Tesla shareholders have voted to ratify CEO Elon Musk’s $56 billion compensation package, as well as approve a plan to move the company’s legal headquarters to Texas. Musk shared the results of the vote on social media, stating that both resolutions were “currently passing by wide margins.” However, he did not disclose the exact results of the vote. The pay package was initially granted to Musk in 2018 and allows him to secure 12 tranches of Tesla stock options based on market capitalization and operational milestones.
In January, a Delaware judge nullified the pay package, ruling that Tesla’s board failed to prove its fairness and that the process leading to its approval was flawed. The decision was made in response to a lawsuit filed by Tesla shareholder Richard Tornetta, who argued that the package was excessively large and that the milestones for Musk’s compensation were expected to be achieved. The lawsuit also claimed that Musk himself came up with the compensation plan and that Tesla misrepresented the independence of its compensation committee and board.
Judge Kathaleen McCormick, in her ruling, stated that Tesla’s board did not discuss or negotiate the compensation package with Musk and that he had significant influence over the approval process. A proxy statement filed by Tesla chair Robyn Denholm called the decision “fundamentally unfair” and inconsistent with the will of the stockholders. Denholm argued that Musk deserved the package due to his leadership and Tesla’s unprecedented growth.
Following the January ruling, Musk asked his followers on social media if Tesla should change its state of incorporation to Texas, which is where its physical headquarters are located. Tesla then submitted the reincorporation plan to another vote, alongside the compensation package vote. However, the latest vote does not override Judge McCormick’s ruling, and it is uncertain if the court will accept the re-vote and reinstate the pay package for Musk.
The exact amount Musk may be awarded depends on the Tesla share price. Tesla’s stock rose 3 percent after Musk’s announcement, although it has seen a 29 percent drop this year due to a decline in sales. Additionally, shareholders at Tesla also re-elected two board members: James Murdoch and Kimbal Musk, who is Elon Musk’s brother.
Overall, the approval of Elon Musk’s compensation package and the relocation of Tesla’s legal headquarters to Texas has generated both support and controversy. While some argue that Musk deserves the package due to Tesla’s growth under his leadership, others believe it is excessively large and question the fairness of the approval process. The outcome of the recent vote does not guarantee the reinstatement of the pay package, as it is subject to the court’s decision.
