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Tesla shareholders approved chief executive Elon Musk’s $56 billion pay package, the electric vehicle-maker said, a big thumbs-up to his leadership and an incentive to keep his focus on his biggest source of wealth.
The approval underscores the support that Musk enjoys from Tesla’s retail investor base, many of whom are vocal fans of the mercurial billionaire. The proposal passed despite opposition from some large institutional investors and proxy firms.
Tesla’s largest outside investor Vanguard said it voted in favour of Musk’s pay package, citing the company’s performance, contributing to the passage of the record-setting arrangement.
Vanguard said in a note it had voted against Musk’s compensation package when it was first approved by shareholders in 2018 because of its potential size, which might not have been justified by performance.
But “given the strong alignment of executive pay with shareholder returns since 2018 and the benefits the board asserted related to the motivational value for the CEO in preserving the original deal,” Vanguard-advised funds voted for the ratification at Tesla’s annual meeting, according to the note.
Vanguard had 232 million Tesla shares as of March 31, or about seven per cent of the company, second only to the 13pc stake held by Musk. While certain externally-managed Vanguard funds vote separately, a Vanguard spokesman said the note’s descriptions covered the majority of its funds.
Musk’s pay was invalidated by a Delaware judge in January, leading to Thursday’s vote. Top proxy advisers and various big investors had lined up against the compensation on concerns including that it was too much money.
Onstage 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 applause. “But I do deliver in the end. That’s the important thing.”
He had tipped off late on Wednesday that the proposals were garnering huge support. The approval does not, however, resolve a lawsuit on the pay package in a Delaware court, which some legal experts think could stretch out for months. The judge invalidated the pay package in January, describing it as “unfathomable.” Musk may also face fresh lawsuits on the package, which would be the largest in US corporate history. Shareholders had voted for this package in 2018.
“This thing is not over,” said Brian Quinn, a professor at Boston College Law School. The Delaware judge will scrutinize the vote and require Tesla to prove the process was not coerced or improperly influenced by Musk, he said.
The judge had criticised Tesla’s board as “beholden” to him, saying the plan was proposed by a conflicted board with close personal and financial ties to its top executive.
Shareholders also approved a proposal to move the company’s legal home to Texas from Delaware. They also approved other proposals including the re-election of two board members: Musk’s brother Kimbal Musk and James Murdoch, son of media mogul Rupert Murdoch.
Shareholders did increase the level of investor control by passing proposals in favour of shortening board terms to one year and lowering voting requirements for proposals to a simple majority, despite board opposition to both.
Tesla did not disclose the voting tallies, which are expected to be revealed in coming days. At least a half-million viewers watched the meeting on the livestream on social media platform X, and about 40,000 watched on YouTube.
Shareholder approval for the compensation serves as both an endorsement of Musk’s tenure and an acknowledgment that investors do not want to risk the company’s future.
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