Tesla shareholders were poised to approve CEO Elon Musk’s controversial $56 billion pay package, signaling strong support for his leadership. The package, which is the largest in U.S. corporate history, has faced significant legal scrutiny but appears to have garnered sufficient backing to pass. This approval is seen as a critical endorsement of Musk’s vision for the electric-vehicle maker and a strategic move to retain his focus on Tesla amidst his multiple ventures.
Late on Wednesday, Musk posted on his social media platform, X (formerly Twitter), a chart indicating that both the pay package resolution and a vote to move Tesla’s legal home to Texas were set to pass by wide margins. This preliminary voting tally was confirmed by a source familiar with the matter, noting that shareholders could still alter their votes until the annual meeting commenced at Tesla’s headquarters in Texas at 4:30 p.m. EDT (2030 GMT) on Thursday.
“Thanks for your support!” Musk exclaimed on X, reflecting his satisfaction with the voting trends.
Originally approved in 2018, Musk’s pay package has been a point of contention. In January, a Delaware judge invalidated the package, labeling it “unfathomable.” Despite this, shareholder approval could bolster Tesla’s appeal against the ruling, even though the company acknowledges that a favorable vote might not completely resolve the legal dispute.
In January, Musk hinted at pursuing AI and robotics projects outside of Tesla if the pay package did not secure enough support, which underscored the importance of this vote. Recently, he has pivoted Tesla’s focus towards robotaxis, a move that has stirred concern among investors wary of the challenges in perfecting autonomous technology. This shift in focus from mass-market electric vehicles to more ambitious projects underscores Musk’s vision for Tesla’s future.
Tesla’s stock, which has seen a 60% decline from its peak in 2021 due to slowing EV sales and Musk’s divided attention, was up 3.8% on Thursday afternoon. The potential approval of the pay package appears to have mitigated some investor concerns regarding Musk’s commitment to Tesla.
“This vindicates Musk and allays some investor concerns around his waning interest in Tesla,” commented Sandeep Rao, a senior researcher at Leverage Shares, an entity that holds Tesla stock.
Despite the apparent support, major proxy firms like Glass Lewis and Institutional Shareholder Services, along with large investors such as Norway’s sovereign wealth fund and several significant U.S. pension funds, have advised shareholders to reject the pay package. Marcie Frost, CEO of the California Public Employees’ Retirement System, argued that the package was excessive and could dilute the value of other shareholders’ stocks.
However, Tesla has actively campaigned for the pay package’s approval, particularly targeting retail investors who make up a substantial portion of its ownership base but often do not vote. This strategy appears to have paid off,
The approval of Musk’s pay package does not mark the end of legal challenges. The Delaware judge criticized Tesla’s board for being too aligned with Musk, pointing out that the pay plan was proposed by a board with close personal and financial ties to him. This conflict of interest, coupled with the board’s failure to fully inform shareholders in 2018, has cast a shadow over the legitimacy of the package.
Musk’s influence on Tesla is undeniable. Since the pay package’s initial approval, he has expanded his involvement in other companies, including SpaceX, X, and xAI, an artificial intelligence firm he founded in 2023. Despite these additional commitments, the vote suggests that shareholders believe Musk remains critical to Tesla’s success.
“Shareholders seem to think he’s the only person with the best strategy to implement going forward,” said Jason Schloetzer, a business professor at Georgetown University. This sentiment reflects a belief in Musk’s unique vision and capability, despite the risks associated with his multifaceted business engagements.
While Musk’s leadership has driven Tesla to significant milestones, including becoming the world’s most valuable automaker by market capitalization, recent years have seen challenges. Sales and profit growth have slowed, and the company’s strategic direction has faced scrutiny. The approval of the pay package could be seen as a vote of confidence in Musk’s ability to navigate these challenges and continue driving innovation.
Musk’s recent emphasis on robotaxis represents a bold strategic shift. While autonomous technology promises to revolutionize transportation, it also involves significant risks and uncertainties. Investors’ endorsement of Musk’s pay package suggests a willingness to support this high-stakes vision, albeit with a degree of cautious optimism.
The approval of Elon Musk’s $56 billion pay package by Tesla shareholders is a significant endorsement of his leadership and vision for the company. Despite the legal challenges and opposition from some major investors, the support from a broad base of shareholders underscores their belief in Musk’s unique ability to steer Tesla towards a future dominated by autonomous vehicles and advanced technologies. As Tesla continues to navigate the complexities of the EV market and broader technological landscape, Musk’s leadership will remain a critical factor in its trajectory.
The coming months will be crucial for Tesla as it addresses the legal challenges associated with the pay package and continues to innovate in the electric vehicle and autonomous driving sectors. Shareholders have made their stance clear: they are willing to bet on Musk’s vision, despite the inherent risks, in the hope of realizing the transformative potential he promises.
