocate from Delaware.
Ball’s lawsuit, filed in Delaware Chancery Court, accuses Musk of coercing investors into supporting both the Texas move and his reinstated pay package by threatening to shift Tesla’s artificial intelligence assets. Ball asserts, “Musk has engaged in strong-arm, coercive tactics to obtain stockholder approval” of both proxy questions. The suit names Tesla’s directors and Musk as defendants.
This legal challenge follows Delaware Chancery Judge Kathaleen St. J. McCormick’s January decision to void the unprecedented executive compensation plan that Tesla’s board approved for Musk in 2018. McCormick found that the board had conflicts of interest and that Tesla failed to adequately disclose the plan’s details. She will consider on July 8 whether to approve a request for billions of dollars in legal fees from lawyers representing the Tesla investor who initially contested Musk’s pay.
In response to McCormick’s ruling, Musk has threatened to relocate Tesla’s corporate headquarters from Delaware to Texas. The upcoming proxy vote aims to secure shareholder support for both the move and the reinstatement of his compensation plan. Texas is currently establishing a new business court system, which some legal experts believe may be more favorable to influential corporate figures like Musk.
Following the court’s ruling, Musk has already moved other companies he manages out of Delaware for incorporation purposes and has encouraged other business owners to do the same. Despite Delaware’s status as the corporate home to over 70% of Fortune 500 companies and its chancery court being the top US venue for corporate litigation, Musk is advocating for a shift.
Ball contends that because Tesla seeks to “entirely repeal” its current charter with the Texas move, shareholders should be informed that more than 66% approval is required under Delaware law, rather than a simple majority. He requests a judicial order to nullify the vote if it does not meet this higher threshold.
Additionally, the lawsuit claims Musk is violating proxy vote rules by threatening to resign as Tesla’s “Technoking”—a title he prefers—and to take its AI assets with him. This week, Musk confirmed he redirected artificial intelligence chips from Tesla to his X Corp. social media platform and his new venture, xAI Corp., citing a lack of storage space at Tesla as the reason for the diversion.
Ball is also seeking a ruling that Tesla’s directors failed to adequately disclose enough information about the incorporation shift and the re-ratification of Musk’s pay to allow investors to make fully informed decisions. The case is expected to be assigned to Judge McCormick, who has presided over several cases involving Musk’s actions in recent years.
The case is officially titled Ball v. Tesla, 2024-0621, Delaware Chancery Court (Wilmington).
