Tesla shareholder vote on Musk pay plan fails to resolve ‘legal dispute’ | Wilnesh News

Tesla’s Thursday’s annual meeting in Austin, Texas, will hold a final vote on a controversial proposal that would require shareholders to “approve 100% of the industry-based stock options awarded to Elon Musk in 2018.” performance stock options.”

Even if investors support the measure, the courts will have the final say.

This proposal is one of beat The question for shareholders to consider is on the ballot after a Delaware court ordered in January that the Tesla CEO’s compensation package be struck down. The compensation package includes performance-based stock options, previously worth about $56 billion.

Judge Kathhaleen McCormick found that Tesla board members lacked independence from Musk, failed to engage in appropriate arm’s-length negotiations with the CEO, and failed to negotiate with shareholders over its 2018 compensation plan. Shareholders were not provided with a full picture before the vote.

Ann Lipton, a corporate and securities trial lawyer who teaches at Tulane University School of Law, said shareholders cannot overturn the judge’s ruling.

“Some people apparently (mistakenly) believe that a yes vote will resolve the legal dispute,” Lipton told CNBC in an email. “It won’t. It will make things more complicated.”

A vote to reinstate the pay plan would be a public relations win for Musk, who is dealing with a series of major challenges at Tesla and other companies. The electric car maker is mired in declining sales due to an aging product lineup, increased competition, especially in China, and a deteriorating brand. recent surveys Part of the reason is Musk’s “antics” and “political rants.”

Large institutional investors including CalPERS and CalSTRS, California’s massive retirement system, as well as Norway’s sovereign wealth fund and SOC Investment Group, were staunchly opposed to voting for the pay plan.

“The compensation is excessive compared to executives at peer companies, highly dilutive to shareholders, and has no bearing on Tesla’s long-term profitability,” CalPERS CEO Marcie Frost said in a statement. statement Wednesday.

In contrast, Tesla said in its April proxy statement that several institutional shareholders disagreed with the court’s ruling and said they would support a vote to restore Musk’s compensation package.

Sarath Sanga, a professor at Yale Law School, said the proposal to approve Musk’s compensation plan was an effort by the company to fix what the court found to be a “flawed process.” 204 regulations Delaware Business Law.

“You need to have an independent board negotiating with the CEO and then you need to submit all the appropriate details for a vote,” Sanga said. “The courts say they don’t. Even majority approval could be challenged and require more judicial review.”

Sanga noted that a shareholder vote in favor of the compensation plan could help Musk influence the courts to grant him options in the future.

A majority of Tesla shareholders must submit their vote before the market closes on Wednesday. Others in attendance are eligible to vote Thursday in person or online.

In addition to voting on the pay package, Tesla shareholders will decide whether the company should move its domicile from Delaware, where most large public companies are registered, to Texas, where Tesla’s largest U.S. factory is located.

Musk recommended the company take action after McCormick’s decision in the Delaware Chancery Court.

Shareholders also introduced a proposal to require Tesla to conduct an “annual report on anti-harassment and discrimination efforts.” Tesla and SpaceX have asked investors to reject the proposal even as they face private lawsuits and state and federal investigations into alleged gender and racial discrimination.

Tesla shares are down 29% this year, lagging far behind the Nasdaq, which is up 17%. Musk has been encouraging shareholders to look beyond the current state of the business and toward a future he says will be filled with artificial intelligence software, robotaxis and robotics.

“If someone doesn’t believe Tesla is going to solve the self-driving problem, I don’t think they should be an investor in the company,” Musk said during his latest earnings call in April. “We will, and we do,” he added.

Musk has been making statements like this for years, but the company has yet to follow through.

He still has friends and followers.

Altimeter Capital CEO Brad Gerstner said on CNBC’s “Halftime Report” on Tuesday that he believes Tesla is the leader in autonomous driving technology.

“I think Elon is doing a great job, and I think his advantages in artificial intelligence and fully autonomous driving are grossly underestimated relative to every other manufacturer in the world,” said Gerstner, whose company specializes in autonomous driving. holds a small stake in SLA.

While Musk has been promising since 2016 to develop software that could turn existing Tesla vehicles into self-driving vehicles, rivals such as Pony.ai, Didi Chuxing and Waymo have developed robo-taxi taxis and are already operating them Business services.

watch: Brad Gerstner of Altimeter