Tesla CEO Elon Musk secured enough shareholder votes to approve his 2018 stock option compensation package. Shareholders also approved the company’s decision to reincorporate Tesla in Texas, moving it away from the state where the Musk’s pay package: Delaware.
Shareholders in attendance at the company’s annual meeting Thursday, held at Tesla’s giant Texas factory, cheered and applauded warmly when general counsel Brandon Ehrhart announced the results of the vote. The margin of victory was not immediately clear.
“I just want to start by saying: Hot damn, I love you guys,” Musk said as he hopped on stage Thursday. “I think we’re not just opening a new chapter for Tesla, we’re starting a new book.”
Votes in favor of Musk’s 2018 stock option award — which could mean he gets a payout of up to $56 billion, the largest CEO compensation package in history — don’t ensure he gets it. The judge in Delaware who decided to overturn it has yet to issue her final decision.
Her post-trial opinion issued in January came after a years-long legal battle. Tesla shareholder Richard Tornetta filed a lawsuit in 2019 to void Musk’s pay deal, claiming at the time that Musk was a part-time CEO and was getting an unfair amount of money without the board requiring him to focus entirely on Tesla.
That lawsuit and the evidence presented at trial led Judge Chancellor Kathaleen McCormick to strike down the pay package, ruling it was unfair. He said at the time that shareholders were not fully informed at the time of the vote because Tesla did not properly disclose Musk’s control in the process of constructing the pay package.
Tesla and Elon Musk supporters have been posting relentlessly on X in recent weeks in favor of the CEO’s pay package. Musk has addressed many of those posts, leading 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 split 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 again from separate shareholders to launch xAI, a rival AI company, and divert talent and resources to it.
The fear that Musk’s pay package will be blocked by the courts is likely why Tesla has pushed to re-incorporate in Texas, where the automaker clearly believes it will face less challenge in the courts.
After Delaware Chancellor McCormick 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 if Tesla should change its state of incorporation in Texas, and now here we are.
Unsurprisingly, none of the five shareholder proposals that would have required Tesla to keep up its ESG game passed — things like annual reporting on anti-harassment and anti-discrimination efforts, adopting collective bargaining and adopting goals and reporting on the incorporation of sustainability metrics into executive compensation plans. The board recommended that shareholders vote them all down, and typically, whatever the board recommends, Tesla shareholders follow.
Two shareholder proposals passed. The first reduces director terms to one year, and the second requires simple majority voting provisions in Tesla’s governing documents.
