Tesla CEO Elon Musk has secured enough shareholder votes to have his 2018 stock option compensation package approved. Shareholders also approved the company’s decision to re-incorporate of Tesla in Texas, moving it away from the state where Musk’s pay package was struck down: Delaware.
Shareholders present at the company’s annual meeting Thursday, held at Tesla’s Texas gigafactory, cheered and gave a standing ovation when general counssel Brandon Ehrhart announced the results of the vote. The margin of victory was not immediately clear.
“I just want to start off by saying: Hot damn, I love you guys,” Musk said as he leapt around on the stage Thursday. “I think we’re not just opening a new chapter for Tesla, we’re starting a new book.”
The votes in favor of Musk’s 2018 stock option award – which could mean he gets a payout of up to $56 billion, the biggest CEO compensation package in history – doesn’t ensure that he’ll get it. The judge in Delaware who decided to rescind it still has to issue her final ruling.
Her post-trial opinion issued in January came after a years-long legal battle. Tesla shareholder Richard Tornetta filed a suit in 2019 to rescind Musk’s pay deal, claiming at the time that Musk was a part-time CEO getting an unjust amount of money without the board demanding he focus entirely on Tesla.
That lawsuit and the evidence presented at trial led the judge, chancellor Kathaleen McCormick to void the pay package, ruling that it was unfair. She said at the time that shareholders weren’t fully informed at the time of the vote because Tesla didn’t properly disclose Musk’s control over the process of constructing the pay package.
Supporters of Tesla and Elon Musk have in the last few weeks posted relentlessly on X in favor of the CEO’s pay package. Musk has engaged with many of those posts, which has led to a flurry of regulatory filings as Tesla worked to cover its proxy statement bases this time around.
That said, shareholders are still likely to sue Tesla and Musk for approving a pay package for a CEO whose time is divided between several other companies, including xAI, SpaceX and Neuralink. In fact, Tesla and Musk have been sued twice this week: Once by shareholders who claimed Musk made billions selling Tesla stock in 2021 and 2022 using insider information, and again by separate shareholders for starting xAI, a competing AI company, and diverting talent and resources to it.
The fear of Musk’s pay package being blocked by the courts is likely why Tesla pushed to reincorporate in Texas, where the automaker clearly thinks it’ll get less of a challenge in the courts.
After McCormick of the Delaware Court of Chancery issued her opinion earlier this year, Musk posted on X: “Never incorporate your company in the state of Delaware.” He then posted a poll asking whether Tesla should change its state of incorporation to Texas, and now we’re here.
Unsurprisingly, none of the five shareholder proposals that would require Tesla to up its ESG game passed – things like annual reporting on anti-harassment and discrimination efforts, adoption of collective bargaining,and adopting targets and reporting for integrating sustainability metrics into senior executive compensation plans. The board recommended that shareholders vote against all of them, and typically, whatever the board recommends, Tesla shareholders go with.
Two stockholder proposals did pass. The first reduces director terms to one year, and the second requires simple majority voting provisions in Tesla’s governing documents.
This story is still developing. Please check back in for updates.