Tesla attorneys ask judge to vacate decision invalidating massive pay package for Elon Musk

a request

Defense attorneys say the vote makes clear that Tesla shareholders, with full knowledge of the flaws in the 2018 process that McCormick pointed out in her January ruling, are adamant that Musk is entitled to the pay package. Photo via cdn.britannica.com

Attorneys for Elon Musk and Tesla’s corporate directors are asking a Delaware judge to vacate her ruling requiring the company to rescind a massive and unprecedented pay package for Musk.

Friday's hearing follows a January ruling in which Chancellor Kathaleen St. Jude McCormick concluded that Musk engineered the landmark 2018 pay package in sham negotiations with directors who were not independent. The compensation package initially carried a potential maximum value of about $56 billion, but that sum has fluctuated over the years based on Tesla's stock price.

Following the court ruling, Tesla shareholders met in June and ratified Musk’s 2018 pay package for a second time, again by an overwhelming margin.

“Honoring the shoulder vote would affirm the strength of our corporate system,” David Ross, an attorney for Musk and the other individual defendants, told McCormick. “This was stockholder democracy working.”

Ross told the judge that the defendants were not challenging the factual findings or legal conclusions in her ruling, but simply asking that she vacate her order directing Tesla to rescind the pay package.

McCormick, however, seemed skeptical of the defense arguments, peppering attorneys with questions and noting that there is no precedent in Delaware law for allowing a post-trial shareholder vote to ratify adjudicated breaches of fiduciary duty by corporate directors.

“This has never been done before,” she said.

Defense attorneys argued that, while they could find no case that is exactly comparable, Delaware law has long recognized shareholder ratification as a cure to corporate governance errors, and has long acknowledged the “sovereignty” of shareholders as the ultimate owners of a corporation.

“I candidly don’t see how Delaware law can tell the owners of the company that they’re not entitled to make the decision they made,” said Rudolf Koch, an attorney for Tesla.

Donald Verrilli, a lawyer for an induvial stockholder who owns more than 19,000 Tesla shares, suggested that it would be wrong for the lone shareholder who filed the lawsuit to thwart the will of the majority of Tesla shareholders. At the time the lawsuit was filed, the plaintiff owned just nine shares of Tesla stock.

“The voice of the majority of shareholders should matter…. This lawsuit is not representing the interest of the shareholders," Verrilli said.

Thomas Grady, an attorney for a group of Florida objectors who own or manage almost 8 million Tesla shares with some $2 billion, argued that for McCormick to rule for the plaintiff, she has to “disenfranchise” all other Tesla shareholders.

Greg Varallo, an attorney for the plaintiff, urged McCormick not to give any credence to the June shareholder vote, saying it has no legal precedent in Delaware or anywhere else. There also is no reason for the court to reopen the trial record and admit new evidence, he said.

Under Delaware law, stockholders have no authority to overrule courts by trying to use a post-trial ratification vote as a “giant eraser,” Varallo argued.

“Ratification is not magic, and it never has been,” Varallo added. “This should end here and now.”

McCormick gave no indication on when she would rule. She also has yet to rule on a huge and unprecedented fee request by plaintiff attorneys, who contend that they are entitled to legal fees in the form of Tesla stock valued at more than $7 billion.

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Shareholders of the electric vehicle and solar panel company are voting on the package, with the results to be tabulated at Tesla's June 13 annual meeting. Photo via cdn.britannica.com

Elon Musk sees more resistance against his multibillion dollar pay package

just say no

A second shareholder advisory firm has come out against reinstating a pay package for Tesla CEO Elon Musk that was voided earlier this year by a Delaware judge.

ISS late Thursday joined Glass Lewis in recommending against the package, recently valued by the company at $44.9 billion but in January had a value of about $56 billion.

Shareholders of the electric vehicle and solar panel company are voting on the package, with the results to be tabulated at Tesla's June 13 annual meeting.

ISS said in its recommendations on Tesla's proxy voting items that Musk's stock-based package was outsized when it was approved by shareholders in 2018, and it failed to accomplish board objectives voiced at that time.

