Elon Musk Secures $56-Billion Tesla Pay Package, Cites Confidence In Delivering Results
The approval, announced on Thursday, highlights Elon Musk's strong support among Tesla's retail investors, despite opposition from some large institutional investors and proxy firms
Elon Musk pay package: Tesla shareholders have given a resounding endorsement to CEO Elon Musk's $56-billion pay package, solidifying his leadership and ensuring his continued focus on the electric vehicle maker, according to Reuters report. The approval, announced on Thursday, highlights Musk's strong support among Tesla's retail investors, despite opposition from some large institutional investors and proxy firms.
Speaking at the annual shareholder meeting in Austin, Texas, Musk attributed his success to his optimistic outlook. "If I wasn't optimistic this wouldn't exist, this factory wouldn't exist," Musk said, receiving applause from the audience. "But I do deliver in the end. That's the important thing."
Tesla annual meeting in 25 mins! https://t.co/VJrCQl8OD4
— Elon Musk (@elonmusk) June 13, 2024
The approval, however, does not resolve an ongoing lawsuit in a Delaware court regarding the pay package, which some legal experts believe could take months to conclude. In January, the judge had invalidated the pay package, calling it "unfathomable." There is also potential for new lawsuits over what is the largest compensation package in US corporate history.
"This is not over," said Brian Quinn, a professor at Boston College Law School. He noted that the Delaware judge would closely examine the vote and require Tesla to prove the process was fair and not improperly influenced by Musk. The judge had previously criticized Tesla's board for being too closely aligned with Musk.
In addition to approving Musk's pay package, shareholders voted to move Tesla's legal home from Delaware to Texas and re-elected board members Kimbal Musk and James Murdoch. They also passed proposals to shorten board terms to one year and lower voting requirements for proposals to a simple majority, despite board opposition.
Tesla did not disclose the voting tallies on Thursday, with the results expected in the coming days. The meeting drew significant online attention, with at least half a million viewers on the social media platform X and about 40,000 on YouTube.
"This is a clear message that Tesla's retail shareholders approve of what's going on," said Lindsey Stewart, a director at Morningstar Sustainalytics. "It will be interesting to see the exact percentages of the votes."
Shareholder approval of Musk's compensation package serves as both an endorsement of his tenure and a recognition that investors are unwilling to risk Tesla's future without him. "They are brushing aside key man risks, where Tesla has become even more dependent on Musk," said Jason Schloetzer, a business professor at Georgetown University.
Musk had previously threatened to develop AI and robotics products outside of Tesla if he failed to gain enough voting control. He has shifted the company's focus to robotaxis, moving away from cheaper mass-market electric cars, which has concerned some investors about the feasibility of perfecting autonomous technology.
During the meeting, Musk announced that Tesla recently shipped a record 1,300 Cybertrucks in a week and that plans for volume production of Semi trucks were underway. He also discussed plans for autonomous cars, though he did not provide a timeline for their launch.
Tesla's stock has dropped about 55 per cent from its 2021 peak due to slowing EV sales and Musk's divided attention between his various ventures. However, the stock closed up 2.9 per cent on Thursday.
"Shareholders have once again endorsed the terms of the contract, indicating that 'a deal is a deal' and Musk deserves to be rewarded for meeting the lofty thresholds of an entirely incentive-based contract," said Garrett Nelson, an analyst at CFRA Research. "The news lifts a major overhang on the shares, although we wouldn't be surprised by a 'sell the news' reaction on Friday following big gains over the past two trading sessions."
Despite the approval, large investors like the California Public Employees' Retirement System have labeled the pay package "excessive." Ivan Frishberg, chief sustainability officer at Amalgamated Bank, stated, "Elon Musk and Chair Robyn Denholm have framed this as a vote on CEO loyalty, but good governance is crucial for a company's bottom line, and Tesla's board is clearly deficient in that regard."
While Musk is credited with much of Tesla's success, there are concerns about him spreading himself too thin. Since the approval of his pay package in 2018, Musk has taken on two additional companies, now overseeing six firms, including SpaceX, social media giant X (formerly Twitter), and the artificial-intelligence firm xAI, which he founded in 2023.
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