- Tesla got investor approval for Elon Musk’s compensation, but he’s not likely to make a comeback just yet.
- Musk’s compensation plan was first approved in 2018 but was struck down by a Delaware judge in January.
- Now Tesla must take the matter back to a judge.
Tesla announced at its annual meeting on Thursday that it had won approval for Elon Musk’s compensation package after weeks of campaigning.
Musk was quick to celebrate the win, saying, “Awesome! Love you guys.”
Though Musk took to the stage at the event and performed a victory dance, this was only the first battle the company had won.
Despite investor approval, Musk still won’t get his compensation package back. The next step is for Tesla to take the matter back to court.
Musk’s compensation plan was originally approved in 2018 but was rejected by Tesla shareholders in January by a Delaware judge. Lawsuit filed They argued that the agreement was “beyond the bounds of reasonable judgment.”
Tesla has not yet disclosed how many investors voted in favor of the proposal. The company also passed a proposal on Thursday to move its headquarters from Delaware to Texas, but the vote does not allow Tesla to avoid the ruling. A Delaware court will decide whether the compensation plan can be reinstated.
“The Delaware litigation will likely continue,” Anne Lipton, a business law professor at Tulane University Law School, told Business Insider. “The new vote took place when Tesla was still a Delaware company and is governed by Delaware law, as Tesla noted in its SEC filing. So it’s up to the Delaware courts to decide whether the new vote actually has ratifying effect.”
In a filing with the Securities and Exchange Commission last month, Tesla assured Delaware Treasurer Katherine McCormick that it would not challenge rulings about Musk’s compensation in Texas courts or elsewhere.
Lipton added that regardless of how the justices evaluate the recent votes, the case will likely drag on for a longer period as the losing side is likely to appeal.
Dorothy Rand, a corporate law professor at Columbia University, told BI that the matter could take months to resolve because Tesla must first wait for McCormick to decide on legal fees, but she believes Tesla will likely appeal the ruling and take the case to the Delaware Supreme Court.
“Tesla hasn’t formally decided to appeal, but all signs point to that,” Rand said. “It’s still a long way from now before Elon receives any compensation.”
The case could also lead to more litigation, said Anat Aron Beck, a corporate law expert at Case Western Reserve University. Musk is known for being pro-litigious. On Thursday, a group of Tesla shareholders filed another lawsuit, alleging that Musk is diverting AI talent to his other company, xAI, rather than Tesla. Tesla is pursuing its own AI projects.
In January, Delaware Treasurer Katherine McCormick ruled to invalidate the compensation plan, finding that Musk’s close ties to the directors gave him undue influence over the agreement.
When the compensation package is no longer valid, Estimation It is estimated to be worth about $55 billion. The largest compensation package ever paid to a CEO.
Musk doesn’t receive a salary at Tesla, but his compensation is determined by the company’s performance. The compensation is structured around 12 tranches of stock options that will vest if Tesla hits certain goals over a 10-year period. If the company hits each milestone, Musk will receive shares equivalent to 1% of the company’s shares outstanding at the time of the vesting. Tesla has announced that it will have met all 12 goals by 2023.
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