The firm said that Tesla met the pay package’s performance objectives, and it recognized the company's substantial growth in size and profitability. But concerns about Musk spending too much time on other ventures that were raised in 2018 and since then have not been sufficiently addressed, ISS said.

“The grant, in many ways, failed to achieve the board’s other original objectives of focusing CEO Musk on the interests of Tesla shareholders, as opposed to other business endeavors, and aligning his financial interests more closely with those of Tesla stockholders,” ISS wrote.

Also, future concerns remain unaddressed, including a lack of clarity on Musk's future compensation and the potential for his pay to significantly dilute shareholder value, ISS wrote.

Musk plays big roles in his other ventures including SpaceX, Neuralink and the Boring Company. Last year he bought social media platform X and formed an artificial intelligence unit called xAI.

Last week the other prominent proxy advisory firm, Glass Lewis, also recommended against reinstating Musk's 2018 compensation package. The firm said the package would dilute shareholders' value by about 8.7%. The rationale for the package “does not in our view adequately consider dilution and its long-lasting effects on disinterested shareholders,” Glass Lewis wrote.

But in a proxy filing, Tesla said that Glass Lewis failed to consider that the 2018 award incentivized Musk to create over $735 billion in value for shareholders in the six years since it was approved.

“Tesla is one of the most successful enterprises of our time,” the filing said. “We have revolutionized the automotive market and become the first vertically integrated sustainable energy company."

Tesla is struggling with falling global sales, slowing electric vehicle demand, an aging model lineup and a stock price that has tumbled about 30% this year.

Tesla asked shareholders to restore Musk's pay package after it was rejected by a Delaware judge this year. At the time, it also asked to shift the company’s legal corporate home to Texas.

Glass Lewis recommended against moving the legal corporate home to Texas, but ISS said it favored the move.

California’s public employee retirement system, which holds a stake in Tesla, said it has not made a final decision on how it will vote on Musk’s pay. But CEO Marcie Frost told CNBC that as of Wednesday, the system would not vote in favor. CalPERS, which opposed the package in 2018, said it will discuss the matter with Tesla “in the coming days.”

In January, Delaware Chancellor Kathaleen St. Jude McCormick ruled that Musk is not entitled to the landmark stock compensation that was to be granted over 10 years.

Ruling on a lawsuit from a shareholder, she voided the pay package, saying that Musk essentially controlled the board, making the process of enacting the compensation unfair to stakeholders. “Musk had extensive ties with the persons tasked with negotiating on Tesla’s behalf,” she wrote in her ruling.

In a letter to shareholders released in a regulatory filing last month, Tesla Chairwoman Robyn Denholm said that Musk has delivered on the growth it was looking for at the automaker, with Tesla meeting all of the stock value and operational targets in the 2018 package. Shares at the time were up 571% since the pay package began.

“Because the Delaware Court second-guessed your decision, Elon has not been paid for any of his work for Tesla for the past six years that has helped to generate significant growth and stockholder value,” Denholm wrote. “That strikes us — and the many stockholders from whom we already have heard — as fundamentally unfair, and inconsistent with the will of the stockholders who voted for it.”

Tesla posted record deliveries of more than 1.8 million electric vehicles worldwide in 2023, but the value of its shares has eroded quickly this year as EV sales soften.

The company said it delivered 386,810 vehicles from January through March, nearly 9% fewer than it sold in the same period last year. Future growth is in doubt and it may be a challenge to get shareholders to back a fat pay package in an environment where competition has increased worldwide.

Starting last year, Tesla has cut prices as much as $20,000 on some models. The price cuts caused used electric vehicle values to drop and clipped Tesla’s profit margins.

In April, Tesla said that it was letting about 10% of its workers go, about 14,000 people.

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Houston companies scoop up $31 million in funds from DOE, EPA methane emissions program

fresh funds

The U.S. Department of Energy and the U.S. Environmental Protection Agency announced the selection of seven projects from Houston companies to receive funding through the Methane Emissions Reduction Program.

