Tesla Shareholders Voting to Approve $56 Billion Pay Package for Elon Musk, CEO Announces on X

Tesla shareholders are currently voting on a monumental $56 billion pay package for CEO Elon Musk and a proposal to relocate the electric vehicle maker's legal headquarters from Delaware to Texas. Musk announced on social media platform X that the proposals were passing by wide margins, although the final results will be revealed at a meeting on Thursday.

The vote on Musk's 2018 incentive package, which was valued at up to $56 billion at the time, is the largest in U.S. corporate history. This comes after a Delaware judge voided the plan, stating that it was approved by a board "beholden" to Musk. The preliminary tally, confirmed by a person familiar with the matter, indicates that a combination of big institutional investors and retail investors have pushed the 'yes' vote over the line. However, shareholders are allowed to change their votes up until the start of the annual meeting.

In addition to the pay package, Tesla shareholders are also voting on the relocation of the company's legal headquarters to Texas and the re-election of two board members: Musk's brother Kimbal Musk and James Murdoch. Musk expressed his gratitude to shareholders for their support in a tweet, referring to the resolutions on his pay package and the move.

Why It Matters : The vote on Musk's pay package is seen by many as a test of confidence in his leadership. While Musk is widely credited with much of Tesla's success, the company has recently experienced slowing sales and profits. The board argues that Musk, the world's richest person, deserves the package because he has met all the ambitious targets related to market value, revenue, and profitability. They also claim that the pay package is necessary to keep Musk devoted to Tesla, despite a Delaware judge's assertion that the 2018 plan failed to ensure Musk would commit a substantial amount of time to the company.

Musk has even threatened to develop AI and robotics products outside of Tesla if he does not gain enough voting control, which requires the approval of the 2018 pay package. Some large shareholders, including Norway's sovereign wealth fund and California's two largest pension funds, have opposed the compensation, deeming it excessive. In response, Tesla has been actively seeking support for Musk's pay package, particularly from retail investors who make up a significant portion of its ownership base but often do not vote. Company executives have posted messages on X, emphasizing Musk's critical role in Tesla's success, and the company has run social media ads. Musk has also promised a personal tour of Tesla's Texas factory to some shareholders who cast their votes.

The same pay package was previously rejected by a Delaware judge, who invalidated it as an "unfathomable sum" granted by a conflicted board with close personal and financial ties to Musk. The board decided to hold the shareholder vote to strengthen its appeal of the ruling, in which the judge cited the board's failure to fully inform shareholders before approving the pay package in 2018. Musk may have to wait months or even years to have his pay package restored as appeals make their way through Delaware's Supreme Court. Tesla could also face additional litigation from some shareholders. One shareholder has already filed a lawsuit challenging the upcoming vote on Musk's pay package and the change of domicile.

Key Takeaways

• Tesla shareholders are voting on a $56 billion pay package for Elon Musk, the largest in U.S. corporate history.
• Shareholders are also voting on moving Tesla's legal headquarters from Delaware to Texas.
• The vote is seen as a test of confidence in Musk's leadership amid slowing sales and profits.
• The pay package was previously invalidated by a Delaware judge, and further litigation is possible.
• Tesla has been actively seeking support for the pay package, especially from retail investors, through social media and other means.