Tesla shareholders have re-approved CEO Elon Musk’s $44.9 billion pay package, the company announced. Brandon Ehrhart, Tesla’s general counsel and corporate secretary, made the announcement at Tesla’s annual shareholder meeting, noting that the stockholders ratified the 100 percent performance-based stock option award initially approved by stockholders in 2018.
Ehrhart also stated that shareholders approved a corporate move from Delaware to Texas and re-elected board members James Murdoch and Kimbal Musk. The official announcement followed a social media post by Musk, in which he revealed that affirmative votes were leading significantly.
Under a settlement with the Securities and Exchange Commission, Musk is required to pre-approve social media posts that might contain material information related to Tesla. The company submitted an SEC filing with a screenshot of Musk’s post describing the preliminary results.
Legal uncertainty remains
Musk’s pay plan, previously nullified by a judge’s ruling, faces continued legal scrutiny. A Delaware Court of Chancery ruling in January 2024 voided the original pay plan after a shareholder lawsuit, stating that the proxy information provided to investors before 2018 was deficient. The court noted that the proxy statement inaccurately described key directors as independent while omitting critical details.
Leveraging a legal principle known as “ratification,” Tesla sought to legitimize the pay package through the shareholder vote. However, the tactic remains legally uncertain. Even Tesla acknowledges the unpredictability of how a shareholder vote to ratify the 2018 CEO performance award would be treated under Delaware law.
Legal experts suggest that Judge Kathaleen McCormick may need to provide another ruling, as Musk’s legal team has assured her the case will not be moved to Texas. The Associated Press reported that the case would remain in Delaware jurisdiction.
New lawsuit challenges re-vote
The re-vote has also prompted legal challenges in the same Delaware court. Donald Ball, a Tesla shareholder, recently filed a lawsuit against Musk and Tesla, accusing the Board of failing to provide a complete and fair picture to shareholders regarding the impact of re-approving Musk’s pay plan.
Ball’s complaint highlights potential “radical tax implications” for Tesla, which could significantly impact the company’s pre-tax profits for the past two years. It also asserts that Musk employed strong-arm tactics to secure shareholder approval for both the Redomestication Vote and the Ratification Vote.
Tesla Board Chairperson Robyn Denholm has urged shareholders to re-approve Musk’s pay plan, arguing that Musk might leave Tesla or allocate less time to the company if the resolution failed.
This article was updated with the final result of the shareholder vote.