Elon Musk’s $44.9B pay package restored after Tesla shareholder vote
FILE - Elon Musk attends the 10th Annual Breakthrough Prize Ceremony at Academy Museum of Motion Pictures on April 13, 2024 in Los Angeles, California.
Tesla CEO Elon Musk’s record $44.9 billion pay package has been restored following a shareholder vote on Thursday.
The compensation plan was initially approved by the board and stockholders six years ago.
Musk won’t immediately get access to the funds soon as the package will be tied up in the Delaware Chancery Court for months as Tesla appeals the rejection.
Back in January, the court ruled that Musk basically controlled the Tesla board when it approved the pay package back in 2018 and that it failed to fully inform its shareholders who approved it that same year.
Tesla has said it would appeal, but asked shareholders to reapprove the package at Thursday’s the company's annual meeting in Austin, Texas.
Separately, it was also approved on Thursday that Tesla's official and legal headquarters will be in Texas, Musk said.
"Its incredible," a jubilant Musk told the crowd gathered at Tesla's headquarters and large factory in Austin, Texas. "I think we’re not just opening a new chapter for Tesla, we’re starting a new book."
The company moved to Austin in order to avoid the Delaware courts, but some legal experts say the issue of Musk's pay will still be decided in Delaware.
This is largely due to Musk's lawyers assuring Chancellor Kathleen St. Jude McCormick that they won't try to move the case to Texas.
But experts differ on whether the new ratification of the pay package will make it easier for Tesla to get it approved.
Charles Elson, a retired professor and founder of the corporate governance center at the University of Delaware, said he doesn’t think the vote will influence McCormick, who issued a decision based on the law.
McCormick’s ruling essentially made the 2018 compensation package a gift to Musk, Elson said, and that would need unanimous shareholder approval, an impossible threshold. The vote, he said, is interesting from a public perception standpoint, but "in my view it does not affect the ruling."
John Lawrence, a Dallas-based lawyer with Baker Botts who defends corporations against shareholder lawsuits, agreed that the vote doesn’t end the legal dispute and automatically give Musk the stock options. But he says it gives Tesla a strong argument to get the ruling overturned.
He expects Musk and Tesla to argue that shareholders were fully informed before the latest votes, so McCormick should reverse her decision. But the plaintiff in the lawsuit will argue that the vote has no impact and isn’t legally binding, Lawrence said.
If the ruling stands, then Musk likely will appeal to the Delaware Supreme Court, Lawrence added.
The Associated Press contributed to this report. This story was reported from Los Angeles.