Tesla’s $56 billion pay package for CEO Elon Musk has gained support from small investors and major funds, but the next hurdle is convincing a skeptical Delaware judge to recognize it. At the company’s annual meeting on Thursday, the official vote results will be revealed.
Elon Musk, the driving force behind Tesla’s advancements, has received vocal support for the pay package, particularly from small shareholders. However, concerns have arisen due to recent declines in sales and stock prices, potentially influencing a strong “no” vote.
Before Tesla can give shares to Musk, there will likely be months of litigation regarding the pay ratification vote. This includes scrutinizing Musk’s efforts to rally shareholders in support of his compensation and appealing the original ruling that voided the pay package.
Judge Kathaleen McCormick of Delaware’s Court of Chancery nullified the pay package in January due to Musk’s improper control of the negotiation process and Tesla’s failure to fully inform investors before the vote. A final legal resolution in Musk’s favor is uncertain and will take time.
Samantha Crispin, a corporate attorney at Baker Botts, noted that a shareholder vote alone wouldn’t automatically reverse Judge McCormick’s decision. The situation is unprecedented, and the outcome remains uncertain.
Tesla argues that the shareholder vote corrected the 2018 vote by disclosing extensive information to investors, including McCormick’s ruling. Tesla also formed a special committee, led by independent board member Kathleen Wilson-Thompson, to review the pay deal and determine its benefits for shareholders.
However, Tesla acknowledges that a favorable ratification may not fully resolve the pay dispute. Ratification typically addresses technical glitches in corporate documents but may not address larger concerns raised by shareholders.
Several major shareholders and some smaller ones voted against the pay package due to concerns about its size, Tesla’s slowing business, and Musk’s numerous distractions in other ventures.
A Tesla investor named Donald Ball has already filed a legal challenge to the vote. The lawsuit accuses Musk of using coercive tactics to push for approval of his pay package, citing Musk’s messages on the X social media platform expressing his desire to have a larger stake in the company.
Columbia Law School Professor Zohar Goshen believes that the Delaware court decision may reverse itself if the shareholder vote is in favor of the pay package. However, given the unique circumstances, it is difficult to predict the court’s ruling.
In conclusion, while Tesla has garnered support for Elon Musk’s $56 billion pay package, the legal battle ahead will determine its fate. The outcome remains uncertain, but Tesla and Musk will likely argue that Musk has the right to express his desire to step away from the company. The decision of the Delaware court could have significant implications for Tesla and its shareholders.
