Shareholders approve Elon Musk’s $56B Tesla pay package

Tesla CEO Elon Musk’s now infamous $56B pay package has been in limbo since a Delaware court overturned the 2018 compensation plan in January of this year. The plan called for rewarding Elon Musk handsomely for increasing Tesla’s valuation from around $60B to $650B, a goal once considered laughably unlikely, with the option for Musk to purchase millions of shares at a pre-determined price.

In the end, Tesla did end up meeting every single goal set out in the plan, which triggered the option for Musk to purchase the shares. That is, until a Delaware court decided that the company’s board of directors breached its fiduciary duty in approving the plan, as Judge Kathaleen McCormick found that the board and its votes were under the sway of Musk. The court also found that even though shareholders voted in favor of the plan in 2018, that they may not have been sufficiently aware of the power Musk held at Tesla.

In a bid to cement its legitimacy, and to show shareholder support for the compensation plan, Tesla sought a shareholder vote on the matter. As the votes were rolling in on late Wednesday night, it became all but certain that the resolution, along with another one calling for Tesla to officially, and legally, move the to Texas, would pass by a wide margin. On June 13, Tesla General Counsel Brandon Ehrhart announced that both votes had passed, despite some institutional investors taking a stand against its passing.

What happens next?

It’s a public relations win for Musk

Tesla

On paper at least, the shareholder vote passing is a huge win for Musk, and for the shareholders who supported it, but the story is far from over. It’s Tesla’s hope that a resounding vote would send the message to the Delaware courts that shareholders fully support Musk’s compensation plan, and are acutely aware of all the factors the court laid out in its initial decision. In fact, Tesla included those criticisms in the disclosures for the vote, so that there would be no question this time around that shareholders were informed.

Still, Tesla will now need to approach the Delaware courts and hope for a different result. The company has made clear that if it can not get the Judge McCormick to change her mind, that it will seek to fight this all the way to the Delaware Supreme Court.

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Moving to Texas

The vote to move Tesla’s articles of incorporation to Texas, thereby moving the legal home of the company to the state, has also passed. While Tesla has given assurances that it will not seek to use the move to Texas to evade the Delaware judgment, the company is undoubtedly hoping that Texas’ reputation for its business-friendly courts will help it to avoid similar issues in the future.

Musk’s role going forward

Does Musk have time for Tesla?

Tesla

In the lead up to this vote, there was a lot of frank discussion about the role Musk would play in the future of Tesla should the vote fail, with rampant rumors that he might simply leave the company. As the defacto leader of the company becomes stretched thinner across his various enterprises, such as SpaceX, The Boring Company, X, and now xAI, there is growing concern about the time Musk has to focus on Teslas’ growth, strategy, and day-to-day operations. It seems, however, that shareholders are eschewing these concerns, and voting in favor of the package.

For now, it remains unclear if Elon Musk will be able to purchase the many tranches of shares laid out in his original compensation plan, so only time will tell if the world’s richest man will become that much richer.