Tesla board restores Musk’s $44B pay
- by Northwest Arkansas Democrat Gazette
- Jun 14, 2024
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TOM KRISHER THE ASSOCIATED PRESS
Vehicles pass the Tesla Gigafactory, Thursday, June 13, 2024, in Austin, Texas. Tesla shareholders are charting the future of the electric vehicle company as they wrap up voting whether or not to restore CEO Elon Musk's massive pay package that was thrown out by a Delaware judge. (AP Photo/Eric Gay)
DETROIT -- Tesla shareholders voted on Thursday to restore CEO Elon Musk's record $44.9 billion pay package that was thrown out by a Delaware judge earlier this year.
Vote totals were not immediately announced. The favorable vote doesn't mean CEO Musk will get the all-stock compensation anytime soon. The package is likely to remain tied up in the Delaware Chancery Court for months as Tesla appeals the rejection.
The court ruled in January that Musk essentially controlled the Tesla board when it approved the package in 2018, and that it failed to fully inform shareholders who approved it the same year.
Tesla has said it would appeal, but asked shareholders to reapprove the package at Thursday's annual meeting in Austin, Texas.
Shares of the company rose Thursday after Tesla said in a regulatory filing that stockholders would vote to approve Musk's pay by a wide margin.
In a filing with the U.S. Securities and Exchange Commission on Thursday, Tesla published Musk's own posts late Wednesday on X, the social media platform he owns, with charts that appeared to show that shareholders were in favor of his compensation package, as well a measure to move Tesla's legal home from Delaware to Texas.
The company sought the votes after a Delaware judge threw out the pay package in January. Chancellor Kathaleen St. Jude McCormick determined Musk is not entitled to the landmark package, which was worth nearly $56 billion before a stock slide this year.
Legal experts say that releasing vote totals while balloting is in progress could present problems for Tesla, and that may be why the company made the filing with the SEC, which is likely to look into the matter.
Shareholders cast votes online Thursday and in person Thursday afternoon at Tesla's annual shareholders meeting in Austin, Texas. They also can change previously cast votes.
"Anytime you tell people you're winning, you're encouraging others to join you and those who oppose you to pull back," said Charles Elson, a retired professor and founder of the corporate governance center at the University of Delaware.
Erik Gordon, a law and business professor at the University of Michigan, said Musk's posts could draw legal scrutiny. "His post had better be accurate or else anyone who bought stock relying on it will have a securities law case against him," Gordon said in an email.
The SEC declined comment Thursday, and a message was left seeking comment from Tesla.
Elson said posting corporate proxy vote totals before the balloting ends is "highly unusual."
Social media posts by Musk have drawn scrutiny from the SEC before. He and Tesla were fined a total of $40 million for statements about funding to make Tesla a private company that Musk made on X's predecessor, Twitter, before he bought the social media platform.
Shares of Tesla closed Thursday up just under 3% at $182.47. The stock is down about 25% this year.
Approval of the pay package almost guarantees that Musk will remain at the company that has grown to be the world leader in electric vehicles.
Even with the approval, there remains uncertainty. Musk has threatened on X to develop artificial intelligence elsewhere if he doesn't get a 25% stake in Tesla (He owns about 13% now). Musk's xAI recently received $6 billion in funding to develop artificial intelligence.
Multiple institutional investors have come out against that sizeable payout, some citing falling vehicle sales, price cuts and the tumbling Tesla stock price. But Tesla's top five institutional shareholders, Vanguard, BlackRock, State Street, Geode Capital and Capital Research either said they don't announce their votes or wouldn't comment. They control about 17% of the votes.
One institutional investor who came out against the package is California's State Teachers Retirement System. The large pension fund said Tuesday that it would vote against Musk's pay "based on its sheer magnitude, and because the award would be extremely dilutive to shareholders. We also have concerns with the lack of focus on profitability for the company."
In May, two big shareholder advisory firms, ISS and Glass Lewis, recommended shareholders reject the package.
But Tesla and Musk lobbied to get the package approved in posts on X, television appearances and in proxy filings with the U.S. Securities and Exchange Commission.
Tesla Chairwoman Robyn Denholm, in a letter to shareholders, wrote that the package was approved by 73% of the vote six years ago. "Because the Delaware Court second-guessed your decision, Elon has not been paid for any of his work for Tesla for the past six years that has helped to generate significant growth and stockholder value. That strikes us -- and the many stockholders from whom we already have heard -- as fundamentally unfair, and inconsistent with the will of the stockholders who voted for it," she wrote.
Tesla has said the 2018 award incentivized Musk to create over $735 billion in value for shareholders in the six years since it was approved.
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