DETROIT (AP) — Shareholders of Tesla voted on Thursday to reinstate CEO Elon Musk’s $44.9 billion pay package, which was previously invalidated by a Delaware judge earlier this year.
The exact vote totals were not immediately announced. Even with the favorable vote, it does not guarantee that CEO Musk will receive the all-stock compensation in the near future. The package is expected to be held up in the Delaware Chancery Court for several months as Tesla appeals the initial rejection.
In a ruling back in January, the court determined that Musk had significant control over the Tesla board when the package was approved in 2018. Additionally, it concluded that shareholders who approved the package were not fully informed about it at the time.
Although Tesla has stated that it plans to appeal the ruling, they requested shareholders to reapprove the package during the company’s annual meeting in Austin, Texas.
THIS IS A BREAKING NEWS UPDATE. AP’s earlier story follows below.
At Tesla’s annual meeting, shareholders are making decisions about the future of the electric vehicle company, including a vote on whether to reinstate CEO Elon Musk’s substantial pay package, which was previously rejected by a Delaware judge.
Following a regulatory filing by Tesla, the company’s stock prices rose on Thursday, indicating that stockholders were likely to approve Musk’s $44.9 billion compensation package by a considerable margin.
The filing, submitted to the U.S. Securities and Exchange Commission, included Musk’s own social media posts from X, his platform, showing charts suggesting strong shareholder support for his compensation package and a proposal to relocate Tesla’s legal headquarters from Delaware to Texas.
The vote follows a decision by a Delaware judge in January to invalidate the pay package. Judge Kathaleen St. Jude McCormick found that Tesla had misled shareholders when the all-stock compensation was originally approved in 2018, ruling that Musk is not entitled to the significant package, which was valued at nearly $56 billion before a drop in stock value earlier this year.
The release of vote totals while the ballot is still open could lead to issues for Tesla, which may explain why the company made the filing with the SEC for further investigation.
Shareholders still have the opportunity to cast their votes online and in person at the annual meeting in Austin, where they also have the option to change their initial votes.
Charles Elson, a retired professor specializing in corporate governance, noted that sharing vote totals before balloting ends is highly uncommon and could influence the outcome of the vote.
Legal expert Erik Gordon mentioned potential legal scrutiny arising from Musk’s social media posts and emphasized the importance of accuracy in such statements to avoid any securities law violations.
As of market close on Thursday, Tesla’s stock prices were up by nearly 3% at $182.47, although they are down about 25% for the year.
If Musk’s pay package is approved, it would solidify his position at Tesla, the leading electric vehicle company. However, any rejection could lead to consequences such as shifting AI research to other companies or even Musk stepping away from Tesla.
Amid uncertainties, Musk has continued to push for his pay package and has expressed intentions to pursue AI development elsewhere if his demands are not met. Nevertheless, early indications suggest that shareholders also support relocating Tesla’s legal headquarters to Texas, a move intended to avoid Delaware court oversight and the prior ruling by Judge McCormick.
Several institutional investors have opposed the substantial payout, citing various concerns such as falling sales, price fluctuations, and declining stock value. Despite this, Tesla’s top five institutional shareholders did not disclose their voting intentions or declined to comment, collectively holding about 17% of the votes.
One vocal opponent of Musk’s pay package is California’s State Teachers Retirement System, which criticized the size of the award and its dilutive effect on shareholders’ interests. Additionally, shareholder advisory firms ISS and Glass Lewis have recommended voting against the package.
Tesla and Musk have engaged in an extensive lobbying effort to garner support for the pay package, utilizing social media, television appearances, and SEC filings to convey their arguments to shareholders.
In a letter to shareholders, Tesla Chairwoman Robyn Denholm highlighted the significance of Musk’s contributions to the company and its stockholder value, urging approval of the package that was initially backed by 73% of shareholders six years ago.
If Tesla proceeds with relocating its legal headquarters to Texas prior to finalizing the vote on Musk’s pay package and manages to secure approval, the impact of the Delaware court ruling could potentially be mitigated. The package reapproval could then occur under Texas jurisdiction.
Legal experts anticipate Tesla’s appeal of Judge McCormick’s ruling to the Delaware Supreme Court for further review and resolution of the ongoing compensation dispute.
