After months of fighting over a pay package promised to Elon Musk six years ago (one that included stock grants worth around $56 billion today), things are finally coming to a head.

At Tesla’s annual meeting on Thursday, shareholders will vote on whether to re-approve the compensation agreement after a Delaware judge struck it down in January. The outcome could change Musk’s relationship with the company, and Tesla officials are not taking any risks.

“If Tesla wants to retain Elon’s attention and motivate him to continue devoting his time, energy, ambition and vision to delivering comparable results in the future, we must maintain our agreement,” Robyn Denholm, the company’s president, wrote to investors on Wednesday. .

Regardless of the outcome of the vote, more lawsuits and other battles may arise, some of which could test the corporate legal system. Here’s our guide to how different situations could play out.

Tesla could use shareholder approval to make its case for Musk’s salary in court. If it wins the vote on Musk’s compensation, the company is likely to go to Chancellor Kathaleen McCormick, the Delaware Court of Chancery judge who rejected the compensation plan, and argue that shareholders, armed with the information she said which they had not had when they approved the package, have once again ratified the proposal. The company is expected to say that this makes the matter moot.

If McCormick declares the plan acceptable, the plaintiffs who initially sued over it are likely to appeal to the Delaware Supreme Court. Among his possible arguments: the new vote does not resolve an issue that was already decided by a judge, and shareholder votes may have been influenced by implicit threats to Tesla’s future if the vote did not go in favor of Musk.

Rejection of the pay package by shareholders could result in a new agreement or a lawsuit. The company will most likely continue its efforts in Chancery Court to reinstate the 2018 agreement. But Tesla said in a Monday filing that if that plan was not ultimately ratified, the automaker may need to negotiate a compensation plan. replacement with Musk “to motivate him to dedicate his time and energy to Tesla.” He added that “for Musk to agree, any new plan would have to be of a similar magnitude to the 2018 plan.”

As Ben Kallo, an analyst at Robert W. Baird, told DealBook: “It’s kind of like ‘take my ball and go home.'”

Because Tesla’s stock value has increased significantly since 2018, creating a replacement plan may ultimately be more expensive than reestablishing the old one. Tesla took a $2.3 billion accounting charge for the original plan. The company estimated it would need to take on an accounting charge of more than $25 billion to deliver a functionally equivalent plan today.

Another potential outcome if the matter doesn’t go Musk’s way: He could try a novel legal tactic by filing a lawsuit to demand he be paid anyway, since he essentially had a contract to receive that money.

Tesla’s proposal to reincorporate in Texas will also be voted on Thursday. If the company wins that vote and moves to Texas, it will continue its efforts in the Delaware Court of Chancery to reinstate the compensation package. In that case, Musk’s critics worry that Tesla could use the courts of its new home to attack its old one.

It would be highly unusual and aggressive for one state’s judiciary to allow such an attack on another state’s judiciary, said Ann Lipton, a business law professor at Tulane University. That said, McCormick has left it up to Tesla’s Delaware lawyers to inform him if the company decides to use the Texas courts as a weapon. It’s unclear what she would do if that happened.

Will the proposals be approved? Some context to consider:

• The compensation proposal requires a majority of votes cast at the meeting to be approved. The question of reinstatement requires a stricter standard: the majority of Tesla’s outstanding shares.

• Tesla has a higher percentage of retail investors in its shareholder base (44 percent, according to S&P Global Market Intelligence) than any other company in the S&P 500. In Tesla’s case, they are more likely to vote how Musk wants them to, But traditionally it is difficult to get small shareholders to vote.

• Two influential shareholder advisory firms, Institutional Shareholder Services and Glass Lewis, have urged investors to reject the compensation plan but tentatively supported the reinstatement proposal. The advice of these so-called proxy advisors has traditionally had significant influence over institutional shareholders.

The bottom line: “The new vote only adds complexity; it doesn’t eliminate it,” Lipton said. And that uncertainty doesn’t help Tesla: “I think it weighs on investor sentiment,” Kallo said, “whether that’s reality or not. —Michael de la Merced

IN CASE YOU HAVE MISSED IT

The United States added many more jobs last month than expected. The May jobs report showed 272,000 were created, well above what economists expected. The surprisingly strong result pushed back market expectations that the Federal Reserve will cut rates in September.

