Tesla shareholders vote to restore Elon Musk’s pay package
13 June 2024, 23:04
The package is likely to remain tied up in the Delaware Chancery Court and Supreme Court for months as Tesla tries to overturn the rejection.
Tesla shareholders have voted to restore chief executive Elon Musk’s record 44.9 billion US dollar (£35 billion) pay package that was thrown out by a Delaware judge earlier this year.
Vote totals were not immediately announced at Tesla’s annual stockholders’ meeting on Thursday, but the company said they voted for Mr Musk’s compensation plan, which initially was approved by the board and stockholders six years ago.
But the favourable vote does not necessarily mean that Mr Musk will get the all-stock compensation anytime soon.
The package is likely to remain tied up in the Delaware Chancery Court and Supreme Court for months as Tesla tries to overturn the rejection.
Tesla last valued the package at 44.9 billion dollars in an April regulatory filing.
It was once as much as 56 billion dollars (£43.8 billion) but has declined in value in tandem with Tesla’s stock, which has dropped about 40% in the last 12 months.
Chancellor Kathaleen St Jude McCormick ruled in January in a shareholder’s lawsuit that Mr Musk essentially controlled the Tesla board when it ratified the package in 2018, and that it failed to fully inform shareholders who approved it the same year.
Tesla has said it would appeal, but asked shareholders to reapprove the package at Thursday’s annual meeting.
A separate issue to move the company’s legal home to Texas to avoid the Delaware courts was also approved, Mr Musk said on Thursday at the meeting in Austin, Texas.
“It’s incredible,” a jubilant Mr Musk told the crowd gathered at Tesla’s headquarters and large factory in Austin.
“I think we’re not just opening a new chapter for Tesla, we’re starting a new book.”
Legal experts say the issue of Mr Musk’s pay will still be decided in Delaware, largely because Mr Musk’s lawyers have assured Ms McCormick that they will not try to move the case to Texas.
But they differ on whether the new approval of the pay package will make it easier for Tesla to get it approved.
Charles Elson, a retired professor and founder of the corporate governance centre at the University of Delaware, said he does not think the vote will influence Ms McCormick, who issued a decision based on the law.
Ms McCormick’s ruling essentially made the 2018 compensation package a gift to Mr Musk, Mr Elson said, and that would need unanimous shareholder approval, an impossible threshold.
The vote, he said, is interesting from a public perception standpoint, but “in my view it does not affect the ruling”.
John Lawrence, a Dallas-based lawyer with Baker Botts who defends corporations against shareholder lawsuits, agreed that the vote does not end the legal dispute and automatically give Mr Musk the stock options.
But he says it gives Tesla a strong argument to get the ruling overturned.
He expects Mr Musk and Tesla to argue that shareholders were fully informed before the latest votes, so Ms McCormick should reverse her decision.
But the plaintiff in the lawsuit will argue that the vote has no impact and is not legally binding, Mr Lawrence said.
The vote, he said, was done under Delaware law and should be considered by the judge.
“This shareholder vote is a strong signal that you now have an absolutely well informed body of shareholders,” he said.
“The judge in Delaware still could decide that this doesn’t change a thing about her prior ruling and doesn’t require her to make any different ruling going forward. But I think it definitely gives Tesla and Musk strong ammunition to try to get her to revisit this.”
If the ruling stands, then Mr Musk is likely to appeal to the Delaware Supreme Court, Mr Lawrence said.
