Tesla boss Elon Musk already confident of victory in pay dispute

Elon Musk has emerged victorious in a high-profile dispute over his lavish pay at a shareholder meeting of his company. Electric car maker Tesla On Thursday, shareholders voted to uphold a pay package awarded to him in 2018 but recently invalidated by a judge. The package consisted of Tesla stock valued at about $55 billion at the time of the court ruling; after the recent price drop, it is still worth about $45 billion.

Tesla initially did not disclose how many people supported the pay package. The night before the shareholder meeting, Musk had already written in Platform X that the vote would be in his favor by a large margin. Shareholders can vote before the event. On Thursday, the stock market had already taken Musk’s comments as a signal that he can defend his position. The stock price rose 3%, and the shareholder meeting was not held until after the close. The price increase may reflect the assumption that Musk might have a greater incentive to continue leading Tesla if he is allowed to keep his salary package.

The compensation agreement, signed in 2018 and approved by shareholders at the time, was highly unusual. It granted Musk no base salary or bonus, but provided for the issuance of up to a dozen tranches of stock options if Tesla hit certain milestones in market value, sales and profits. Those requirements were ambitious; Tesla’s market value at the time was $60 billion. Dollarsetting a target of up to $650 billion.

But Tesla has achieved all of these goals in recent years, and Musk has received all twelve of them. In the case of Tesla, its market value once rose to more than $1 trillion, but has now fallen sharply and is less than $600 billion recently. As a result, he is below the highest target in the salary plan, although according to the agreement, this will not lead to the subsequent repayment of the granted stock options.

The legal dispute over the compensation package stems from a lawsuit by a shareholder who said Musk was overpaid. Delaware judge Kathryn McCormick sided with him in her ruling. She called Musk’s compensation package “historically unprecedented” and “unfair” and said the agreement was reached in a “deeply flawed” manner, including because of Musk’s close relationships with board members. Shareholders were not aware of these conflicts of interest at the time. McCormick was particularly sharp in attacking board chair Robin Denholm, accusing her of “negligence” in her oversight duties.

Tesla has said it will appeal the ruling. The company has also decided to let shareholders vote again on the pay package. The idea is that another shareholder vote could change the judge’s mind, although that is not considered a certainty.

In recent weeks, both Musk and Denholm have actively lobbied shareholders to approve the compensation package. For example, shareholders who voted were told they would have the opportunity to tour Tesla’s factory. Elon Musk Winning. Days earlier, Denholm described the compensation package as an important tool that ties Musk to Tesla. The agreement must remain in place “to capture Elon’s attention and motivate him to devote his time, energy, ambition and vision to Tesla.” Musk is “not a typical manager.”

Musk has many other interests besides Tesla. He runs the space company SpaceX, acquired the online platform Twitter (now renamed X), and has founded a number of other companies in recent years, including brain implant developer Neuralink and artificial BroadCast Unitedligence specialist X.AI. He recently publicly threatened to leave Tesla after he demanded an additional compensation package that would increase his stake to 25%. He said he would prefer to develop products outside of Tesla if that was not approved.

Ahead of the shareholder meeting, several prominent institutional investors said they would vote against the pay package. However, Tesla’s individual shareholders are particularly high in the vote. Musk called shareholders who voted for his pay package in 2018 but have now changed their minds “Vow Defenders.”

In addition to the salary package, Tesla shareholders also voted to move the legal headquarters from Delaware to Texas, where the company already has a headquarters and a large factory. The project was also put on the agenda after the Delaware ruling and shareholder vote. Musk also announced in recent months that he would withdraw SpaceX and Neuralink from Delaware.