The projects are among 43 others nationwide, including 12 from Texas, that reduce, monitor, measure, and quantify methane emissions from the oil and gas sector. The DOE and EPA awarded $850 million in total through the program.

The Houston companies picked up $31.7 million in federal funding through the program in addition to more than $9.5 million in non-federal dollars.

“I’m excited about the opportunities these will create internally but even more so the creation of jobs and training opportunities for the communities in which we work,” Scott McCurdy, Encino Environmental Services CEO, said in a news release. His company received awards for two projects.

“These projects will allow us to further support and strengthen the U.S. Energy industry’s ability to deliver clean, reliable, and affordable energy globally,” he added.

The Houston-area awards included:

DaphneTech USA LLC

Total funding: $5.8 million (approximately $4.5 million in federal, $1.3 million in non-federal)

The award was granted for the company’s Daphne and Williams Methane Slip Abatement Plasma-Catalyst Scale-Up project. Daphne will study how its SlipPure technology, a novel exhaust gas cleaning system that abates methane and exhaust gas pollution from natural gas-fueled engines, can be economically viable across multiple engine types and operating conditions.

Baker Hughes Energy Transition LLC

Total funding: $7.47 million (approximately $6 million in federal, $1.5 million in non-federal)

The award was granted for the company’s Advancing Low Cost CH4 Emissions Reduction from Flares through Large Scale Deployment of Retrofittable and Adaptive Technology project. The project aims to develop a scalable, integrated methane emissions reduction system for flares based on optical gas imaging and estimation algorithms.

Encino Environmental Services

Total funding: $15.17 million (approximately $11 million in federal, $4.17 million in non-federal)

The award was granted for two projects. The Advanced Methane Reduction System: Integrating Infrared and Visual Imaging to Assess Net Heating Value at the Combustion Zone and Determine Combustion Efficiency to Enhance Flaring Performance project aims to develop and deploy an advanced continuous emissions monitoring system. It’s Advancing Methane Emissions Reduction through Innovative Technology project will develop and deploy a technology using sensors and composite materials to address emissions originating in storage tanks.

Envana Software Solutions

Total funding: $5.26 million (approximately $4.2 million in federal, $1 million in non-federal)

The award was granted for the company’s Leak Detection and Reduction Software to Identify Methane Emissions and Trigger Mitigation at Oil and Gas Production Facilities Based on SCADA Data project. It aims to improve its Recon software for monitoring methane emissions and develop partnerships with local universities and organizations.

Capwell Services Inc.

Total funding: $4.19 million (approximately $3.3 million in federal, $837,000 in non-federal)

The award was granted for its Methane Emissions Abatement Technology for Low-Flow and Intermittent Emission Sources project. It aims to to deploy and field-test a methane abatement unit and improve air quality and health outcomes for communities near production facilities and establish field technician internships for local residents.

Blue Sky Measurements

Total funding: $3.41 million (approximately $2.7 million in federal, $683,000 in non-federal)

The award was granted for its Field Validation of Novel Fixed Position Optical Sensor for Fugitive Methane Emission Detection Quantification and Location with Real-Time Notification for Rapid Mitigation project. It aims to field test an optical sensing technology at six well sites in the Permian Basin.

Southern Methodist University, The University of Texas at Austin, Texas A&M Engineering Experiment Station and Hyliion Inc. were other Texas-based organizations to earn awards. See the full list of projects here.

Texas university's 'WaterHub' will dramatically reduce water usage by 40%

Sustainable Move

A major advancement in sustainability is coming to one Texas university. A new UT WaterHub at the University of Texas at Austin will be the largest facility of its kind in the U.S. and will transform how the university manages its water resources.

It's designed to work with natural processes instead of against them for water savings of an estimated 40 percent. It's slated for completion in late 2027.

The university has had an active water recovery program since the 1980s. Still, water is becoming an increasing concern in Austin. According to Texas Living Waters, a coalition of conservation groups, Texas loses enough water annually to fill Lady Bird Lake roughly 89 times over.

As Austin continues to expand and face water shortages, the region's water supply faces increased pressure. The UT WaterHub plans to address this challenge by recycling water for campus energy operations, helping preserve water resources for both the university and local communities.

