Tesla CEO Musk's pay package gets nod from 77% of votes at investor meet

Tesla CEO Elon Musk's $56 billion pay package garnered support from about 77% of total votes cast at its annual shareholder meeting, according to a company filing on Friday.
 

Investors holding 1.76 billion shares voted in favor of the pay package, which is the largest in U.S. corporate history, while 528.9 million shares voted against and 20.6 million shares abstained.
 

In 2018, 73% of Tesla investors had voted in favor of the same pay package, which was voided by a Delaware judge this year.

Tesla shareholders had approved Musk's pay on Thursday, in what was a big thumbs-up to his leadership and an incentive to keep his focus on the electric automaker, which is his biggest source of wealth.
 

 

The approval underscored the support that Musk enjoys 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.
 

The approval does not, however, resolve a lawsuit on the pay package in a Delaware court, which some legal experts said could stretch out for months. The judge invalidated the pay in January, describing it as "unfathomable."

A yes vote gives the electric carmaker more ammunition in a Delaware court, where a judge voided the 2018 pay package plan, which at the time was the largest in U.S. corporate history, saying the board was "beholden" to CEO Musk.
 

It also marks a massive win for Musk and the board, who have put their credibility on the line to gain shareholder approval, despite opposition from major investors Glass Lewis and Institutional Shareholder Services (ISS).

 

"Thanks for your support!!" Musk said in his post on X.
 

The result will be announced at a meeting at Tesla's headquarters in Texas at 4:30 pm (2130 GMT) on Thursday.

A person familiar with the preliminary voting tally said a combination of big institutional investors and retail investor got the 'yes' result over the line.
 

Shareholders, however, are allowed to change their vote up to the start of the annual meeting.
 

Tesla shareholders also cast ballots on other proposals including the move of its legal headquarters from Delaware to Texas, as well as the re-election of two board members: Musk's brother Kimbal Musk and James Murdoch.
 

Referendum
 

Some investors viewed the vote on Musk's pay as a test of confidence in his leadership. While he is undoubtedly Tesla's driving force, and is credited with much of its success, the company has recently seen slowing sales and profits.
 

Tesla's stock has lost nearly 60 per cent of its value from its peak in 2021, when Musk started selling billions of dollars' worth of his stake partly to help finance his purchase of Twitter, sparking concerns that he would be spread too thin. He now runs six firms, including rocket-builder SpaceX, social media giant X - formerly Twitter - and the artificial intelligence firm xA1, which Musk created in 2023.
 

Musk's outspokenness and knack for creating controversy have also weighed on Tesla's reputation and sales.

Tesla stocks ended up 3.9 per cent on Wednesday, a day before the shareholder meeting.

Shareholders, led by major institutional investors, call such compensation far too generous for a leader who is splitting his time between six companies and is now presiding over falling sales and a strategic upheaval at Tesla.
 

The pay package would enable Musk to strengthen ownership "at the expense of diluting the value of those belonging to other shareholders," Marcie Frost, CEO of the California Public Employees' Retirement System said earlier Wednesday.
 

Tesla has been drumming up support for Musk's pay package, especially from retail investors, who make up an unusually high percentage of its ownership base but who often do not vote.
 

Company executives have posted messages on X, saying Musk is critical to Tesla's success. Tesla has run social media ads, and Musk has promised a personal tour of Tesla's factory in Texas to some shareholders who cast votes.
 

The board said the world's richest person deserves the package, because he hit all the ambitious targets on market value, revenue and profitability.
 

The pay package is also needed to keep Musk devoted to Tesla, the board said, even though the Delaware judge said the 2018 pay plan failed to make sure that Musk committed a substantial amount of time to Tesla.
 

Musk has threatened to build AI and robotics products outside Tesla, if he fails to gain enough voting control, which requires the 2018 pay package to be approved.
 

Donald Ball, a Tesla shareholder earlier this month filed a lawsuit challenging the upcoming shareholder vote, saying a ratification of the pay package should be void because Musk has "engaged in strong-arm, coercive tactics to obtain stockholder approval."
 

Court Battle
 

The same package was previously rejected by a Delaware judge who invalidated it as an "unfathomable sum" granted by a conflicted board with close personal and financial ties to its top executive.
 

The board held the shareholder vote as a way to bolster its appeal of the ruling, in which the judge cited the board's failure to fully inform shareholders before approving the pay package in 2018.
 

"Even if the shareholders do approve the old package, it is not clear that the Delaware court will allow that vote to be effective," said Adam Badawi, a law professor who specializes in corporate governance at the University of California Berkeley.
 

Musk has to wait months or years to get his pay package restored as appeals wind their way up to Delaware's Supreme Court.