Tesla shareholders have reapproved a pay package for CEO Elon Musk worth billions, despite a previous court ruling voiding it. The vote, completed at Tesla’s annual meeting, showed overwhelming support for Musk’s 2018 compensation plan, with 84% of shares not held by Musk or his brother Kimbal backing it. This approval surpasses the 73% who supported the package when it was originally passed. The package, now valued at $48.3 billion, grants Musk 303 million options to buy Tesla shares at a significantly reduced price.
Tesla’s board argued that maintaining Musk’s pay package is crucial for the company’s success, as it ensures his continued attention amidst challenges like falling sales and profits. “This is obviously not about the money,” Tesla Chair Robyn Denholm stated, emphasizing that the goal is to keep Musk focused on creating value for stockholders.
Moving Legal Headquarters to Texas
In addition to the pay package, shareholders approved relocating Tesla’s legal headquarters from Delaware to Texas, with 63% of shares in favor. This move could potentially allow Tesla to revive Musk’s pay package in a new legal environment, should the appeal in Delaware fail.
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The move follows a January ruling by Delaware Chancery Court Chancellor Kathaleen McCormick, who criticized the process of awarding Musk’s pay package as “deeply flawed” and biased due to personal relationships between board members and Musk.
Support and Opposition
Despite the controversy, several major investors, including Cathie Wood of Ark Invest and Ron Baron of Baron Capital, supported the pay package, praising Musk’s critical role in Tesla’s achievements. However, significant opposition came from entities like the California State Teachers Retirement Fund and Norway’s sovereign wealth fund, which expressed concerns over the package’s size and fairness.
Musk’s leadership has faced increased scrutiny, especially after his acquisition of Twitter (now X) and his involvement in multiple companies. The CEO’s controversial management style and decisions, such as mass layoffs and rehiring at Tesla, have raised questions among investors about his focus and priorities.
Legal and Financial Implications
The approval of Musk’s compensation package does not guarantee its implementation, as the Delaware court’s ruling remains a significant hurdle. Legal experts suggest that the new shareholder vote could bolster Tesla’s chances in an upcoming appeal. However, any new compensation plan would need substantial changes to comply with legal standards and avoid further conflicts of interest.
Tesla’s stock, which has seen a dramatic rise since 2018, has recently suffered a decline, losing more than half its value from its peak in 2021. The company has had to cut prices amid increased competition and weaker demand, contributing to investor concerns about Musk’s leadership and Tesla’s future.
The recent shareholder vote reflects a strong endorsement of Musk’s leadership despite legal challenges and controversies. With Tesla’s legal headquarters moving to Texas and a renewed push to implement Musk’s compensation package, the company is navigating complex financial and legal landscapes to secure its CEO’s involvement and drive future growth.