Tesla shareholders have voted in favour of a $56 billion pay package for CEO Elon Musk and approved the relocation of the electric vehicle maker’s legal headquarters from Delaware to Texas, as reported by Reuters. Musk announced the results on the social media platform X on Wednesday, noting the approval came by wide margins.
The affirmative vote bolsters Tesla’s position in an ongoing Delaware court case, where a judge had previously voided the 2018 pay package plan. At the time, this plan was the largest in US corporate history, and the court ruled that Tesla’s board was overly influenced by Musk.
This shareholder approval marks a significant victory for Musk and Tesla’s board, who faced opposition from major investors Glass Lewis and Institutional Shareholder Services (ISS). “Thanks for your support!!” Musk posted on X.
Both Tesla shareholder resolutions are currently passing by wide margins!
♥️♥️ Thanks for your support!! ♥️♥️ pic.twitter.com/udf56VGQdo
— Elon Musk (@elonmusk) June 13, 2024
The official results will be disclosed at a meeting scheduled for Thursday at Tesla’s Texas headquarters at 4:30 pm. Preliminary tallies suggest that a mix of institutional investors and retail shareholders secured the ‘yes’ vote.
Shareholders still have the opportunity to change their votes up until the start of the annual meeting. In addition to voting on Musk’s pay package, they also decided on the relocation of Tesla’s legal headquarters and the re-election of board members Kimbal Musk and James Murdoch.
Many investors saw the vote on Musk’s pay as a referendum on his leadership. Despite being credited with much of Tesla’s success, the company has recently experienced declining sales and profits. Tesla’s stock has lost nearly 60% of its value since its peak in 2021, a decline partly attributed to Musk selling large portions of his stake to finance his purchase of Twitter. Musk now manages six companies, including SpaceX, the social media giant X (formerly Twitter), and the artificial intelligence firm xAI.
Musk’s controversial public persona has also impacted Tesla’s reputation and sales. Nevertheless, Tesla shares rose by 3.9% on Wednesday, just before the shareholder meeting.
Critics, led by major institutional investors, argue that the compensation package is excessively generous for a CEO dividing his time between multiple ventures. Marcie Frost, CEO of the California Public Employees’ Retirement System, stated that the pay package would dilute the value of other shareholders’ stakes.
Tesla has actively sought to garner support for Musk’s pay package, particularly from retail investors who constitute a significant portion of its ownership base but often do not participate in voting. Company executives have said Musk’s importance to Tesla’s success through posts on X, social media ads, and promises of personal tours of Tesla’s Texas factory for participating shareholders.
The board justifies the pay package by highlighting Musk’s achievement of ambitious targets related to market value, revenue, and profitability. They argue that the package is crucial to keeping Musk focused on Tesla, despite a Delaware judge previously ruling that the 2018 pay plan did not ensure Musk’s substantial time commitment to the company.
Musk has suggested that if he does not gain sufficient voting control, he might pursue AI and robotics projects outside of Tesla, contingent on the approval of the 2018 pay package.
Earlier this month, Tesla shareholder Donald Ball filed a lawsuit challenging the upcoming vote, alleging that Musk employed coercive tactics to secure stockholder approval.
The same pay package was invalidated by a Delaware judge for being an “unfathomable sum” approved by a conflicted board with close ties to Musk. The current vote aims to strengthen Tesla’s appeal of this ruling, which cited the board’s failure to fully inform shareholders in 2018.
“Even if shareholders approve the old package, it is not clear that the Delaware court will allow that vote to be effective,” said Adam Badawi, a corporate governance law professor at the University of California Berkeley. Musk may have to wait months or years for the pay package to be restored as the appeals process unfolds in Delaware’s Supreme Court.
