Tesla shareholders on Thursday voted to reinstate CEO Elon Musk’s $56 billion pay package that was voided by a Delaware judge and change the company’s state of incorporation from Delaware to Texas.
The EV-maker held its annual shareholder meeting on Thursday in Austin, Texas, and announced that shareholders approved Musk’s pay package, according to preliminary results announced by the company’s general counsel at the meeting. Additionally, shareholders voted to reincorporate Tesla as a business domiciled in Texas instead of Delaware.
Musk suggested earlier in the day that shareholders were set to approve the proposals, posting a graph on X, formerly Twitter, that showed the number of votes in favor for both proposals surging above a “guaranteed win” threshold in recent days. He wrote in a post on X, “Both Tesla shareholder resolutions are currently passing by wide margins! Thanks for your support!!”
Tesla shareholders first approved the $56 billion pay package in 2018. The compensation plan features no salary or bonus and offers rewards in the form of stock options that are awarded based on Tesla’s market value rising to as much as $650 billion over the 10 years following 2018.
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The $56 billion figure refers to the total value of the compensation plan based on the value of the stock when the suit was ongoing. Given that the value fluctuates with changes in Tesla’s stock price, the company cited the value as $44.9 billion in its proxy statement.
| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| TSLA | TESLA INC. | 178.01 | -4.46 | -2.44% |
Musk opened his remarks at the meeting by expressing his gratitude to shareholders and told them, “I just want to start by saying, hot damn, I love you guys!”
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In late January, a Delaware judge voided the pay plan in response to an investor lawsuit. The judge held that Tesla’s board of directors failed to adequately disclose potential conflicts of interest given some directors’ close personal relationships with Musk, and also failed to inform shareholders that Tesla was on pace to achieve many of the pay plan’s performance-based goals.
In the wake of the ruling, Musk called for shareholders to change Tesla’s state of incorporation from Delaware to Texas, where its headquarters is located.
The Delaware judge’s ruling still stands despite the shareholder vote, though the show of support for the compensation plan may factor into a potential appeal and any future litigation on the subject.
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Proxy advisory firms including Glass Lewis and Institutional Shareholder Services opposed the approval of the pay package, as did the California Public Employees’ Retirement System (CalPERS) and the New York City Comptroller Brad Lander.
Reuters reported that Lander said in response to Musk’s announcement ahead of the meeting, “Elon’s tweet is more evidence of the failure of corporate governance at Tesla — this is not how or when shareholder votes are supposed to be made public. As long-term investors in Tesla, we expect genuine board oversight and a CEO who is deeply committed to the company’s growth rather than other business ventures.”
Tesla’s board of directors recommended that shareholders back the proposal. Florida’s pension board and prominent investor Ron Baron, founder of Baron Capital, were among the plan’s public supporters.
Christopher Tsai, president and chief investment officer of Tsai Capital, told Reuters, “People are invested in Tesla because they believe in Elon and they believe in the company, and nothing has changed since the previous vote. Pay the guy and let’s move on, that’s what the shareholders have concluded.”
Texas Gov. Greg Abbott, a Republican, said in a post on X, “Congrats Elon on getting the pay you were promised and on your new incorporation in Texas. Welcome to a state that has neither a personal nor a corporate income tax.”
Tesla’s stock rose 2.92% during Thursday’s trading session and gained a further 0.71% in after-hours trading. The stock is down about 26.5% in 2024 so far.
FOX Business’ Kelly O’Grady and Chris Pandolfo and Reuters contributed to this report.
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