“Thanks for your support!!” Musk stated in his article on X.
Overwhelming shareholder acceptance of the richest reward terms in U.S. corporate history should alleviate investor concerns about Musk’s future at the firm, while also providing ammo for the electric carmaker’s quest to overturn a court ruling to invalidate the compensation plan.
Musk would still face a lengthy legal struggle to persuade the Delaware judge who ruled that the Tesla board was “beholden” to him, as well as potential new litigation over the latest vote.
“Even if the shareholders approve the old package, it is unclear whether the Delaware court will allow that vote to take effect,” said Adam Badawi, a legal expert at UC Berkeley.
The outcome will be revealed at a meeting at Tesla’s headquarters in Texas on Thursday at 4:30 p.m. (2130 GMT).
According to a person familiar with the preliminary voting tally, a combination of large institutional and retail investor ballots helped push the ‘yes’ vote over the finish line.
Major proxy firms Glass Lewis and Institutional Shareholder Services (ISS) encouraged shareholders to oppose the pay package, and big investors, including Norway’s sovereign wealth fund, stated that they would vote against it.
Shareholders can amend their vote up until the opening of the annual meeting.
Tesla shareholders also voted on other measures, such as moving its legal headquarters from Delaware to Texas and re-electing two board members, Musk’s brother Kimbal Musk and James Murdoch.
Texas Governor Greg Abbott praised Musk following his post, stating on X, “Welcome to a state with no personal or corporate income tax.”
REFERENDUM
Some investors saw the vote on Musk’s compensation as a test of their trust in his leadership. While he is definitely Tesla’s driving force and is credited with much of the company’s success, sales and earnings have recently slowed.
Tesla’s stock has fallen over 60% of its value from its peak in 2021, when Musk began selling billions of dollars in stakes to help finance his acquisition of Twitter, raising concerns that he would be spread too thin. Musk now runs six companies, including rocket constructor SpaceX, social media behemoth X (previously Twitter), and artificial intelligence startup xAI, which he founded in 2023.
Musk’s outspokenness and proclivity for causing controversy have also hurt Tesla’s brand and sales.
The pay deal would allow Musk to increase his ownership “at the expense of diluting the value of those belonging to other shareholders,” said Marcie Frost, CEO of the California Public Employees’ Retirement System.
Tesla stock closed up 3.9% on Wednesday, a day before the shareholder meeting.
Tesla has been drumming up support for Musk’s pay package, particularly among retail investors, who account for an unusually large amount of the company’s ownership but rarely vote.
Company officials have posted statements on X, stating that Musk is important to Tesla’s growth. Tesla has sponsored social media commercials, and Musk has pledged to give select shareholders who voted a personal tour of the company’s Texas factory.
The board claimed the world’s richest individual deserved the package since he met all of the aggressive benchmarks for market value, revenue, and profitability.
The pay package is also required to keep Musk committed to Tesla, according to the board, despite the fact that the Delaware judge found that Musk’s 2018 pay plan failed to ensure that he dedicated a significant amount of time to Tesla.
Musk has threatened to launch AI and robotics technologies outside of Tesla if he does not win enough votes to approve the 2018 salary package.
COURT BATTLE
The Delaware court that disqualified the remuneration package stated that the plan was established by a biased board with deep personal and financial links to its chief executive.
The board held the shareholder vote to support its appeal of the verdict, in which the judge emphasized the board’s inability to adequately inform shareholders prior to approving the pay package in 2018.
“How the shareholders vote now doesn’t really answer the question whether the board violated its duties in 2018, and that’s the issue on appeal,” Ann Lipton, a corporate law professor at Tulane University, stated.
Musk will have to wait months or years for his pay package to be restored while appeals are heard by Delaware’s Supreme Court.
