Tesla shareholders have voted to both reapprove a pay package for CEO Elon Musk, initially valued at $56 billion, and to reincorporate the electric vehicle company in Texas.
The moves grant Musk substantial victories as he attempts to reassert control over Tesla, with the final payout contingent on Tesla’s share price.
The approval reflects the strong backing the 52-year-old billionaire receives from Tesla’s retail investors, who often vocally support the billionaire. Despite resistance from some major institutional investors and proxy advisory firms, the proposal succeeded.
At Tesla’s annual meeting in Austin, Texas, an excited Musk expressed his appreciation to the attendees: “Hot damn, I love you guys.”
HOT DAMN I LOVE YOU GUYS!
一 Elon Musk pic.twitter.com/mIt1fZ9Qi3
— DogeDesigner (@cb_doge) June 13, 2024
During the event, the CEO of X described his unwavering optimism, which he believes is essential to his achievements: “If I wasn’t optimistic this wouldn’t exist, this factory wouldn’t exist,” he declared, receiving applause. He added, “But I do deliver in the end. That’s the important thing.”
The pay deal is exceptionally lucrative, valued at over 3,000 times the annual earnings of the highest-paid US executive last year.
Will the courts still block Elon Musk from his Tesla pay package?
Despite the vote’s outcome, its legal binding remains uncertain. Legal experts have indicated that it is unclear whether the court that initially blocked the deal will acknowledge the re-vote and reinstate the pay package. “The vote changes nothing,” Mathieu Shapiro, managing partner at Obermayer Rebmann Maxwell & Hippel, told the BBC, stating it only provides Tesla with a chance to seek a more favorable court decision.
Speaking to Reuters, Brian Quinn, a law professor at Boston College, noted, “This thing is not over.” He explained that Delaware judge Kathaleen McCormick would thoroughly examine the vote to ensure it was not influenced by coercion or improper pressures from Musk, saying that Tesla’s board was criticized by the judge for being overly dependent on Musk, influenced by close personal and financial relationships.
As a “parting gift” to Delaware following the decision, Musk posted a picture on X of a cake with the words “Vox Populi, Vox Dei,” which means “the voice of the people is the voice of God.”
Sending this cake to Delaware as a parting gift pic.twitter.com/uLKE7LDSCW
— Elon Musk (@elonmusk) June 14, 2024
Tesla C-suite criticized by Delaware judge
Tesla Chair Robyn Denholm’s credibility was at stake following criticism from Judge McCormick, who described her oversight as “lackadaisical” and characterized the board’s behavior as that of “supine servants of an overweening master”
Musk and Denholm framed the shareholder votes as pivotal for Musk’s continuation with the company. Ivan Frishberg, chief sustainability officer at Amalgamated Bank, also told Reuters, “Elon Musk and Chair (Robyn) Denholm have made this about CEO loyalty and presented the votes as a decision about whether the company can keep Musk.
“That is a lot of pressure but it doesn’t change the fact that good governance is good for the bottom line of a company, and the Tesla board is consistently and clearly deficient on that front.”
In recent months, Denholm has been actively involved in shareholder communications, reiterating the theme “a deal is a deal”. She argued that Musk had met the “ludicrously ambitious” share price and financial milestones set in his original 2018 compensation package.
A deal is a deal.
@elonmusk transformed Tesla from a loss-making company to a company that’s changing the world.
And he created tremendous value – over $735 billion – for $TSLA stockholders along the way.
Elon upheld his end of the bargain; it is time to uphold ours.… https://t.co/Bk3QEi7b4g
— Tesla (@Tesla) June 10, 2024
In private discussions with asset managers, the Financial Times reported that Denholm cautioned Tesla might lose Musk if he didn’t receive his shares. She explained that the stock options were vital for keeping him engaged, as “his passion and hobby is interplanetary space travel,” according to one insider.
In addition, shareholders increased their influence by passing measures that shorten board terms to one year and lower voting thresholds for passing proposals to a simple majority, despite the board’s objections to these changes.
Featured image: Elon Musk on X
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