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DETROIT – Tesla shareholders voted on June 13 to restore Elon Musk’s $44.9 billion record pay package, which was thrown out earlier this year by a Delaware court. This vote sent a strong message of confidence in the leadership of the electric car maker.
Musk may not receive the compensation in stock anytime soon, even if the vote is favorable. The package will likely remain in Delaware Chancery Court or Supreme Court for several months as Tesla attempts to overturn the Delaware Judge’s rejection.
Musk has expressed doubts about his future at Tesla this year. He wrote on X that he wants a 25% stake to prevent him from moving the artificial intelligence development to another company. He has said that a higher stake in the company is necessary to control AI.
Tesla has also struggled to maintain its sales and profit margins, as the demand for electric cars slows down worldwide.
Musk assured shareholders at the annual meeting of the company on June 13 in Austin Texas that he would stay, saying he couldn’t sell any shares in the compensation package until five years had passed.
The 2018 CEO Performance Award and our relocation to Texas were approved by a large majority of $TSLA‘s stockholders at yesterday’s Annual Shareholders’ Meeting.
We have submitted all the necessary filings for our conversion to a Texas corporation. We can confirm… — Tesla June 14th, 2024
“It is not cash and I cannot run away, nor would I like to,” he said.
The company has not yet announced the vote totals for Musk’s pay, but it said that shareholders approved Musk’s compensation package, which was originally approved by the board of directors and stockholders over six years ago.
Tesla valued the package last at $44.9 billion when it filed a regulatory filing in April. It was once worth up to $56 billion, but its value has decreased in line with Tesla’s stock which has fallen about 25% this year.
In January, Chancellor Kathaleen S. Jude McCormick found in a lawsuit filed by a shareholder that Musk controlled the Tesla board in 2018 when it ratified a package and that the board failed to inform the shareholders who approved the package that same year.
Tesla has said that it will appeal the decision, but asked shareholders at the annual meeting to reapprove this package.
A separate vote approved the move of the company’s legal residence to Texas in order to avoid the Delaware courts, where Tesla is registered under the corporate status.
Musk, jubilantly, told the crowd at Tesla’s headquarters in Austin and its large factory: “It’s amazing.” “I don’t think we’re just opening a chapter for Tesla. We’re starting a brand new book.”
Musk and Tesla did not win everything. Shareholders approved measures to reduce the terms of board members from three to one year and to reduce the required vote for shareholder proposals to simple majority.
Legal experts say that the issue of Musk’s pay will be decided in Delaware. This is largely because Musk’s lawyers have assured McCormick that they won’t try to move this case to Texas.
They differ on whether the new ratification will make it easier or harder for Tesla to get the package approved.
Charles Elson, retired professor and founder of corporate governance center at University of Delaware said he does not think the vote will affect McCormick’s decision, which was based on law.
Elson said that McCormick’s ruling made the 2018 compensation package into a gift for Musk. This would require unanimous shareholder approval, which is an impossible threshold. Elson said that the vote is interesting in terms of public perception, but “in [his] view, it does not affect (the ruling]”.
John Lawrence, an attorney with Baker Botts in Dallas who defends corporations from shareholder lawsuits, agreed that the vote does not end the legal dispute or automatically give Musk stock options. He says that it gives Tesla a powerful argument to overturn the ruling.
McCormick’s decision should be reversed by Musk and Tesla, who will argue that the shareholders were well informed before the last votes. Lawrence said that the plaintiff will argue the vote is not legally binding and has no effect.
He said that the vote was conducted under Delaware law, and that it should be reviewed by the judge.
“This shareholder vote sends a strong message that you have a group of shareholders who are well-informed,” he said. “The Delaware judge could still decide that this does not change anything about her prior ruling, and doesn’t force her to make a different ruling moving forward. But I think that it gives Tesla and Musk a lot of ammunition to try to convince her to revisit this.”
Lawrence said that if the ruling is upheld, Musk will likely appeal to the Delaware Supreme Court.
Many institutional investors have criticized Musk’s large payout. Some cited the company’s recent struggles. Analysts said that individual shareholder votes likely put Musk’s compensation over the top.
Tesla announced on June 14 that Musk’s compensation package was approved by shareholders with a vote of 1,760,780 650 to 528.908,419, or 77%.
https://t.co/dSjHBguO7T — Tesla (@Tesla) May 27, 2024
Musk began to inform shareholders of new developments in the “Full Self-Driving System” after the results were announced. He has staked his company’s future in the development of robots, artificial intelligence and autonomous vehicles.
Musk said that “Full Self-Driving”, with its new versions, is improving and that its safety per mile was better than human drivers.
“This is going to work.” This is going to be the case. “Mark my words, it’s only a matter time,” he said.
Despite its name “Full Self-Driving”, it can’t drive by itself. The company says that human drivers must always be ready to intervene. Tesla’s “Full Self-Driving Hardware” went on sale in late 2015, and Musk used the name since then as the company collected data to teach the computers how to drive.
Musk promised in 2019 that a fleet autonomous robotaxis would be ready by 2020. He said that the cars will be autonomous in 2022. Musk stated in April of last years that the system would be ready by 2023.
Since 2021, Tesla is beta-testing the “Full Self Driving” with volunteer owners. Last year, U.S. safety regulators forced Tesla to recall the software when they found that it misbehaved at intersections and violated traffic laws.
Musk said that the company has made great progress with its Optimus robot. He said that two robots are currently working in the factory in Fremont, Calif. They take battery cells from a production line and place them in shipping containers.
Musk believes that despite terminating the team responsible for Tesla’s Supercharger network of electric vehicle charging stations, the company will deploy “more chargers that are actually working” this year than the rest. Musk said he expected to spend $500m on Superchargers in the second half of this year.
Hamilton reported in San Francisco.