(Bloomberg) — Tesla Inc. investors reapproved Elon Musk’s compensation and authorized the company’s move to Texas, offering votes of confidence in the chief executive despite falling sales and share price.
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The proposal to ratify a grant of stock options worth up to $55.8 billion was approved with about 72% voting in favor, Tesla said in a regulatory filing on Friday. That’s about a percentage point below the support Musk received when the company first proposed the pay package in 2018.
The salary vote is advisory only and does not guarantee that Musk will obtain his stock options. A Delaware judge voided the payment in January and Tesla is expected to appeal. If that fails, moving the company’s incorporation to Texas will allow the board to revive the salary package in a new state with potentially more favorable courts.
Musk’s pay vote was widely seen as a referendum on the CEO’s leadership and frustration with Tesla’s corporate governance. The CEO oversees six companies and is prone to distractions and abrupt shifts in strategy — he ordered Tesla’s biggest layoffs earlier this year, only to rehire some workers weeks later.
Tesla shares rose as much as 1.5% before regular trading began. Shares are down 27% this year, costing the company nearly $208 billion in market capitalization.
Shareholders also re-elected James Murdoch and Kimbal Musk to Tesla’s eight-member board. Murdoch, son of media mogul Rupert Murdoch, has been a director at Tesla since 2017. Kimbal Musk, Elon’s younger brother, has been on the board since 2004.
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At the company’s Austin headquarters, shareholders applauded as Musk, wearing a black Cybertruck T-shirt, took the stage. He jumped into the air as investors chanted his name, telling the crowd, “Damn, I love you.”
Musk hinted during a presentation that the company was working on three new models, showing images of renderings of mysterious vehicles under white sheets, as he has done in previous years. He said Tesla’s Supercharger network is growing and that it has just approved plans to increase production of semi-trucks. He said Tesla’s weekly production of Cybertrucks reached a record 1,300 in one week.
“A lot of people said the Cybertruck was fake and would never be released,” Musk said. “Now we are sending a lot of Cybertrucks.”
When asked what he would do with his billions, Musk noted that the salary package is made up of stock options and that he would have to keep them for five years. “I can’t run away and I wouldn’t want to,” he said.
Some investors feared that Musk would leave the company if the award was not re-approved. Musk has threatened to develop products outside of Tesla if he does not obtain at least a 25% equity stake. He currently owns around 13% of the shares and exercising the options set out in his compensation agreement would increase his stake to around 21%.
Tesla has made every effort to persuade shareholders to support Musk’s salary package and move to Texas, creating a dedicated website and running ads on X, Musk’s social media platform. In recent days, investors, engineers, and current and former Tesla executives have also turned to X to express their support for Musk and his leadership.
Some large investors, including Norway’s sovereign wealth fund and the California Public Employees’ Retirement System, said they planned to vote against the measure.
When Delaware Court of Chancery Judge Kathaleen St. Jude McCormick voided the pay package earlier this year, she pointed to board directors’ conflicts of interest and the company’s failure to adequately disclose the terms of the plan. The second shareholder vote could boost Tesla’s chances with a future appeal.
McCormick will hear arguments July 8 over disputed attorney fees in the case. Once McCormick decides on fees, she will issue a final decision. Musk will then have 30 days to appeal to the Delaware Supreme Court.
On Thursday evening, Tesla issued a press release confirming that the company was now incorporated in Texas. The conversion certificate was visible on the Texas Secretary of State’s website.
Tesla shareholders are unlikely to re-approve the same compensation plan for Musk as in 2018 because Texas courts are legally required to honor the Delaware court’s ruling, according to Charles Elson, a retired University of Delaware professor and expert. in corporate governance.
The board may have to make substantial changes to the plan, and shareholders will then have to vote once again on Musk’s compensation, Elson said. So if an investor wanted to challenge it, they would have to sue Texas, which is just starting its commercial courts.
–With assistance from Ryan Beene.
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