Shareholders at Tesla have made a significant decision, choosing to maintain Elon Musk’s compensation schedule, which includes a record-breaking $44.9 billion pay package. This move comes after a contentious shareholder referendum, with some notable investors expressing opposition to the deal. Despite the controversy, the majority of shareholders have approved the package, which is seen as crucial for Musk’s continued involvement with the company.
Background and Context
The compensation package was initially approved in 2018, but a Delaware judge invalidated it in January due to concerns over the board’s lack of independence from Musk’s influence and the illegitimate process used to reach the substantial figure. In response, Tesla and Musk advocated for shareholder approval as a show of defiance against the ruling. In instead of a salary or monetary bonus, the package provides stock options that are based on Tesla’s potential market value of up to $650 billion over a ten-year period.
Shareholder Vote
The shareholder vote took place during Tesla’s annual meeting on Thursday, with preliminary indications suggesting that the package was approved by a wide margin. Musk, who took the stage in Austin following the results, expressed his elation, stating, “We’re not just turning a new page—we’re writing a new book.” He continued, “It’s going to be an exceptional book. It’s going to be groundbreaking.”
Institutional Investor Support
While some institutional investors, such as California’s State Teachers Retirement System, publicly announced their intention to vote against the package, Tesla’s top five institutional shareholders, including Vanguard, BlackRock, State Street, Geode Capital, and Capital Research, either declined to comment or did not disclose their voting intentions, controlling approximately 17% of the votes. This lack of transparency has raised concerns about the potential dilutive effects of the package on other shareholders.
Legal and Regulatory Context
The Delaware court’s decision to invalidate the package was based on the assertion that Tesla’s board lacked independence from Musk’s influence and reached the substantial figure through an illegitimate process. In response, Tesla has launched an aggressive lobbying campaign to secure approval for the pay package, utilizing social media, television appearances, and proxy filings with the U.S. Securities and Exchange Commission.
Shareholder Concerns
Some investors see the vote on Musk’s pay as an indicator of how much they trust him to lead. Tesla’s success is largely attributed to Musk, but the company has recently faced slowing sales and profits. Tesla’s stock has lost nearly 60% of its value since its peak in 2021, when Musk began selling billions of dollars’ worth of his stake to finance his purchase of Twitter, now rebranded as X. Musk currently oversees six companies, including SpaceX and xAI, the artificial intelligence firm he founded in 2023.
Future Implications
The approval of Musk’s compensation package could quell investor concerns about his future involvement with the company and provide Tesla with valuable ammunition in its ongoing legal battle to reverse the court decision. However, the package’s approval does not address the question of whether the board violated its duties in 2018, which is the focus of the ongoing appeal. Musk may have to wait months or years for the pay package to be restored as the case progresses through the Delaware Supreme Court.
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Conclusion
Tesla shareholders have chosen to maintain Elon Musk’s compensation schedule, which includes a record-breaking $44.9 billion pay package. This decision comes after a contentious shareholder referendum, with some notable investors expressing opposition to the deal. Despite the controversy, the majority of shareholders have approved the package, which is seen as crucial for Musk’s continued involvement with the company. The implications of this decision will be closely watched as Tesla continues to navigate its legal and regulatory challenges.
