Tesla shareholders approve Elon Musk’s $56 billion pay package
Electric vehicle maker Tesla said on Thursday its shareholders approved a $56 billion pay package for Chief Executive Officer Elon Musk, a major signal to his leadership and an encouragement to keep him focused on his biggest source of wealth.
Electric vehicle maker Tesla said on Thursday its shareholders approved a $56 billion pay package for Chief Executive Officer Elon Musk, a major signal to his leadership and an encouragement to keep him focused on his biggest source of wealth.
The approval underscores the support Musk has from Tesla’s retail investors, many of whom are vocal fans of the mercurial billionaire. The proposal passed despite opposition from some large institutional investors and proxy firms.
On stage at the annual shareholder meeting in Austin, Texas, Musk described himself as pathologically optimistic. “If I wasn’t optimistic this wouldn’t exist, this factory wouldn’t exist,” Musk said to thunderous applause. “But I deliver results in the end. That’s the important thing.”
He informed late Wednesday night that The proposals received overwhelming support,
However, the approval does not resolve the ongoing litigation over the pay package in a Delaware court, which some legal experts believe could last several months. The judge in January invalidated the pay package, calling it “unthinkable.”
Musk could also face new lawsuits over the package, which would be the largest in US corporate history. Shareholders voted for the package in 2018.
“This thing is far from over,” said Brian Quinn, a professor at Boston College Law School. He said a Delaware judge would investigate the vote and ask Tesla to prove the process wasn’t coerced or improperly influenced by Musk.
The judge criticized Tesla’s board, saying it was “beholden” to him, and said the plan was proposed by a controversial board that has close personal and financial ties to the board’s top executive.
Shareholders on Thursday also approved a proposal to move the company’s legal headquarters from Delaware to Texas. They also approved other proposals, including the re-election of two board members: Musk’s brother Kimbal Musk and James Murdoch, the son of media tycoon Rupert Murdoch.
Shareholders increased the level of investor control by passing resolutions to shorten the board’s term by one year and reduce the voting requirement for proposals to a simple majority, both of which the board opposed.
‘A deal is a deal’
Tesla on Thursday did not disclose voting numbers, which are expected to be revealed in the coming days. At least half a million viewers watched the meeting on a livestream on social media platform X, and about 40,000 watched on YouTube.
“First of all, the message is that Tesla’s retail shareholders approve of what’s happening. It will be interesting to see what the exact percentage of votes are,” said Lindsay Stewart, director of Morningstar Sustainalytics.
Shareholder approval of the compensation is both a validation of Musk’s tenure as well as an acknowledgment that investors don’t want to jeopardize the company’s future.
“They are essentially sidestepping major risks to the point where Tesla has become even more dependent on Musk to move forward,” said Jason Schloetzer, a Georgetown University business professor who specializes in corporate governance.
In January, Musk threatened to build AI and robotics products outside of Tesla if he failed to gain sufficient voting control.
He shifted the company’s focus to robotaxis, and sidelined affordable mass-market electric cars, which worried some investors who feared autonomous technology would be difficult to perfect.
Giving an update on Tesla’s performance, Musk said on Thursday that the company recently shipped a record 1,300 Cybertrucks in a week and that mass production of Semi trucks is planned. He also spoke in detail about plans for autonomous cars, though he did not give a time frame for the launch of self-driving vehicles.
Tesla’s stock price has fallen about 55% from its 2021 peak as EV sales have slowed and Musk’s focus has wandered between Tesla and his other companies. The stock closed up 2.9% on Thursday.
“Shareholders once again endorsed the terms of the contract, sending a strong signal that ‘a deal is a deal’ and Musk fully deserves to be rewarded for meeting the high thresholds of the incentive-based contract,” said CFRA Research analyst Garrett Nelson.
“This news has taken the bulk of the impact on stocks away from the news, although we wouldn’t be surprised to see a “sell the news” reaction on Friday after the strong gains over the past two trading sessions as the potential outcome becomes clearer.”
The board had said Musk deserved the package because he had achieved all ambitious targets for market value, revenue and profitability. Major investors, including the California Public Employees Retirement System, had called the pay package “excessive.”
Pressure
“Elon Musk and Chairman (Robyn) Denholm have framed this as about CEO loyalty and presented the vote as a decision about whether the company can keep Musk,” said Evan Frishberg, chief sustainability officer at Amalgamated Bank.
“That’s a lot of pressure, but it doesn’t change the fact that good governance is good for a company’s bottom line, and the Tesla board has been consistently and clearly weak on that front.”
While Musk is undoubtedly the driving force behind Tesla and credited for its success, the company’s sales and profits have been declining. There are concerns that he is spreading himself too thin.
Musk has added two more companies to his roster since the pay package was approved in 2018. He now runs or owns six firms, including rocket-builder SpaceX, social media giant X — formerly Twitter — and artificial-intelligence firm xAI, which Musk said will be formed in 2023.
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