14 June 2024 , 11:09
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The $44.9billion remuneration package of Tesla Chief Elon Musk, which was dismissed by a Delaware judge earlier this year, got the green light from shareholders on Thursday.
The favourable vote does not necessarily mean that Musk will receive all-stock pay in the near futures, as it is expected to remain tied up in the Delaware Chancery Court and Supreme Court while Tesla endeavors to counteract the dismissal order made by the judge.
This year, he has cast doubt over his future with Tesla, posting on his owned social media platform, X, about wanting a 25% stake in the company to prevent him from moving artificial intelligence progression elsewhere. The increased stake, he believes, is crucial to control the usage of AI.
Tesla has also endured stumbling blocks along the way with declining sales and narrowing profit margins as global demands for electric vehicles hit the brakes. However, during Thursday's annual meeting held in Austin, Texas, Musk assured shareholders of his commitment to the company announcing that any shares from the compensation package are not sellable for five years.
"It's not actually cash, and I can't cut and run, nor would I want to," he affirmed. Although voting totals concerning Musk's salary were not immediately shared, the company informed that shareholders approved Musk's payment plan, which was initially endorsed by the board and stockholders half a dozen years ago.
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Tesla's valuation of the package stood at $44.9billion in an April regulatory filing, a drop from its peak of $56billion, mirroring Tesla's stock decline of roughly 25% this year. In January, Chancellor Kathaleen St. Jude McCormick ruled in a shareholder lawsuit that Musk had effective control over the Tesla board when it approved the package in 2018, and that shareholders weren't fully informed when they voted for it that year.
Despite planning to appeal, Tesla has called on shareholders to reapprove the package at Thursday's annual meeting. Another vote saw approval for Tesla to shift its legal headquarters to Texas, sidestepping Delaware courts where it's currently incorporated.
"Its incredible," Musk exclaimed to attendees at Tesla's Austin, Texas headquarters and factory. "I think we're not just opening a new chapter for Tesla, we're starting a new book." However, not all went Musk and Tesla's way. Shareholders voted to shorten board member terms from three years to one and reduced the voting threshold for shareholder proposals to a simple majority.
Legal analysts note that the fate of Musk's compensation will still be determined in Delaware, as Musk's attorneys have committed to not moving the case to Texas. Opinions are split on whether the fresh endorsement of Musk's pay deal will aid Tesla in securing approval.
Charles Elson, the founder of the corporate governance centre at the University of Delaware and now retired, expressed his disbelief that the vote would sway McCormick who made a ruling based on legal considerations. The verdict effectively transformed the 2018 pay package into a gift for Musk, according to Elson. This would necessitate unanimous shareholder agreement, an unattainable benchmark.
From a public perception standpoint, he added: "in my view it does not affect the ruling." John Lawrence, representing corporations in shareholder lawsuits at Baker Botts in Dallas, concurred that the vote doesn't conclude the legal argument or automatically award Musk the stock options. Still, he claims that it presents Tesla with a robust case for overturning the ruling.
He anticipates that Musk and Tesla will insist that shareholders were fully aware before the recent votes, implying that McCormick should retract her verdict. Nevertheless, the lawsuit's complainant will contend that the ballot yields no consequences and has no legal weight, said Lawrence.
According to him, the vote adhered to Delaware law and ought to be acknowledged by the judge. "This shareholder vote is a strong signal that you now have an absolutely well-informed body of shareholders," he said. "The judge in Delaware still could decide that this doesn't change a thing about her prior ruling and doesn't require her to make any different ruling going forward. But I think it definitely gives Tesla and Musk strong ammunition to try to get her to revisit this."
If the ruling stands, then Musk likely will appeal to the Delaware Supreme Court, Lawrence said. Multiple institutional investors have come out against Musk's sizeable payout, some citing the company's recent struggles. But analysts said votes by individual shareholders likely put Musk's pay over the top.
Earlier Thursday, Tesla disclosed that shareholders were voting for Musk's pay package by a wide margin. That drove the company's shares up 3% by the time the markets closed. After the votes were announced, Musk began telling shareholders about new developments in the company's "Full Self-Driving" system. He has staked the company's future on development of autonomous vehicles, robots and artificial intelligence.
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"Full Self-Driving" keeps improving with new versions, and its safety per mile is better than human drivers, Musk said. "This is actually going to work. This is going to happen. Mark my words, this is just a matter of time," he said.
Despite its name, "Full Self-Driving" can't drive itself, and the company says human drivers must be ready to intervene at all times. Tesla's "Full Self-Driving" hardware went on sale late in 2015, and Musk has used the name ever since as the company gathered data to teach its computers how to drive.
In 2019, Musk promised a fleet of autonomous robotaxis by 2020, and he said in early 2022 that the cars would be autonomous that year. In April of last year, Musk said the system should be ready in 2023. Since 2021, Tesla has been beta-testing "Full Self-Driving" using volunteer owners. US safety regulators last year made Tesla recall the software after finding that the system misbehaved around intersections and could violate traffic laws.
Musk also said the company is making huge progress on its Optimus humanoid robot. Currently it has two working at its factory in Fremont, California, that take battery cells off a production line and put them in shipping containers, he said.
Despite laying off the team working on Tesla's Supercharger electric vehicle charging network, Musk said he thinks the company will deploy more chargers this year "that are actually working" than the rest of the industry. In the second half of the year, he expects to spend $500 million on Superchargers, Musk said.