Tesla Shareholders Approve Musk’s $44.9 Billion Compensation Package

DETROIT (AP) – Tesla shareholders voted on Thursday to reinstate CEO Elon Musk’s $44.9 billion compensation package, previously nullified by a Delaware judge earlier this year. This vote demonstrates strong support for Musk’s leadership of the world’s leading electric vehicle manufacturer.

Although the vote is favorable, Musk’s all-stock compensation may not be immediately accessible. The package is expected to be tied up in the Delaware Chancery Court and Supreme Court for several months as Tesla appeals the judge’s earlier decision.

Earlier this year, Musk expressed doubts about his future with Tesla, suggesting on social media platform X that he wanted a 25% stake in the company to prevent him from pursuing AI development elsewhere. He argued that this stake was essential for controlling the use of AI.

Tesla has faced challenges with declining sales and profit margins as global demand for electric vehicles slows. However, at the company’s annual meeting in Austin, Texas, Musk reassured shareholders of his commitment, stating he could not 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.

Late Thursday, Tesla announced that shareholders had voted in favor of Musk’s compensation plan, which was initially approved by the board and shareholders six years ago. Tesla recently valued the package at $44.9 billion in an April regulatory filing, a decrease from its peak value of $56 billion, reflecting a 25% drop in Tesla’s stock value this year.

In January, Chancellor Kathaleen St. Jude McCormick ruled that Musk essentially controlled the Tesla board when it ratified the package in 2018, failing to fully inform shareholders who approved it that same year. Tesla has indicated plans to appeal but sought shareholder reapproval at Thursday’s meeting.

Additionally, shareholders voted to move Tesla’s legal home to Texas, avoiding Delaware’s courts where the company is currently registered.

“This is incredible,” an elated Musk told attendees at Tesla’s Austin headquarters and factory. “We’re not just opening a new chapter for Tesla, we’re starting a new book.”

Musk and Tesla faced some setbacks. Shareholders approved measures reducing board member terms from three years to one and lowering the required vote for shareholder proposals to a simple majority.

Legal experts suggest that the issue of Musk’s compensation will still be decided in Delaware, with Musk’s lawyers assuring McCormick they won’t attempt to move the case to Texas. The new shareholder vote, however, may strengthen Tesla’s argument for overturning the judge’s decision.

Charles Elson, a retired professor and founder of the corporate governance center at the University of Delaware, believes the vote won’t influence McCormick, who made her decision based on the law. McCormick’s ruling classified the 2018 package as a gift to Musk, necessitating unanimous shareholder approval—an impossible standard to meet.

John Lawrence, a Dallas-based lawyer specializing in corporate defense against shareholder lawsuits, agrees the vote doesn’t resolve the legal dispute but believes it provides Tesla a strong argument for overturning the ruling. He anticipates Musk and Tesla will argue that shareholders were fully informed before the recent vote, suggesting McCormick should reconsider her decision.

If McCormick’s ruling stands, Musk is likely to appeal to the Delaware Supreme Court. While some institutional investors oppose Musk’s hefty payout, individual shareholder votes appear to have secured the approval.

Early Friday, Tesla disclosed that shareholders voted 1,760,780,650 to 528,908,419 in favor of Musk’s compensation package, with 77% approval. Tesla’s shares rose 3% by the market close on Thursday and were up 1.2% in premarket trading on Friday.

Following the vote, Musk updated shareholders on developments in Tesla’s “Full Self-Driving” system, emphasizing his commitment to autonomous vehicles, robots, and AI. He stated that the “Full Self-Driving” system, which requires human intervention, continues to improve and will eventually become fully autonomous.

Musk also highlighted progress on Tesla’s Optimus humanoid robot, with two units currently operating at the Fremont, California factory. Despite laying off the Supercharger network team, Musk expects to deploy more functional chargers this year than the rest of the industry combined, with plans to spend $500 million on Superchargers in the second half of the year.

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