Tesla shareholders have voted to restore CEO Elon Musk's record $44.9 billion pay package, sending a strong vote of confidence in his leadership of the electric vehicle maker, but now comes the harder part: persuading a Delaware judge who threw it out earlier this year.
A favorable vote doesn't necessarily mean that Musk will get all-stock compensation soon. The package is likely to remain tied up in the Delaware Chancery Court and Supreme Court for months as Tesla tries to overturn the Delaware judge's rejection.
Musk has raised doubts about his future with Tesla this year, writing on X, the social media platform he owns, that he wants a 25% stake in the company in order to stop him from taking artificial intelligence development elsewhere. A higher stake is needed to control the use of AI, he has said.
Tesla also has struggled with falling sales and profit margins as demand for electric vehicles slows worldwide.
But at the company's annual meeting Thursday in Austin, Texas, Musk reassured shareholders that he would stick around, telling them he can't sell any stock in the compensation package for five years.
"It's not actually cash, and I can't cut and run, nor would I want to," he said.
Vote totals on the pay weren't immediately announced, but the company said shareholders voted for Musk's compensation plan, which was initially approved by the board and stockholders six years ago.
Tesla last valued the package at $44.9 billion in an April regulatory filing. It was once as much as $56 billion but has declined in value in tandem with Tesla's stock, which has dropped about 25% so far this year.
Chancellor Kathaleen St. Jude McCormick ruled in January in a shareholder’s lawsuit that Musk essentially controlled the Tesla board when it ratified the package in 2018 and that it failed to fully inform shareholders who approved it the same year.
Tesla has said it would appeal but asked shareholders to reapprove the package at Thursday’s annual meeting.
Legal home moving to Texas
A separate vote approved moving the company’s legal home to Texas to avoid the courts in Delaware, where Tesla is registered as a corporation.
"It's incredible," a jubilant Musk told the crowd gathered at Tesla's headquarters and large factory in Austin, Texas. "I think we’re not just opening a new chapter for Tesla; we're starting a new book."
Musk and Tesla didn’t win everything.
Shareholders approved measures that trimmed board member terms from three years to one and cut the required vote on shareholder proposals to a simple majority.
Legal experts say the issue of Musk’s pay will still be decided in Delaware, largely because Musk’s lawyers have assured McCormick they won’t try to move the case to Texas.
However, they differ on whether the new ratification of the pay package will make it easier for Tesla to get it approved.
Charles Elson, a retired professor and founder of the corporate governance center at the University of Delaware, said he doesn’t think the vote will influence McCormick, who issued a decision based on the law.
McCormick’s ruling essentially made the 2018 compensation package a gift to Musk, Elson said, and that would need unanimous shareholder approval, an impossible threshold. The vote, he said, is interesting from a public perception standpoint, but "in my view, it does not affect the ruling."
John Lawrence, a Dallas-based lawyer with Baker Botts who defends corporations against shareholder lawsuits, agreed the vote doesn’t end the legal dispute and automatically gives Musk the stock options. But he says it gives Tesla a strong argument to get the ruling overturned.
He expects Musk and Tesla to argue that shareholders were fully informed before the latest votes, so McCormick should reverse her decision. But the plaintiff in the lawsuit will argue that the vote has no impact and isn’t legally binding, Lawrence said.
The vote, he said, was done under Delaware law and should be considered by the judge.
"This shareholder vote is a strong signal that you now have an absolutely well-informed body of shareholders," he said. "The judge in Delaware still could decide that this doesn’t change a thing about her prior ruling and doesn’t require her to make any different ruling in the future. But I think it definitely gives Tesla and Musk strong ammunition to try to get her to revisit this."
If the ruling stands, then Musk likely will appeal to the Delaware Supreme Court, Lawrence said.
Multiple institutional investors have come out against Musk’s sizable payout, some citing the company’s recent struggles. But analysts said votes by individual shareholders likely put Musk’s pay over the top.
Earlier Thursday, Tesla disclosed that shareholders were voting for Musk's pay package by a wide margin. That drove the company's shares up 3% by the time the markets closed.
'Full Self-Driving' can’t drive itself
After the votes were announced, Musk began telling shareholders about new developments in the company's "Full Self-Driving" system. He has staked the company's future on developing autonomous vehicles, robots, and artificial intelligence.
"Full Self-Driving" keeps improving with new versions, and its safety per mile is better than that of human drivers, Musk said.
"This is actually going to work. This is going to happen. Mark my words; this is just a matter of time," he said.
Despite its name, "Full Self-Driving" can’t drive itself, and the company says human drivers must be ready to intervene at all times. Tesla’s "Full Self-Driving" hardware went on sale late in 2015, and Musk has used the name ever since as the company gathered data to teach its computers how to drive.
In 2019, Musk promised a fleet of autonomous robotaxis by 2020, and he said in early 2022 that the cars would be autonomous that year. In April of last year, Musk said the system should be ready in 2023.
Since 2021, Tesla has been beta-testing "Full Self-Driving" using volunteer owners. U.S. safety regulators last year made Tesla recall the software after finding that the system misbehaved around intersections and could violate traffic laws.
Musk also said the company is making huge progress on its Optimus humanoid robot. Currently, it has two working at its factory in Fremont, California, that take battery cells off a production line and put them in shipping containers, he said.
Despite laying off the team working on Tesla’s Supercharger electric vehicle charging network, Musk said he thinks the company will deploy more chargers this year "that are actually working" than the rest of the industry. In the second half of the year, he expects to spend $500 million on Superchargers, Musk said.