On Friday, it was announced by Tesla that Elon Musk, the chief executive, had achieved a decisive win in the shareholder voting regarding his remuneration package of $56 billion (£52 billion) and a proposal to change the firm’s domicile from Delaware to Texas. Musk’s stock options package, the largest in American history, was ratified again by 77% of the votes cast during Tesla’s annual congregation in Austin on Thursday, states a regulatory submission. If the shares owned by Musk and his sibling Kimbal are neglected, this figure changes to 72%.
Tesla’s repositioning to Texas received approval from 63% of the votes cast. The victory margins even astonished the company’s insiders. Robyn Denholm, the Chair, had likened the undertaking to ascending Mount Everest during a hectic campaign spanning several months.
The results bring a significant advantage to Musk in his endeavour to regain control of Tesla. The voting served as a plebiscite on his unpredictable leadership, especially his vision to shape Tesla into a company specialising in artificial intelligence and robotics. With his remuneration confirmed once again, the company is in a better position to contest a January verdict by a Delaware court, nullifying the package of stock options given to him in 2018 over reservations about their worth and the board’s independence.
Musk demonstrated no graciousness in his triumph. On Friday morning, he uploaded on X a photograph of a cake he claimed to be his farewell gift to Delaware. The cake was marked with the Latin phrase “Vox Populi, Vox Dei,” – ‘the voice of the populace is the voice of God’.
While the verdict does not overwrite the court’s ruling, the raised endorsement may play a crucial role in persuading the judge to modify her position, which would strengthen Musk’s hold on Tesla, potentially increasing his stake from the present 13% to more than 20%.
On the preceding day, as the polls closed at 4pm in Austin, Musk arrived on stage before a euphoric crowd chanting his name, where he lavished praise on the chosen group of retail investors, proudly declaring, “Hot damn, I love you guys. We have the finest shareholder base of any public company. We are not merely launching a new phase for Tesla, we are embarking on a new frontier.”
In his keynote address, the CEO of Tesla, who was clearly in high spirits, made a lighthearted reference to his infamous social media post from 2018 regarding the proposed privatisation of Tesla at a price of $420 per share. This figure, many believe, alluded to the colloquial numerical shorthand 4/20, widely used by cannabis enthusiasts to denote both the time of day to indulge and the date of the annual festivities associated with the substance.
Subsequent to this, Tesla was prompt in its relocation efforts. Denholm revealed to the stockholders in her letter that the transition process to Texas has already been initiated through required legal paperwork. The chairperson underscored the affirmation of Tesla’s commitment by the stockholders in regards to the compensation agreement. Her belief is that subjecting it to another review by the Delaware court will ensure that the voices of the stakeholders are accurately represented.
The sequel to this plot sees Delaware welcoming a court hearing in the forthcoming month. The judge, Kathaleen McCormick, is set to review a fee claim of $5.2 billion which has been presented by legal representatives successful in overturning the previous remuneration agreement. Tesla then reserves the right to challenge the resultant verdict before the Supreme Court of Delaware.
Plaintiff’s leading counsel, Greg Varallo, voiced his criticism of the ratification vote demanded and manipulated as per Musk’s directives. He stated, “Our viewpoint is that the ratification vote under analysis is fundamentally flawed in terms of legality and its impact on our case is non-existent. We will individually address any counter-arguments advanced in the due course of time.”
A crucial factor behind Tesla’s successful voting outcome was winning over Vanguard, its biggest stakeholder possessing a 7.3% interest, who had earlier voiced opposition to Musk’s remuneration in 2018.
Despite their admission of the grant appearing to represent a “significant digression” in comparison to precedence in the corporate world, Vanguard elaborated that a retrospective assessment of the plan undermined previous misgivings.
The turnaround by the asset management corporation, worth $9.3 trillion, came after consultation meetings with Musk and Tesla’s directorial board. Their conviction is that the consistent correlation between a chief executive’s compensation and the stakeholder returns since 2018 sufficiently vouched for the shift in thinking, accompanied by the perceived motivational benefits to the CEO.
Similarly, BlackRock, the second most influential stakeholder in Tesla, extended its support to both resolutions. Requests for comments from BlackRock were declined.
Copyright: The Financial Times.