Technology
Thursday, June 13th, 2024 6:55 pm EDT
Key Points
- Tesla’s stock rose about 3% after Elon Musk announced that shareholders are likely to approve his $56 billion pay package and the proposal to move Tesla’s incorporation to Texas.
- The first resolution under consideration is the approval of Musk’s pay package, originally approved in 2018 and voided by a Delaware judge in January; the second resolution is the proposal to transfer Tesla’s state of incorporation from Delaware to Texas.
- The approval of Musk’s pay package has faced opposition from notable shareholders and proxy advisors who argue that the package is excessive and that Musk’s other ventures distract him from Tesla, while supporters claim that Musk is essential to Tesla’s success.
Shares of Tesla surged after Elon Musk indicated that shareholders are poised to approve his controversial $56 billion pay package and the proposal to move the electric car maker’s incorporation to Texas. As of 10:45 a.m. ET, Tesla’s stock was up about 3%.
Tesla shareholders have been voting on two key resolutions ahead of the company’s annual meeting. The majority of votes were submitted by the end of Wednesday, but those attending the meeting could vote in person or online on Thursday. The first resolution concerns the approval of a $56 billion pay package for Musk, initially approved in 2018 but voided by a Delaware judge in January. The second resolution is to transfer Tesla’s state of incorporation from Delaware to Texas, a proposal Musk suggested on social media platform X, which received overwhelming support.
Musk stated that both resolutions are passing by “wide margins,” though he did not provide specific details. Despite the likely approval, Yale law professor Sarath Sanga noted that the ratification of Musk’s pay plan might still face legal challenges and require judicial review.
The initial pay package was based on ambitious targets for Tesla’s financial performance and market value. Since its approval, Tesla has become one of the world’s largest electric auto makers. However, the company now faces slowing growth and increased competition, particularly from Chinese manufacturers. During this period, Musk acquired Twitter (now X) and has focused on other projects, including Neuralink and his AI company xAI.
Critics argue that Musk’s other endeavors distract him and that the $56 billion pay package, the largest in U.S. corporate history, is excessive, especially given recent financial performance concerns. Notable shareholders and top proxy advisors, including Institutional Shareholder Services and Glass Lewis, have recommended voting against the package. The California State Teachers’ Retirement System and Norway’s sovereign wealth fund have also opposed the pay deal, deeming it too high.
Proponents of the compensation package believe Musk is crucial to Tesla’s success and argue that the pay deal incentivizes him. Billionaire investor Ron Baron, a long-time Tesla shareholder, has publicly supported the package, asserting that Musk is integral to Tesla’s future. “Tesla is better with Elon. Tesla is Elon,” Baron stated.
Major investors like Vanguard and BlackRock have not disclosed how they will vote, leaving some uncertainty. Despite this, the positive sentiment around the expected approval of these resolutions has buoyed Tesla’s stock.
For the full original article on CNBC, please click here: https://www.cnbc.com/2024/06/13/elon-musk-says-tesla-shareholders-likely-approved-his-56-billion-pay-deal.html
