On June 12, Tesla CEO Elon Musk announced on social media that shareholders have approved his $56 billion compensation package and the relocation of the electric vehicle manufacturer’s legal headquarters to Texas.
“Thank you for your support!!” Musk stated in a post on X, indicating that both resolutions have been significantly endorsed by the shareholders, although specific details were not disclosed.
According to Reuters, shareholders overwhelmingly approved the largest compensation package in U.S. corporate history, potentially alleviating concerns among investors about Musk’s future within the company and providing backing to overturn the court decision that previously voided the compensation plan.
The $56 billion compensation package was initially approved in 2018 but was declared invalid by a judge in Delaware in January.
The day before the shareholders’ meeting, Tesla’s stock price rose by 3.9%, and pre-market trading on Thursday saw an additional 6.6% increase.
Musk continues to face a lengthy legal battle to persuade the Delaware judge. UC Berkeley law professor Adam Badawi stated, “Even though shareholders have indeed approved the old scheme, it is still unclear whether the Delaware court will allow the vote to take effect.”
The board organized the shareholder vote to support their appeal against the ruling. The judge highlighted that the board had failed to adequately inform shareholders before approving the compensation plan in 2018.
The outcome will be announced at a meeting held at Tesla’s headquarters in Texas on Thursday afternoon at 4:30 GMT.
As appeals progress to the Delaware Supreme Court, Musk must wait months or years to receive his salary.
An individual familiar with the preliminary voting statistics informed Reuters that a combination of large institutional investors and retail investors ultimately resulted in a “yes” vote.
Previously, the company urged shareholders to vote through a special webpage set up for the annual shareholders’ meeting, stating, “Tesla shareholders, time is running out.” The vote was scheduled to conclude at 11:59 local time on Wednesday.
Tesla has been seeking support for Musk’s compensation plan, particularly from retail investors, who hold an unusually high proportion of ownership in the company but often do not vote.
Company executives posted on X that Musk is crucial to Tesla’s success. The board stated that the world’s richest man deserved this treatment because he achieved all ambitious goals regarding market value, revenue, and profitability for the company. Moreover, the compensation plan is necessary to maintain Musk’s loyalty to Tesla.
Tesla is facing challenges of slowing growth and increased competition, especially from Chinese companies. Due to support from the CCP, cheap electric vehicles from China are flooding the markets in the U.S. and Europe. The EU announced tariffs on electric vehicles from China on Wednesday.
In addition to running Tesla and his rocket company SpaceX, Musk acquired the social media platform Twitter (now known as X) and increased focus on other projects, including his brain-machine interface company Neuralink and artificial intelligence company xAI.
Critics of the compensation deal argue that Musk’s attention is being diverted by his other efforts, and this all-encompassing plan in U.S. corporate history is excessive.
Major proxy firms Glass Lewis and Institutional Shareholder Services (ISS) have urged shareholders to reject the compensation plan, and significant investors, including the Norwegian Sovereign Wealth Fund, have also indicated they will vote against it.
Supporters of the compensation argue that without adequate compensation, the billionaire may redirect his efforts elsewhere. They claim that the compensation scheme motivates Musk.
Billionaire investor and long-time Tesla shareholder Ron Baron stated that he voted in support of the compensation plan, underscoring that Musk is key to the future of the electric vehicle manufacturer.
“At Baron Capital, our answer is clear, loud, and unequivocal: Tesla and Elon work better together. Elon is Tesla,” he said earlier this month.
Shareholders can change their votes before the start of the annual meeting.
Meanwhile, major investors, such as Vanguard Group and BlackRock, have not disclosed their voting intentions.
Tesla shareholders also voted on other proposals, including relocating its legal headquarters from Delaware to Texas and re-electing two board members: Musk’s brother Kimbal Musk and James Murdoch.
Texas Governor Greg Abbott congratulated Musk after the announcement and stated on X, “Welcome to a state with no personal income tax and no corporate income tax.”