GameStop shares plunged after the retailer announced a stock sale. Meme stocks closed nearly 40 percent lower yesterday even though Keith Gill, an investor known as @roaringkitty on social media, held a livestream event on YouTube to generate interest. Shares had soared more than 150 percent since mid-May after Gill began posting on X again after a long hiatus.

Regulators target the artificial intelligence sector. The Federal Trade Commission and the Department of Justice will continue investigations into Nvidia, Microsoft and OpenAI over their dominance in the industry. But geopolitics could complicate those efforts: Washington helped engineer a deal for Microsoft to buy a stake in G42, an Abu Dhabi artificial intelligence startup, to prevent China from having access to G42’s technology.

The business of extreme heat

The first heat wave of what is expected to be another unusually hot summer engulfed the western United States this week, with temperatures reaching record highs in Phoenix, Las Vegas and other cities. As periods of excessive heat become more frequent and longer-lasting, executives are seeing impacts on their businesses.

In recent years, mentions of “excessive heat,” “extreme heat” and “heat waves” have peaked during third-quarter earnings calls, according to AlphaSense, a data platform.

Companies from Disney to Walmart have noticed the impact of extreme heat. Some recent examples:

• “We estimate that the adverse weather reduced year-round attendance by more than one million guests,” said Gary Mick, CFO of Six Flags Entertainment, in a conference call in February. “This includes rain and snow in California during spring break, followed by a record summer heat wave in Texas and eight consecutive weekends of rain or threat of rain in the Mid-Atlantic and Northeast after Labor Day.” .

• The financial director of constellation energyDaniel Eggers said on a conference call in November that as a result of the extreme heat in Texas, the state’s grid operator “set 10 new peak demand records over the summer.”

• Ronald Coughlin, CEO of petco at the time, he noted in August that “as a result of the extreme heat, we were able to boost our flea and tick business, resulting in an increase in Rx sales of nearly 20 percent year over year.”

Heat waves have a great economic impact. A 2022 study, published in the journal Science Advances, that analyzed the impact of human-caused heat waves between 1992 and 2013 estimated that they cost the global economy between $5 and $29.3 trillion. Those costs are likely to increase over time.

Barstool Sports’ First CEO Talks Getting Ahead

When Erika Ayers Badan started as CEO of Barstool Sports in 2016, the company had recently been valued at about $12 million. Seven years later, before she resigned, gambling company Penn Entertainment paid $551 million for the often-controversial suite of blogs, podcasts and videos. (Barstool founder Dave Portnoy bought it back soon after.)

Taking the job at an unproven media company alongside Portnoy, who, The Times wrote in 2022, “rose to fame by exploiting misogyny and other offensive behavior,” and becoming the company’s first female employee on top of that, It was a big risk. In her upcoming book, “Nobody Cares About Your Career,” Ayers Badan advocates making those types of bets, among other career advice. She spoke with DealBook’s Sarah Kessler about why companies needed a point of view and how to lead a company that was ostensibly for men. The interview has been condensed and edited.

You wrote: “Women have two ways to change our situation. They can change it from a place of defense that is pure but external” or “they can push from within.” How did that work for you?

One of the things I was very sensitive to when I joined Barstool was the perception that I was essentially committing career suicide by going to a company perceived as masculine. And what I showed is that I took the right job and was able to make something incredible happen, along with really incredibly talented people.

That’s progress for women in the same way it is for women who are progressing outside of the stereotypically male-dominated environment. Both are really important.

Do you think women should continue to be leaning onBy which I mean being aware of all the prejudices against us and trying to adjust our behavior accordingly?

We have to be much less perfect than the women who came before us, who had to be much less perfect than the women who came before us. And I think that’s incredibly exciting.

But you don’t have to play it a certain way. I think I am a good testimony of that.

Part of what made Barstool successful was that it didn’t behave well. At the same time, the company’s reputation closed some business opportunities, such as when The ESPN show was canceled after one episode.. Is that trade-off worth it?

For better or worse, we are in an era of influence. And to become influential, you need to have opinions and show a point of view. You have to get people’s attention. All media will look like this over time, as it becomes more fragmented and people have to find a way to go viral. The guardians, for the most part, have disappeared. You can’t just not say anything. The entire media ecosystem has changed. And for me, the trade-off was infinitely worth it.

It seems like most executives are at a point where they really don’t want to talk about issues or say anything that might cause a backlash.

You see people opting out completely. And I don’t know how long it will work; It works if your product can speak for itself.

Thank you for reading! See you on Monday.

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