Hyunjoo Jin, Ross Kerber and Tom Health
SAN FRANCISCO (Reuters) – Tesla will use Thursday’s strong support for Elon Musk’s $56 billion pay package to try to defeat a Delaware judge who invalidated his 2018 settlement, the company’s board president said on Friday.
The lengthy process to confirm the largest corporate payout package in history ended Thursday when nearly three-quarters of shareholders, excluding Musk and his brother, voted in favor of the deal, overcoming opposition from a number of institutional investors and trusted advisory firms.
The support was roughly in line with the 2018 vote, which was invalidated in January by Delaware Judge Kathleen McCormick (NYSE:). The legal fight to certify Thursday’s vote could begin Friday because the certification does not resolve the lawsuit.
The decisive vote reaffirms the company’s commitment to the 2018 deal, Tesla (NASDAQ:) Chairman Robin Denholm said in a letter to shareholders on Friday. “We intend to return the case to Delaware court to ensure that your voices as the owners of our company are heard,” she wrote.
McCormick in January called the package an “unfathomable sum” provided by a conflicted board of directors with close personal and financial ties to CEO Musk.
Vanguard, Tesla’s largest shareholder after CEO Musk, voted in favor and was instrumental in passing the wage deal after first rejecting it in 2018, according to a note seen by Reuters.
Investors hope the win will help Musk focus more of his attention on Tesla, whose shares have fallen as electric vehicle sales slowed and Musk acquired the social media platform Twitter, later renamed X. Tesla shares fell nearly 2% in Friday trading.
Tesla has listed several voting thresholds required to approve Musk’s salary package. Under the strictest standard, which excluded votes from shares owned by Musk and his brother Kimbal Musk, he received 72% of votes cast, up from 73% in 2018 by the same standard.
With a looser count of all votes cast, he received 77% support, according to Tesla data.
LEGAL CASE
Legal experts are divided on whether he can make an impact in a case that could drag on for months. Some have suggested that arguments in the original case that Tesla shareholders were not fully aware of how quickly Musk would achieve his 2018 goals no longer apply.
“Now that shareholders have voted for it a second time, with all the facts out there, the whole substance of the judge’s argument becomes invalid,” Natela Shenon, a partner at Grant Shenon in Los Angeles, said Thursday night.
The statement did not break down votes by investor type, but it underscored the support Musk enjoys from retail investors, many of whom are ardent fans of the energetic billionaire.
“We have an amazing shareholder base. I mean, it’s just incredible,” Musk said at a shareholder meeting on Thursday.
Some major investors argued that the package would harm existing shareholders and that the board still lacked independence.
“Instead of continuing to try to defend this in court, the board should hire a compensation consultant and review Musk’s incentive plan so that it is appropriate and does not dilute shareholder interests,” said New York Comptroller Brad Lander, who oversees the public city activities. pension funds.
Musk, who also owns artificial intelligence startup xAI, has previously said he would prefer to build artificial intelligence and robotics products outside of Tesla unless he can get 25% of the votes, which would require stock compensation.
A proposal to reorganize Tesla in Texas from Delaware received about 84% of the vote, not including board members Elon and Kimbal Musk.
Tesla CEOs James Murdoch and Kimbal Musk won re-election with 69% and 79% of the votes cast, respectively, the filing shows.
These votes were in line with previous levels of support but were below the average for U.S. corporate directors. Director support for Russell 3000 companies has averaged about 95% in recent years, according to shareholder relations firm Georgeson.