Musk secures $44.9 billion Tesla pay package in shareholder vote

On Thursday, Tesla shareholders voted to reinstate CEO Elon Musk’s substantial $44.9 billion pay package, previously invalidated by a Delaware judge earlier this year, reflecting a strong vote of confidence in his leadership. Despite the favorable vote, Musk’s compensation is likely to remain in legal limbo for months as Tesla attempts to overturn the Delaware judge’s decision.

Musk’s commitment to Tesla has been uncertain this year, as he hinted on his social media platform X that he wanted a 25% stake in the company to prevent him from shifting his AI development efforts elsewhere. He argued that this higher stake is necessary to control AI use. Tesla has also been grappling with declining sales and profit margins amid a global slowdown in electric vehicle demand.

During Tesla’s annual meeting in Austin, Texas, Musk reassured shareholders of his commitment to the company, stating that he cannot sell any stock from the compensation package for five years. “It’s not actually cash, and I can’t cut and run, nor would I want to,” he said.

While the exact vote count on Musk’s compensation wasn’t immediately disclosed, Tesla confirmed that shareholders had voted in favor of the plan, initially approved by the board and shareholders six years ago. Tesla last valued the package at $44.9 billion in an April regulatory filing, down from a peak of $56 billion as Tesla’s stock has dropped about 25% this year.

In January, Chancellor Kathaleen St. Jude McCormick ruled in a shareholder lawsuit that Musk effectively controlled Tesla’s board when it approved the package in 2018, and that shareholders were not fully informed. Tesla plans to appeal this ruling but sought reapproval of the package at Thursday’s meeting.

Additionally, shareholders approved moving Tesla’s legal headquarters to Texas to avoid Delaware courts, where Tesla is currently registered. Musk celebrated the meeting’s outcome, calling it the start of a new chapter for Tesla.

Despite these wins, shareholders also approved measures to shorten board member terms from three years to one and to lower the required vote on shareholder proposals to a simple majority.

Legal experts suggest the issue of Musk’s pay will still be decided in Delaware, as Tesla’s lawyers assured McCormick they wouldn’t move the case to Texas. Opinions differ on whether the new shareholder vote will influence the court’s decision. Charles Elson, a retired professor from the University of Delaware, believes the vote won’t affect McCormick’s ruling, which he says essentially deemed the 2018 compensation package a gift to Musk requiring unanimous shareholder approval. John Lawrence, a lawyer with Baker Botts, argues that the vote provides Tesla with a strong argument to overturn the ruling, as shareholders were fully informed before the latest vote.

If McCormick’s ruling stands, Musk will likely appeal to the Delaware Supreme Court. Institutional investors have opposed Musk’s payout, citing Tesla’s recent struggles, but analysts believe votes from individual shareholders secured the approval.

Early Friday, Tesla revealed that shareholders voted for Musk’s pay package by a margin of 1,760,780,650 to 528,908,419, with about 77% in favor. Tesla’s shares rose 3% by market close Thursday and were up 1.2% in pre-market trading Friday.

Following the votes, Musk updated shareholders on the company’s developments in “Full Self-Driving” technology, emphasizing its progress and safety improvements. Despite its name, “Full Self-Driving” requires human intervention. Musk has been promising autonomous driving capabilities since 2015, with the latest projection for readiness in 2023.

Musk also highlighted advancements in Tesla’s Optimus humanoid robot, which is now operational at the Fremont factory. Additionally, he mentioned plans to expand Tesla’s Supercharger network, expecting to spend $500 million on it in the second half of the year.