Tesla Shareholders Vote To Reinstate Elon Musk's $56 Billion Pay Package

Remember the time in the beginning of the year when the court ruled Elon Musk's $56 billion compensation package for his role as a CEO at Tesla as illegal and cancelled the deal? It brought up some interesting details of some kind of collusion amongst board members and Musk to get this high pay package. The arguments was that details of this payment were not disclosed to investors and was too high of a pay for a work of CEO, and something not right was going on there. This drama continued when the lawyers who argued the case against Elon Musk and won became a bit too greedy and demanded the court to award them 10% of the $56 billion and that they deserved $5.6 billion for their legal work. Now that was crazier than what they were trying to correct. Such hypocrisy, I thought. Well, the fight didn't end there, and there is more to come it seems.

Tesla shareholders voted on multiple resolutions and among these resolutions was to approve and reinstate Musk's original $56 billion pay package and move Tesla's incorporation from Delaware to Texas. A lot of companies set their incorporation in Delaware. Probably for tax or legal reasons. Ever since Delaware judge ruled against Musk, he has been telling everybody to move their company incorporation away from Delaware. It seems like a personal revenge actions by Musk. Nevertheless, Tesla shareholders did approve move to Texas. They also approved reinstating Musks $56 billion pay package. Victory for Musk. This is not the end of this story yet. Even though shareholders approved the deal, Musk still legally cannot be compensated this amount. This needs to be resolved in courts. This approval by shareholders may help his case and he may eventually receive all the moneyz he has been demanding. Approval by shareholders is significant, because the main argument against Musk was that there were irregularities in the deal, and shareholders did not receive full information and the deal went against shareholders' interests.

There were shareholders who voted against as well. Among them are Norways sovereign fund, and California Public Employees' Retirement System who hold dozens of millions of shares. However their votes weren't enough and majority voted in favor of Musk. Musk is not a regular CEO that can easily be replaced. Many investors see Tesla success as doings of Musk's genius ideas and actions. We can't really predict future, we can really know if Tesla would be as successful with another CEO. On the one hand I am sure there are plenty of brilliant leaders and innovators that can run Tesla and maybe even take it to the next level. But this is a huge gamble for investors, and investors do not like gambling. They prefer certainty. Why fix something, if nothing is broken?

This reminds me of story of Steve Jobs and Apple. This is a great example of a CEO and a leader that can't actually be easily replaced, and doing so may hurt the company and investors. Jobs made Apple a success story from nothing. But then due to his personality and how he ran things, CEO who Jobs brought in and the board decided to go against Job and pushed him out of the company. After many years it became very clear that it was the worst decision Apple has ever made, and Apple never seen the same success and just kept heading towards bankruptcy. After many years Jobs returned to Apple as an advisor initially, then as a CEO to rescue the company from collapsing and made it a success once again. This efforts made Apple the most expensive tech company in the world, if not the most expensive company. I am not sure if the same thing would happen to Tesla with Musk if history repeated. But there are similarities in the leadership styles, innovation, and character of these innovators. While both are praised for the contributions to technological advancements and innovation, they also are hated by many within the company and outside. Both became super reach early on, both build multiple companies, both liked to be in the public, and both have been great at marketing.

When you see these similarities, it is understandable that investors wouldn't want to make any changes in leadership. And nobody has been talking about replacing Musk either. The drama was all about the money he receive as compensation. The only person who has been mentioning separation of Musk from Tesla has been Musk himself. He has been public about the compensation, stating that he deserves a lot more, otherwise his time is not well spent at Tesla and he is better of innovating elsewhere. And he has many companies to dedicate his time at. Musk has also threatened that he would take his AI efforts and developments in robotics to other companies, instead of keeping them within Tesla. This of course Tesla investors wouldn't want. It may just been cheaper to pay Musk higher pay, just so he keeps all the innovation in Tesla. I don't think these threats by Musk were courteous to the company or the investors. So much ego here. Perhaps he deserves it. It is for the investors to judge and decide. I am not invested in Tesla, and what Elon thinks or does wouldn't effect me. Just shows his character.

This story show how much power and influence Elon Musk has within investors and investors community in general. It is one thing to be able to demand a pay he thinks he deserve, it is another thing to convince investors to change the incorporation and company's legal structures and jurisdictions just because a judge from Delaware may have wronged him. Shareholders votes demonstrate that the sentiment is Must is Tesla, and Tesla is Musk. As such by taking actions against Musk Delaware judge was acting against Tesla. So it makes sense to move away from Delaware to Texas, perhaps where Tesla is welcomed and courts are Musk friendly.

Free market should decide compensations for CEOs and other executives. If shareholders find Musk deserves $56 billion, so be it. In the end shareholders are the ones who suffer the consequences if they made bad decisions, or be part of the success if they made the right call. It is probably shouldn't be judge's decision to cap the pay. In this case, when case went through the court and rulings were made it was clear if majority shareholders would approve such compensations. Now that we know they do, perhaps judge and courts will be willing to join the shareholders and reinstate Musk's pay package. We will see how this will unfold. Good luck Tesla!