Key Takeaways
- Tesla shareholders voted in favor of a resolution to reinstate Elon Musk’s $56 billion pay package, which had been struck down by a Delaware Judge.
- The award had divided powerful investors but the company’s army of private investors helped to get the vote over the line and secure Musk’s commitment to the company.
- Shareholders also approved a proposal to move Tesla’s incorporation to Texas from Delaware.
Elon Musk emerged victorious on Thursday as Tesla (TSLA) shareholders voted to approve his $56 billion compensation package, as well as a proposal to move the company’s incorporation to Texas.
The compensation plan was approved by investors in 2018 but was struck down by a Delaware Judge earlier this year. At the company’s annual shareholder meeting on Thursday, the proposal was approved as a resolution, which could help the board in its battle against the court order.
Tesla stock had rallied 2.9% Thursday ahead of the final shareholder Tally after Musk said late Wednesday in a post on X that both the compensation and incorporation resolutions were on the way to “passing by a wide margin.”
Norway’s $1.7 trillion sovereign wealth fund, which owns 31.57 million Tesla shares and the California Public Employees’ Retirement System, which holds 9.5 million shares, both came out in opposition to the compensation package.
However, there were powerful voices in favor of the pay package, including Baron Capital, which holds 17.22 million Tesla shares. Founder Ron Baron said in an open letter ahead of the vote that “Tesla is better with Elon. Tesla is Elon.”
Famed short seller and long-time Tesla bear Jim Chanos also said that shareholders should approve the package, saying, “A deal’s a deal even if it’s a bad deal.”
Analysts had feared that a rejection of the compensation proposal would be detrimental to Tesla’s business and its stock price. Elon Musk had previously said he would continue his artificial intelligence initiatives at some of his other companies if the compensation award was rejected. Some feared that he may even leave the electric vehicle maker.
Delaware Court Ruling Still in Effect
Even with shareholder approval, legal experts are unclear on whether it will be enough to overturn the Delaware court’s decision.
Tesla said in a regulatory filing in April that it hoped shareholder backing would close the door on the issue, particularly after the court said the company failed to disclose important details to shareholders.
Lawyers for Tesla are set to convene with the court in July and will have a shareholder majority as leverage.
Texas Incorporation Approved
Tesla shareholders also approved the company’s plan to move its incorporation to Texas from Delaware. The company moved its corporate headquarters to Austin, TX from California in 2021, after Musk criticized California’s regulatory and tax environment.
The billionaire had been critical of Delaware and its court system after the initial ruling on his pay package and said companies should incorporate in other states.
“If your company is still incorporated in Delaware, I recommend moving to another state as soon as possible,” Musk said on X in February.
Other resolutions passed included the re-electon to the board of Musk’s brother Kimbal Musk, and James Murdoch, son of Australian media tycoon Rupert Murdoch.
Tesla shares rose 0.1% to $182.70 in extended trading Thursday. The stock has lost about a quarter of its value so far in 2024.
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