Elon Musk's $55 Billion Pay Package Approved - What Does This Mean for Tesla's Future?
With Tesla’s shareholder meeting looming, Elon Musk has preemptively shared data suggesting that shareholders have given the green light to two highly debated proposals: the reapproval of his massive $55 billion pay package and the redomiciling of the company to Texas.
Why This All Started
The seeds of this controversy were planted back in 2018, when Tesla shareholders approved Musk’s multi-billion-dollar compensation package. But the Delaware Court of Chancery later voided this package, citing issues with the board's independence and shareholder disclosure. In response, Musk threatened to move Tesla’s headquarters to Texas, escalating the tension.
The reapproval came back on the agenda as the Tesla board, composed of both old and new members, decided to put the pay package and the idea of relocating Tesla's state of incorporation from Delaware to Texas in front of the shareholders once more.
Why Delaware, Anyway?
Delaware is a preferred state for many U.S. businesses, thanks to its business-friendly laws and predictable legal outcomes. Samantha Crispin from Baker Botts highlighted that Delaware’s well-developed body of case law offers predictability that few other states can match. However, states like Texas and Nevada are vying for a piece of this corporate pie, even though they lack the established judicial frameworks of Delaware.
The Campaigning Process
Tesla left no stone unturned in its campaign to influence shareholder votes, even diverting ad money to garner support. The complexities of the voting requirements mean that while the pay package needed a simple majority, the redomiciling proposal required 50% of the total shares outstanding. This increased the stakes significantly, making high voter turnout essential.
The campaign was highly polarizing. While numerous prominent investors supported the measures, key pension funds and proxy advisory firms recommended voting against them. With remote voting closing just before midnight on June 12, the numbers favoring the proposals surged in the last few hours.
Musk Leaks Results of the Upcoming Vote
Hours before the voting deadline, Musk took to Twitter to share what he claimed were the near-final results. According to him, both resolutions were set to pass. However, his charts missed multiple other significant resolutions on the ballot. The leaked data revealed interesting trends, such as higher approval for moving to Texas compared to Musk’s compensation package, possibly due to Musk's shares being ineligible to vote on his pay.
The other intriguing observation was the significant last-day voting surge supporting both proposals. Total voter turnout was around 70%, up from previous highs, hinting that Tesla's aggressive campaign had some impact.
What’s Next?
This vote is far from the final word. Legal challenges are anticipated, especially given the history of the pay package being voided by the Delaware Court. Tesla plans to appeal the Delaware decision, likely using the recent vote results as evidence of shareholder support.
Questions remain about the board’s independence, an issue that previously voided the compensation package. Tesla’s extensive campaigning and Musk’s tweet could also come under scrutiny, as they might have influenced the voting outcome.
The lawyers who initially voided the pay package are now requesting a $6 billion fee for their efforts—a figure that, while relatively low as a percentage, has raised eyebrows. Furthermore, potential SEC investigations into the voting process and Musk’s actions are on the horizon.
Electrek's Take
From a governance perspective, neither of these proposals is particularly commendable. Allocating $55 billion to a CEO who has been preoccupied with numerous distractions is questionable, as that money could have sustained thousands of employees for decades.
Relocating to Texas might be a worthwhile discussion, but the decision feels hasty and impulsive. As the shareholder vote likely reflects, current Tesla shareholders still have faith in Musk’s leadership, but this vote doesn't necessarily imply broad support.
Musk’s recent focus on various other ventures, including his controversial Twitter acquisition and numerous culture wars, appears more detrimental than beneficial to Tesla’s mission of sustainable transport. This ongoing saga will continue to captivate the world of corporate governance and EV enthusiasts alike. Buckle up, because this story is far from over.