Both firms are technically separate, right? I suppose x,y,z would mind if Musk just took the tech to Boring company. And a,b would mind if he chose Tesla (if it were not the best)?
Or are people flexible in this regard? In the initial stages?
Conflicts of interest are common for board members -- you choose board members for their connections. So it's not surprising for a board member to bring up an opportunity that is advantageous to the company, but where they also have some personal interest on the outcome.
That's a problem, though, because there are divergent interests: Musk should rationally vote his 80% in favor of the deal even if it decreases the value of the company, as long as it increases the combined value of his share in the two companies. If he did that, a+b would have a winning shareholder lawsuit, because it violates a board member's duty of loyalty to put personal interests above the interests of the company.
So we neutralize that possibility by disclosing everything and allowing the non-conflicted members to vote on the deal. If both sides approve it, we can assume that it individually increases the value of both companies, Musk has done his job as a well-connected board member, and no one has a legal claim based on the conflict of interest.
The point is: they agree on a contract that hopefully keeps ownership well delineated in the event of an ownership change, or outside lawsuit, or ... whatever legal event may come up.
For the initial projects, it's possible that Tesla will license tech to TBC for a nominal price, because they can justify it as expanding the market -- if TBC is initially successful, it will greatly expand the market for that tech.
This is also why no carmaker except for Mercedes has used Tesla patents at all, and Mercedes simply bought 5% of Tesla to get the patents.
Tesla offered to share them with other auto OEMs, if they sign up to agree to Tesla's terms.