Investors show trust in Musk, augmenting his wealth.
The business magnate Elon Musk is set to receive a hefty compensation package worth a whopping $56 billion, which was approved by Tesla's shareholders during their annual meeting. This massive payout is equivalent to the economic output of Iceland and Malta combined. Apart from approving this huge damaging package, the shareholders also agreed to Tesla's planned move from Delaware to Texas as it was announced by the company. This decision seems to bolster their confidence in Musk's leadership.
Small investors and big funds both showed their support for the plans. Musk had previously predicted that shareholders would support the proposals, and sure enough, Tesla's shares rose by 1.17% to hit $184.61 the day prior to the vote. Following the approval, the stock price saw an increase of 2.9%. To boost the cause, Tesla extensively promoted the "Yes" vote through various means, including messages from its senior staff on platform X and even factory tours.
Musk, during his on-stage address, expressed his unwavering optimism towards Tesla's future, crediting it as the reason for the company's existence. He emphasized that regardless of the controversies, his ultimate goal is to deliver results.
Potential Legal Trouble Ahead?
Despite the approval of the compensation package, legal experts predict a long battle. Brian Quinn, a law professor at Boston College Law School, voiced concerns, saying "This matter is not yet over." Previously in January, Delaware Judge, Kathaleen McCormick, revoked the compensation package. Criticizing Musk for commanding the process of negotiating the compensation deal through the board in 2018, the judge also stated that Tesla failed to inform investors before they cast their votes on the package.
Tesla contends that ample information was made available to shareholders before the vote, including Judge McCormick's 200-page decision. The issue of Musk's influence over the negotiation process was recently resolved but the final verdict still awaits. In fact, one disgruntled shareholder has already initiated legal proceedings against the new vote.
Numerous large investors and even some small investors opposed this mammoth compensation package. There are worries that Musk's involvement with other businesses like SpaceX, Neuralink, and X might distract him, affecting his ability to lead Tesla effectively. Furthermore, Musk's controversial comments have raised concerns that these could negatively impact Tesla's reputation and sales. In the first quarter, Tesla saw its sales dip for the first time since 2018, and its share price has tumbled by around 55% from its all-time high in 2021.
