Tesla shareholders have voted to approve a $56 billion pay package for CEO Elon Musk and to move the company’s legal home to Texas. This decision, made by wide margins, comes after a Delaware court previously voided a similar pay package plan in 2018, stating that the board was too aligned with Musk. Despite opposition from major investors Glass Lewis and Institutional Shareholder Services (ISS), Musk and the board have successfully gained shareholder approval for the new pay package.
The preliminary voting tally showed that a combination of institutional investors and retail investors voted in favor of the pay package. Shareholders have the option to change their vote up until the start of the annual meeting. In addition to approving Musk’s pay package, shareholders also voted on other proposals, including the relocation of Tesla’s legal headquarters from Delaware to Texas and the re-election of board members, Kimbal Musk and James Murdoch.
The vote on Musk’s pay package was seen as a test of confidence in his leadership by some investors. While Musk has been credited with much of Tesla’s success, the company has recently seen slowing sales and profits. Tesla’s stock has decreased significantly in value since its peak in 2021, and concerns have arisen about Musk’s involvement in multiple companies, including SpaceX, X, and xA1. Musk’s controversial comments and actions have also impacted Tesla’s reputation and sales.
Tesla has been campaigning for support for Musk’s pay package, particularly from retail investors. Company executives have emphasized Musk’s importance to Tesla’s success, and Musk has made promises, like personal tours of Tesla’s factory in Texas, to shareholders who cast votes. The board maintains that Musk deserves the package, as he has met ambitious targets for market value, revenue, and profitability. They argue that the pay package is necessary to keep Musk committed to Tesla.
The pay package approval is crucial for Musk to maintain voting control over Tesla and prevent him from building AI and robotics products outside of the company. However, there have been legal challenges to the pay package ratification, with accusations of coercive tactics used by Musk. The board’s decision to hold the shareholder vote was an attempt to appeal the previous court ruling that invalidated the 2018 pay package, citing conflicts of interest within the board. It remains uncertain whether the Delaware court will allow the new vote to be effective, leading to potential delays in implementing the pay package. Musk may need to wait for months or years for appeals to progress through the legal system.