The 9,600-square-foot water treatment facility will use an innovative filtration approach. To reduce reliance on expensive machinery and chemicals, the system uses plants to naturally filter water and gravity to pull it in the direction it needs to go. Used water will be gathered from a new collection point near the Darrell K Royal Texas Memorial Stadium and transported to the WaterHub, located in the heart of the engineering district. The facility's design includes a greenhouse viewable to the public, serving as an interactive learning space.

Beyond water conservation, the facility is designed to protect the university against extreme weather events like winter storms. This new initiative will create a reliable backup water supply while decreasing university water usage, and will even reduce wastewater sent to the city by up to 70 percent.

H2O Innovation, UT’s collaborator in this project, specializes in water solutions, helping organizations manage their water efficiently.

"By combining cutting-edge technology with our innovative financing approach, we’re making it easier for organizations to adopt sustainable water practices that benefit both their bottom line and the environment, paving a step forward in water positivity,” said H2O Innovation president and CEO Frédéric Dugré in a press release.

The university expects significant cost savings with this project, since it won't have to spend as much on buying water from the city or paying fees to dispose of used water. Over the next several years, this could add up to millions of dollars.

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A version of this story originally appeared on our sister site, CultureMap Austin.

Report: Texas solar power, battery storage helped stabilize grid in summer 2024, but challenges remain

by the numbers

Research from the Federal Reserve Bank of Dallas shows that solar power and battery storage capacity helped stabilize Texas’ electric grid last summer.

Between June 1 and Aug. 31, solar power met nearly 25 percent of midday electricity demand within the Electric Reliability Council of Texas (ERCOT) power grid. Rising solar and battery output in ERCOT assisted Texans during a summer of triple-digit heat and record load demands, but the report fears that the state’s power load will be “pushed to its limits” soon.

The report examined how the grid performed during more demanding hours. At peak times, between 11 a.m. and 2 p.m. in the summer of 2024, solar output averaged nearly 17,000 megawatts compared with 12,000 megawatts during those hours in the previous year. Between 6 p.m. and 9 p.m., discharge from battery facilities averaged 714 megawatts in 2024 after averaging 238 megawatts for those hours in 2023. Solar and battery output have continued to grow since then, according to the report.

“Batteries made a meaningful contribution to what those shoulder periods look like and how much scarcity we get into during these peak events,” ERCOT CEO Pablo Vegas said at a board of directors conference call.

Increases in capacity from solar and battery-storage power in 2024 also eclipsed those of 2023. In 2023 ECOT added 4,570 megawatts of solar, compared to adding nearly 9,700 megawatts in 2024. Growth in battery storage capacity also increased from about 1,500 megawatts added in 2023 to more than 4,000 megawatts added in 2024. Natural gas capacity also saw increases while wind capacity dropped by about 50 percent.

Texas’ installation of utility-scale solar surpassed California’s in the spring of last year, and jumped from 1,900 megawatts in 2019 to over 20,000 megawatts in 2024 with solar meeting about 50 percent of Texas' peak power demand during some days.

While the numbers are encouraging, the report states that there could be future challenges, as more generating capacity will be required due to data center construction and broader electrification trends. The development of generating more capacity will rely on multiple factors like price signals and market conditions that invite more baseload and dispatchable generating capacity, which includes longer-duration batteries, and investment in power purchase agreements and other power arrangements by large-scale consumers, according to the report.

Additionally, peak demand during winter freezes presents challenges not seen in the summer. For example, in colder months, peak electricity demand often occurs in the early morning before solar energy is available, and it predicts that current battery storage may be insufficient to meet the demand. The analysis indicated a 50% chance of rolling outages during a cold snap similar to December 2022 and an 80% chance if conditions mirror the February 2021 deep freeze at the grid’s current state.

The report also claimed that ERCOT’s energy-only market design and new incentive structures, such as the Texas Energy Fund, do not appear to be enough to meet the predicted future magnitude and speed of load growth.

Read the full report here.

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