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Elon Musk, Tesla’s chief executive, has secured shareholder approval to reinstate his unprecedented $56 billion (£44 billion) pay package, marking the largest in American corporate history.
Tesla confirmed that the proposals to ratify Musk’s compensation deal and relocate the company’s legal headquarters to Texas were endorsed by shareholders. Enthusiastic chants of “Elon Musk, Elon Musk” filled the air as the preliminary results were revealed at the company’s annual meeting at its Austin, Texas headquarters.
Expressing his gratitude to shareholders, Musk exclaimed: “Hot damn, I love you guys.”
Musk has been striving to reclaim the payout, initially agreed upon in 2018, after a Delaware judge annulled the agreement in January over concerns regarding the board’s transparency and independence during its approval process.
Over the past two months, Musk and Tesla’s board have endeavoured to persuade shareholders to support the deal, aiming to fortify their appeal against the Delaware ruling.
Wall Street has viewed the vote as a barometer of confidence in Musk’s leadership at Tesla. The carmaker’s shares have plummeted by about 60 per cent since their 2021 peak due to a slowdown in electric vehicle sales, sparking criticism that Musk’s attention has been too fragmented between Tesla and his other ventures. Tesla’s board has contended that Musk merits the package, having met all ambitious targets related to market value, revenue, and profitability.
Following the announcement, Tesla shares surged by 2.9 per cent, or $5.18, closing at $182.47 on Thursday, after Musk indicated that the key proposals had been approved by “wide margins”.
This shareholder endorsement represents a significant triumph for Musk, who this week faces allegations of pursuing several female employees at his company SpaceX. Musk has not responded to the accusations, detailed in a report by the Wall Street Journal.
Despite the investor support, Musk still confronts a legal battle to secure final approval for the payout. “Even if the shareholders do approve the old package, it is not clear that the Delaware court will allow that vote to be effective,” stated Adam Badawi, a law professor at UC Berkeley, ahead of the annual meeting.
Tesla’s chair, Robyn Denholm, had hinted that Musk might depart from the company if investors voted against the pay deal, urging shareholders to ensure Musk remains motivated to devote his energy and vision to Tesla. Conversely, Musk had threatened to develop AI and robotics products outside of Tesla if he failed to secure enough voting control, contingent on the approval of the 2018 pay package.
The record-breaking payout has polarized shareholders. Advocates included Ron Baron of Baron Capital, who praised Musk’s “relentless drive and uncompromising standards” as essential to Tesla’s success. Other supporters were Baillie Gifford & Co, the Scottish asset manager, and Ark Investment Management, led by renowned American fund manager Cathie Wood. However, Norges Bank, Norway’s sovereign wealth fund, and the California Public Employees’ Retirement System opposed Musk’s proposed compensation.
Shareholder advisory firms Glass Lewis and Institutional Shareholder Services also recommended rejecting the pay package.
Daniel Ives, a technology analyst at Wedbush Securities, described the vote as a “pop-the-champagne moment for Musk and Tesla shareholders.” In a note on Thursday, Ives remarked: “If this proposal had failed, it could have led to many negative scenarios, including Musk stepping down as CEO of Tesla. Instead, it’s a day of celebration in Austin, though challenges in demand remain, marking a pivotal period for Tesla.
“Tesla is Musk and Musk is Tesla. Shareholders spoke loud.”
