Tesla shareholders approved CEO Elon Musk’s US$56 billion pay package, the electric vehicle-maker said on Thursday, a big thumbs-up to his leadership and an enticement for keeping his focus on his biggest source of wealth.
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Elon Musk meets Premier Li Qiang in Beijing amid Tesla bid to promote self-driving tech
Elon Musk meets Premier Li Qiang in Beijing amid Tesla bid to promote self-driving tech
The approval also underscores the support that Musk enjoys from Tesla’s retail investor base, many of whom are vocal fans of the mercurial billionaire. The proposal passed despite opposition from some large institutional investors and proxy firms.
The Tesla CEO could still face a long legal fight to convince a Delaware judge who invalidated the package in January, describing it as “unfathomable”. He may also face fresh lawsuits on the package, which would be the largest in US corporate history.
Shareholder approval for the compensation serves as both an endorsement of Musk’s tenure and an acknowledgement that investors do not want to risk the company’s future.
In January, Musk threatened to build AI and robotics products outside Tesla if he failed to gain enough voting control, which essentially required the 2018 pay package to be approved.
He shifted the company’s focus to robotaxis, shelving cheaper mass-market electric cars, to the concern of some investors who feared the autonomous technology will be hard to perfect.
“This vindicates Musk and allays some investor concerns around his waning interest in Tesla,” said Sandeep Rao, senior researcher at Leverage Shares, which owns Tesla’s stock.
The board had said that Musk deserves the package because he hit all the ambitious targets on market value, revenue and profitability. Large investors including the California Public Employees’ Retirement System had called the pay package “excessive”.
“Elon Musk and Chair Denholm have made this about CEO loyalty and presented the votes as a decision about whether the company can keep Musk. That is a lot of pressure,” Ivan Frishberg, chief sustainability officer at Amalgamated Bank, told Reuters. The bank voted against the pay proposal, citing concerns about lack of independence and corporate governance at Tesla.
Tesla had been drumming up support for Musk’s pay package, especially from retail investors, who make up an unusually high percentage of its ownership base but who often do not vote. Company executives have posted messages on X, saying Musk is critical to Tesla’s success. Tesla has run social media ads, and Musk has promised a personal tour of Tesla’s factory in Texas to some shareholders who cast votes.
They are brushing aside essentially key man risks, where Tesla has become even more dependent on Musk going forward
While Musk is undoubtedly Tesla’s driving force, and is credited with much of its success, the company’s sales and profit have slowed. There are concerns that he is spreading himself too thin.
The approval suggests shareholders “think he’s the only person with the best strategy to implement going forward”, said Jason Schloetzer, a business professor at Georgetown University with expertise in corporate governance.
“They are brushing aside essentially key man risks, where Tesla has become even more dependent on Musk going forward,” he said, citing high-profile executive departure in the past few months. The Delaware judge who ruled against the package criticised Tesla’s board for being “beholden” to him, saying the plan was proposed by a conflicted board with close personal and financial ties to its top executive.
The board held the shareholder vote as a way to bolster its appeal of the ruling, in which the judge cited the board’s failure to fully tell shareholders before approving the pay package in 2018.