Musk says Tesla shareholders voted yes to his $56 billion pay package

By Hyunjoo Jin, Abhirup Roy and Abinaya V

(Reuters) – Tesla shareholders are voting to approve a $56 billion pay package for Elon Musk and to move the electric vehicle maker’s legal headquarters to Texas, Musk said on social media platform X on Wednesday. fair, adding that approval was by wide margins.

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

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

“Thank you for your support!!” Musk said in his X post.

The result will be announced at a meeting at Tesla headquarters in Texas at 4:30 pm (9:30 pm GMT) on Thursday.

A person familiar with the preliminary vote count said a combination of large institutional investors and retail investors got the “yes” result across the line.

Shareholders, however, can change their vote until the start of the annual meeting.

Tesla shareholders also voted on other proposals, including moving its legal headquarters from Delaware to Texas, as well as re-electing two board members: Musk’s brother Kimbal Musk and James Murdoch.

REFERENDUM

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

Tesla shares have lost nearly 60% of their value since their peak in 2021, when Musk began selling billions of dollars of his stake, in part to help finance his purchase of Twitter, sparking concerns that he was spread too thin. He now runs six companies, including rocket builder SpaceX, social media giant X – formerly Twitter – and artificial intelligence company xA1, which Musk created in 2023.

Musk’s outspokenness and talent for creating controversy have also weighed on Tesla’s reputation and sales.

Tesla shares closed up 3.9% on Wednesday, the day before the shareholder meeting.

Shareholders, led by large institutional investors, consider this compensation too generous for a leader who is splitting his time between six companies and who is now leading a decline in sales and a strategic turnaround at Tesla.

The pay package would allow Musk to strengthen ownership “at the expense of diluting the value of those owned by other shareholders,” Marcie Frost, CEO of the California Public Employees Retirement System, said Wednesday.

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Tesla has been drumming up support for Musk’s pay package, especially from retail investors, who make up an unusually high percentage of its shareholder base but who often don’t vote.

Company executives posted messages on X, saying Musk is critical to Tesla’s success. Tesla posted ads on social media and Musk promised a personal tour of the Tesla factory in Texas to some shareholders who voted.

The board said the world’s richest person deserves the package because he has achieved all ambitious targets in terms of market value, revenue and profitability.

The pay package is also necessary to keep Musk dedicated to Tesla, the board said, although the Delaware judge said the 2018 pay plan failed to ensure Musk dedicated a substantial amount of time to Tesla.

Musk has threatened to build AI and robotics products outside of Tesla if he cannot gain enough voting control, which requires passage of the 2018 pay package.

Tesla shareholder Donald Ball earlier this month filed a lawsuit challenging the upcoming shareholder vote, saying the ratification of the pay package should be nullified because Musk “engaged in coercive and violent tactics to obtain shareholder approval.”

COURT BATTLE

The same package was previously rejected by a Delaware judge who invalidated it as an “unfathomable sum” granted by a board at odds with close personal and financial ties to its chief executive.

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

“Even if shareholders approve the old package, it is unclear whether the Delaware court will allow this 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 for his pay package to be restored as appeals reach the Delaware Supreme Court.

(Reporting by Hyunjoo Jin and Abhirup Roy in San Francisco, Greg Roumeliotis in New York and Abinaya Vijayaraghavan in Bengaluru; Editing by Nivedita Bhattacharjee and Miral Fahmy)