Tesla Investors Reject Proposals to Trim Use of Texas Laws

Tesla wont have to consult shareholders before using Texas law to bar smaller investors from submitting proxy proposals or bringing lawsuits against company management.

Three shareholder proposals on the companys proxy ballot, two of which would have curtailed Tesla Inc.s ability to apply management-friendly Texas laws without consulting shareholders, failed to garner majority support Thursday at the annual meeting.

Thursdays shareholder meeting was viewed by many as a barometer for investor sentiment on Teslas 2024 Texas reincorporation. The state is trying to attract more public companies with a less-stringent regulatory environment. The very presence of the three Texas- focused proposals on the ballot pointed to progressive shareholders anxiety over the move.

The first proposal, filed by the New York state comptrollers office, sought to repeal Teslas tightened policy regarding derivative suits. The company used a state law enacted this year to set a 3% ownership threshold for shareholders to introduce lawsuits on behalf of the corporation and against its management. There was no ownership minimum before.

The second, filed by the Illinois State Treasurers office, would have required a two-thirds shareholder vote to ratify any company decision to limit eligibility for submitting shareholder resolutions. Texas passed a law this year allowing companies to set a minimum ownership threshold of at least $1 million of company stock or 3% of voting shareswhichever is lessfor such proposals.

The third, filed by Newground Social Investment, was similar to the Illinois resolution. It would have required Teslas board to seek shareholder approval before setting ownership thresholds for shareholder proposals that are higher than those of the Securities and Exchange Commission.

Texas passed a suite of business-friendly laws this year to lure in public companies. The states first independent stock exchange, which promises companies some of the same benefits of reincorporation if they list, also gained SEC approval in September.

Also at

Teslas meeting, shareholders voted to approved an executive pay package that could make Elon Musk the first trillionaire.

Investors did vote against one of the boards recommendations, supporting a shareholder proposal to elect board directors annually. The vast majority of SP 500 companies have adopted this board structure.

Others that failed to garner majority support included shareholder proposals to consider integrating sustainability metrics into executive pay, conduct child labor audits, and get rid of supermajority voting requirements.