NEW DELHI: Tesla shareholders voted on Thursday to reinstate CEO Elon Musk’s $44.9 billion pay package, which had been previously thrown out by a Delaware judge earlier this year.
Although the vote totals were not immediately disclosed, the favorable outcome does not guarantee that Musk will receive the all-stock compensation in the near future, as the package is expected to remain tied up in the Delaware Chancery Court for several months while Tesla pursues an appeal.
Musk’s control over Tesla board
In January, Chancellor Kathaleen St. Jude McCormick issued a ruling in a lawsuit brought by a shareholder. The ruling stated that Musk held control over the Tesla board when it approved the package in 2018, and the that the board did not provide information to the shareholders who approved the package during the same year.
Tesla has said that it would appeal the decision but requested that shareholders reapprove the package at the company’s annual meeting in Austin, Texas.
Tesla shareholders are deciding the company’s future as they conclude voting on whether to reinstate CEO Elon Musk’s substantial compensation package, which was rejected by a Delaware judge.
Tesla ‘s share price
The company’s shares increased on Thursday after Tesla disclosed in a regulatory filing that shareholders are voting to approve Musk’s pay, valued at approximately $44.9 billion, with a modest gain of just under 3%, reaching $182.47 per share.
However, the company’s stock has experienced a decline of approximately 25% since the beginning of the year.
Package decreased to $44.9 billion
In a filing with the US Securities and Exchange Commission, Tesla shared Musk’s own posts from late Wednesday on X, the social media platform he owns, which included charts suggesting that shareholders supported his pay package and a proposal to relocate Tesla’s legal home from Delaware to Texas.
In a recent regulatory filing from April, Tesla disclosed that the value of the package had decreased to $44.9 billion.
The package’s worth, which had previously reached as high as $56 billion, has fallen alongside Tesla’s stock price, which has experienced a decline since the beginning of the year.
Legal experts caution that disclosing vote totals while balloting is ongoing could create issues for Tesla, which may explain why the company made the filing with the SEC, as the agency is likely to investigate the matter.
Tesla and Musk fined
A retired professor and founder of the corporate governance center at the University of Delaware, Charles Elson said, “Anytime you tell people you’re winning, you’re encouraging others to join you and those who oppose you to pull back,” Elson added that releasing corporate proxy vote totals before the end of the balloting process is “highly unusual.”
Elon Musk’s social media posts have previously attracted attention from the Securities and Exchange Commission (SEC). Tesla and Musk were fined a total of $40 million for statements he made on Twitter, prior to his acquisition of the platform, regarding funding to make Tesla a private company.
The approval of Musk’s compensation package would nearly ensure his continued involvement with the company he has built into the global leader in electric vehicles. Tesla is also expanding into artificial intelligence and robotics, including self-driving vehicles, which Musk believes represents the company’s future.
Musk to create products outside Tesla if….
If the pay package is approved, it would almost guarantee that Musk would remain at the company he grew to be the world leader in electric vehicles, shifting to AI and robotics including autonomous vehicles, which Musk says is Tesla’s future.
But if shareholders were to vote against his pay, the CEO might follow through on his warnings to pursue artificial intelligence research at one of his other ventures, or even depart from Tesla entirely.
Even with shareholder approval, uncertainties remain. Musk has threatened to create AI and robotic products outside Tesla if lose the resolution and doesn’t receive a 25% stake in Tesla, despite currently owning approximately 13%. Recently, Musk’s x AI secured $6 billion in funding to advance artificial intelligence development.
(With inputs from agencies)