In vote of confidence, Tesla shareholders approve Elon Musk's $56B US pay package | CBC News (2024)

Thomson Reuters

· Posted: Jun 13, 2024 6:52 AM EDT | Last Updated: June 14

Teslashareholders approved CEOElonMusk's $56-billion US 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.

The compensation package garnered support from about 77 per cent of votes cast at its annual shareholder meeting, according to a company filing on Friday. That was up fourpercentage points from the 2018 vote on the pay package, voided in January by a Delaware judge who described it as "unfathomable."

Shareholders also approved a proposal to move the company's legal home to Texas from Delaware,Teslasaid at its annual shareholder meeting in Austin.

Muskhad tipped off late on Wednesday that the proposals were garnering huge support and thanked shareholders. A chart on his social media platform X showed theresolutionswere set to pass by wide margins.

The approval also underscores the support thatMuskenjoys fromTesla's retail investor base, many of whom are vocal fans of the mercurial billionaire. The proposal passed despite opposition from somelarge institutional investorsand proxy firms.

TheTeslaCEO could still potentially face fresh lawsuits on the package, which would be the largest in U.S. corporate history.

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Musk's AI threats

Shareholder approval for the compensation serves as both an endorsem*nt ofMusk's tenure and an acknowledgement that investors do not want to risk the company's future.

In January,Muskthreatened tobuild AI and robotics products outside of Teslaif he failed to gain enough voting control, which essentially required the pay package to be approved.

He shifted the company's focus to robotaxis,shelvingcheaper mass-market electric cars, to the concern of some investors who feared the autonomous technology will be hard to perfect.

Tesla's share price has dropped about 60 per cent from its 2021 peak as EVsaleshave slowed andMusk's attention has wavered between Tesla and other companies he runs. The stock closed up 2.9 per centon Thursday.

"This vindicatesMuskand allays some investor concerns around his waning interest in Tesla," said Sandeep Rao, senior researcher at Leverage Shares, which owns Teslastock.

The board had said thatMuskdeserves 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."

Musk and Telsa chairRobyn Denholm "have made this about CEO loyalty and presented the votes as a decision about whether the company can keepMusk. 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 forMusk'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, sayingMuskis critical to Tesla's success. Tesla has run social media ads, andMuskhas promiseda personal tour of Tesla's factoryin Texas to some shareholders who cast votes.

Despite Musk, Tesla sales slow

WhileMuskis 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.

Muskhas added two more companies to his roster since the pay package was approved in 2018. He now runs or owns six firms, including rocket-builder SpaceX, social media giant X — formerly Twitter — and the artificial-intelligence firm xAI, whichMuskcreated in 2023.

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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 in Washington with expertise in corporate governance.

"They are brushing aside essentially key man risks, where Tesla has become even more dependent onMuskgoing forward," he said, citing high-profile executive departures in the past few months.

Kathaleen McCormick, the Delaware judge who ruled against the package, criticized 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 inform shareholders before approving the pay package in 2018.

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