On Thursday, Tesla shareholders voted to reinstate CEO Elon Musk’s substantial $44.9 billion all-stock compensation package, which had been previously nullified by a Delaware judge. This decision signals strong support for Musk’s leadership amid challenging times for the electric vehicle manufacturer.
Although the shareholder vote is favourable, it does not guarantee that Musk will receive the compensation immediately. The package remains entangled in legal proceedings in the Delaware Chancery Court and Supreme Court, with Tesla appealing the judge’s rejection.
This year, Musk has cast uncertainty over his future with Tesla, suggesting on social media platform X that he seeks a 25% stake in the company to prevent him from diverting his focus to artificial intelligence development elsewhere. Musk argues that this higher stake is essential for controlling AI use.
Tesla has faced declining sales and profit margins as global demand for electric vehicles slows. However, during the company’s annual meeting in Austin, Texas, Musk reassured shareholders of his commitment to Tesla, emphasizing 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,” Musk stated.
While the exact vote totals were not disclosed, Tesla confirmed shareholder approval of Musk’s compensation plan, originally sanctioned 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 due to a 25% drop in Tesla’s stock value this year.
Chancellor Kathaleen St. Jude McCormick ruled in January that Musk had essentially controlled the Tesla board when it ratified the package in 2018, and the board had failed to fully inform shareholders. Tesla has appealed this ruling and sought shareholder reapproval at the annual meeting.
In a separate vote, shareholders approved moving Tesla’s legal domicile to Texas to avoid Delaware’s courts, where Tesla is registered as a corporation.
Despite the new shareholder vote, legal experts believe the compensation issue will still be decided in Delaware. Charles Elson, a retired professor and corporate governance expert, noted that the vote is unlikely to sway McCormick, who based her decision on legal grounds. John Lawrence, a corporate lawyer, argued that the vote provides Tesla with a stronger argument to overturn the ruling by demonstrating that shareholders were fully informed before the latest vote.
Institutional investors have opposed Musk’s hefty pay-out, citing Tesla’s recent struggles. However, votes from individual shareholders likely ensured the approval of Musk’s compensation plan. The company’s shares rose 3% by the close of markets following the disclosure of the voting results.
After the vote, Musk discussed new advancements in Tesla’s “Full Self-Driving” system, asserting its safety and ongoing improvements. Despite its name, the system requires human supervision and has faced regulatory scrutiny. Musk also highlighted progress on the Optimus humanoid robot, which is now operational at Tesla’s Fremont factory.
Additionally, Musk mentioned plans to expand Tesla’s Supercharger network, predicting more functional chargers deployed this year than by any other company, with a $500 million investment planned for the second half of the year.
The shareholder vote to reinstate Musk’s pay package reflects strong confidence in his leadership despite legal and market challenges. As Tesla navigates these complexities, the company continues to push forward with its ambitious plans for autonomous driving, robotics, and expanding its charging infrastructure.
Main Image: Fox 4 News
