Musk says Tesla shareholders to back $56 bn pay deal
3 Min Read
Billionaire Tesla owner Elon Musk, the richest man alive, wants to increase his net worth by a single package of $56 billion as he faces legal issues over the Tesla deal.
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Tesla CEO Elon Musk leaves the Tesla Gigafactory for electric cars after a visit in Gruenheide near Berlin, Germany, March 13, 2024. (AP)
Tesla CEO Elon Musk revealed Thursday that shareholders are decisively voting to approve his colossal $56 billion compensation package ahead of an annual general meeting slated for later in the day.
The unprecedented pay package, the largest ever given to a chief executive of a US company, faces an investor ballot following its earlier rejection by a US judge. Shareholders will also be voting on Musk's proposal to relocate Tesla's legal headquarters to Texas.
Despite opposition from prominent investors like Norway's sovereign wealth fund and the California State Teachers' Retirement System, as well as recommendations from proxy advisory firms Glass Lewis and Institutional Shareholder Services to reject the compensation package, Musk remains optimistic.
On Wednesday evening, he took to the social media platform X, formerly known as Twitter, stating, "Both Tesla shareholder resolutions are currently passing by wide margins! Thanks for your support!!"
The final vote results will be revealed at Tesla's Texas headquarters at 4:30 pm ET (8:30 pm GMT).
Even with potential approval, Musk may encounter further challenges, including additional litigation. Legal experts highlight uncertainties about whether the Delaware court, which previously blocked the pay deal, will accept the new shareholder vote, which is not legally binding, and subsequently reinstate the compensation package.
Tumultuous legal history
The reward, initially approved by Tesla's board in 2018, came under scrutiny after a Tesla shareholder filed a lawsuit contesting its validity. In January, Delaware judge Kathaleen McCormick ruled that Tesla's board had inappropriately established the "historically unprecedented compensation plan" and questioned its necessity to retain Musk at Tesla.
"Swept up by the rhetoric of 'all upside', or perhaps starry-eyed by Musk's superstar appeal, the board never asked the $55.8 billion question: was the plan even necessary for Tesla to retain Musk and achieve its goals?" McCormick noted in her decision.
Even before then, tracing back to November 2022, the richest man alive appeared in front of a Delaware court to defend his compensation package following a lawsuit by shareholder Richard Tornettea.
At the time, Tornetta accused Musk of influencing the board of directors to receive the huge pay package while only acting as a "part-time CEO," as the suit mentions that he was not devoting his time to Tesla as he runs several companies at once, asking the court to rescind the package.
The shareholder's attorney, Gregory Varallo, attempted during the hearing to prove that Musk was rewarded the massive sum of money unjustly, while accusing the board of directors of having failed to work in the best interest of the company's shareholders.
