Tesla shareholders gave the green light for Elon Musk’s $56 billion pay package to be approved. The votes were announced at Tesla’s annual meeting on Thursday, along with the decision to reincorporate Tesla in Texas.
In 2022, Musk faced a week-long trial in the Delaware Court of Chancery over his compensation grant – a pay deal made by the board of directors back in 2018. It was the largest pay package for a CEO in the history of the world.
The approval given by shareholders this week, however, does not guarantee Musk’s massive payout. The Delaware judge who decided to rescind the package in 2022 still has to issue her final ruling.
Why is Tesla’s move to Texas of interest? It is believed by moving the company away from Delaware, Tesla could potentially avoid further legal challenges standing between Musk and the biggest compensation payout in the world.
Tesla’s legal battles and controversies
Musk’s legal woes (in matters relating to the payout) began in 2019, a year after the board of directors proposed the payout. A company stakeholder, Richard Tornetta, went to court to rescind Musk’s pay deal back, on the grounds that it was “unjustly paid” to the billionaire.
Tornetta submitted a 96-page legal brief, stating that Musk was a “part-time CEO” who failed to perform its fiduciary duty to investors. Musk then appeared before Kathaleen McCormick, the same judge who forced him to honor his Twitter contract.
McCormick ruled that the pay package was indeed unfair. And due to Tesla not properly disclosing Musks’ control over the process of how the pay package was constructed, McCormick ruled that the shareholders weren’t fully informed at the time of the original vote.
Tesla versus xAI
And the legal woes continue. This week alone, Tesla and Musk have been sued twice. The first lawsuit was by shareholders who claimed the world’s richest man (as of June 2024, worth $210 billion) made his billions by selling Tesla stock using insider information.
Musk was then sued again by separate shareholders for starting xAI, an AI company that competes with Tesla. Musk stirred the pot this month when he compromised Tesla’s roadmap by redirecting shipments of Nvidia’s high-end AI processors from Tesla to X (Twitter) and xAI.
Musk is on a mission to build the world’s largest supercomputer, and to continue xAI’s “steep trajectory of progress over the coming months.”
About the author
Cheryl has contributed to various international publications, with a fervor for data and technology. She explores the intersection of emerging tech trends with logistics, focusing on how digital innovations are reshaping industries on a global scale. When she's not dissecting the latest developments in AI-driven innovation and digital solutions, Cheryl can be found gaming, kickboxing, or navigating the novel niches of consumer gadgetry.
