Victory for Elon Musk: Shareholders Approve Tesla Chief Executive’s $56 Billion Pay Package

The landslide result signals a vote of confidence in the controversial Tesla executive, but it will have questionable legal weight.

AP/Kirsty Wigglesworth
Elon Musk AP/Kirsty Wigglesworth

Investors are signaling a major show of confidence in chief executive Elon Musk as Tesla shareholders vote to re-approve his $56 billion compensation package. Now, the billionaire chief executive is tasked with convincing a Delaware court. 

The crowd erupted with cheers as Tesla’s legal officer, Brandon Ehrhart, announced the results of the poll during Tesla’s shareholder meeting at Austin, Texas, on Thursday. 

Tesla investors also voted in favor of the proposal to move the company’s incorporation to Texas from Delaware. “Welcome to Texas,” Mr. Ehrhart quipped. 

The result, though symbolically significant, holds questionable legal weight and will not immediately restore the compensation package that was voided in January by a Delaware court for not being “in the best interest” of investors. 

It’s possible that the the signal of approval from shareholders may help Mr. Musk in his effort to appeal the ruling, though the company noted in its proxy filing that it “cannot predict with certainty how a vote to ratify Musk’s compensation would be treated under Delaware law.”

“This doesn’t fully settle the matter; the compensation package can still be deemed illegal,” a Piper Sandler analyst, Alexander Potter, wrote to clients on Wednesday, adding that the stock was expected “to respond favorably to this news.” 

It could be some time before Mr. Musk can even file an appeal, given that he will need to wait for the court to settle the case’s legal fees. The subsequent litigation process could take months. 

In spite of the legal battle ahead, the result provides relief to investors who worried that Mr. Musk would choose to leave Tesla should the vote not come out in his favor. 

This became a concern after Mr. Musk said he would be “uncomfortable” with “growing Tesla to be a leader in AI & robotics without having ~25% voting control,” he wrote in a post on X following the January ruling. Mr. Musk owns about 13 percent of the company now. 

Mr. Musk’s value to the company is what motivated many shareholders to vote in favor of the pay package. A billionaire investor who is a Tesla shareholder, Ron Baron, said earlier this month, “Tesla is better with Elon. Tesla is Elon.” 

Voters were divided, though, over Mr. Musk’s perceived lack of commitment to the company given that the billionaire entrepreneur owns several other businesses. Some hoped that the pay package would serve to capture and shift the chief executive’s attention away from his other business ventures. Others wondered whether the pay package is what enabled him to pursue those other opportunities. 

Several notable institutional investors came out against the deal, including the California State Teachers’ Retirement System and Norway’s sovereign wealth fund. 

Tesla’s largest investors, Vanguard Group, BlackRock, and State Street, which together own about 17 percent of Tesla stock, did not publicly announce their votes. 

Mr. Musk had already declared victory on Wednesday night when he shared the preliminary results of the poll in a post on X showing that both resolutions were passing by wide margins. Tesla’s stock price rose almost 4 percent during trading on Wednesday and nearly 7 percent in after-hours trading. 

The market has continued to respond positively to the news, with Tesla’s share price climbing. The recent gains, though, will not likely offset the serious losses Tesla has faced this year. As of Wednesday’s close, Tesla was down 29 percent for the year, largely due to the release of disappointing first quarter sales numbers. 

The company will face an uphill battle as second quarter earnings are released in just a couple of weeks. Initial forecasts paint a pessimistic picture of the company’s finances. 

Yet Mr. Musk seems optimistic for the future: “I’ve been pathologically optimistic,” he told the crowd of shareholders. “But I do deliver in the end.”

The New York Sun

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