Elon Musk's $56B Pay Package Now Needs Green Signal From Delaware Judge Who Earlier Voided It: Report

Tesla Inc. TSLA shareholders approved the pay compensation package plan for CEO Elon Musk that was originally approved in 2018, during the annual shareholders meeting. The next step for Musk is reportedly to convince a skeptical Delaware judge to approve his $56 billion pay package after securing shareholder support.

What Happened: Despite strong backing from small investors, recent declines in sales and stock prices have led to notable opposition. The pay package faces months of litigation before shares can be awarded to Musk, Reuters analyzed on Thursday.

“A vote by shareholders wouldn't cause an automatic reversal of Chancellor [Kathaleen] McCormick's decision. We are in uncharted waters here,” said Samantha Crispin, corporate attorney at Baker Botts.

In January, Judge McCormick of Delaware’s Court of Chancery voided the pay deal, citing Musk’s undue influence over the 2018 board process and insufficient investor information. Tesla argues that the recent vote corrected these issues by providing extensive disclosures.

See Also: Investor Naval Ravikant Threatens To Sell All Tesla Holdings If CEO Musk’s Pay Plan Is Rejected But Says

However, Tesla acknowledges that shareholder ratification may not resolve the dispute. Some investors remain opposed, citing Musk’s distractions and the size of the award. A legal challenge has already been filed by shareholder Donald Ball, accusing Musk of coercive tactics.

Columbia Law School Professor Zohar Goshen believes the court should reverse its decision but notes the complexity of the case.

“It is hard to estimate how the court will rule because there is too much noise around this decision,” Goshen said.

Why It Matters: The 2024 Tesla Shareholders Meeting held on June 13 was a pivotal moment for the company. Shareholders were not only voting on Musk’s compensation but also on the company’s move to Texas. This meeting was closely watched by analysts and industry experts, who were concerned about the potential consequences of Musk’s departure.

Wedbush analyst Dan Ives emphasized the integral connection between Musk and Tesla, stating, “Tesla is Musk and Musk is Tesla.”

Former Ford CEO Mark Fields warned of a significant talent drain if Musk were to leave, which could severely impact the company. Fields noted, “At the end of the day, if Elon Musk leaves, you're going to have a drain of talent there at Tesla. That's going to hurt them a lot.”

Price Action: At the time of writing, Tesla was trading 7.17% higher on Thursday’s pre-market at $190.00, according to Benzinga Pro.

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Image created using photos on Shutterstock

This story was generated using Benzinga Neuro and edited by Pooja Rajkumari

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