Tesla shareholders are voting to approve a $56 billion compensation package for Elon Musk and move the electric car maker’s legal headquarters to Texas, Musk said on social media platform X on Wednesday, adding that the votes were “in sync.” By a large margin.
A yes vote would give the electric car maker more ammunition after a Delaware judge struck down a 2018 compensation package plan that was then the largest in U.S. corporate history, finding the board was “beholden” to Chief Executive Officer Musk.
It’s also a big win for Musk and his board, who have put their credibility on the line to win shareholder approval despite opposition from major investors Glass Lewis and Institutional Shareholder Services (ISS).
“Thank you all so much for your support!!” Musk said in X’s post.
The results will be announced at 4:30 p.m. ET on Thursday at a conference at Tesla’s headquarters in Texas.
A person familiar with the preliminary vote tally said the “yes” result was driven by a combination of large institutional and individual investors.
However, shareholders may change their vote up until the start of the annual meeting.
Tesla shareholders also voted on other proposals, including moving the company’s headquarters from Delaware to Texas and re-electing Musk’s brother, Kimbal Musk, and James Murdoch to the board of directors.
Referendum
Some investors saw the vote on Musk’s pay as a test of confidence in his leadership.
While he is undoubtedly the driving force behind Tesla and is credited with much of the company’s success, the company has recently seen slowing sales and profit growth.
Tesla shares have fallen nearly 60% from their peak in 2021, when Musk began selling billions of dollars’ worth of shares to fund his acquisition of Twitter, sparking concerns that his investment may be stretched thin.
He currently runs six companies, including rocket manufacturer SpaceX, social media giant X (formerly Twitter), and xA1, an artificial intelligence company Musk founded in 2023.
Musk’s outspokenness and knack for controversy have also hurt Tesla’s reputation and sales.
Tesla shares rose 3.9% on Wednesday, the day before the shareholder meeting.
Shareholders, led by large institutional investors, have criticized the pay as too high for a leader who splits his time between six companies and is now overseeing Tesla’s declining sales and a major strategic shift.
Marcy Frost, CEO of the California Public Employees’ Retirement System, said Wednesday that the compensation package would allow Musk to bolster his ownership stake “at the expense of diluting value for other shareholders.”
Tesla has garnered support for Musk’s compensation package, especially from individual investors, who make up an unusually large portion of the company’s shareholder base but often do not vote.
Company executives posted messages on X saying Musk was essential to Tesla’s success.
Tesla ran social media ads and Musk promised some shareholders who voted a personal tour of the Tesla factory in Texas.
The board said the world’s richest man deserved the reward because he had achieved all of his ambitious targets for market value, sales and profitability.
A Delaware judge said the 2018 compensation plan did not ensure Musk would devote significant time to Tesla, but the board said the compensation package was also necessary to keep Musk focused on Tesla.
Musk is making threats Developing AI and robotics products outside of Tesla If they do not receive enough votes, their 2018 compensation package will need to be approved.
Tesla shareholder Donald Ball filed a lawsuit earlier this month challenging the upcoming shareholder vote, arguing that approval of the compensation package should be invalid because Musk “used aggressive and coercive tactics to obtain shareholder approval.”
Legal battle
The same package had previously been rejected by a Delaware judge, who found it invalid as an “incalculable sum” awarded by an interested board of directors with close personal and financial ties to the CEO.
The board conducted the shareholder vote as a way to bolster its appeal against the ruling, in which the judge noted the board did not provide shareholders with sufficient information before approving the compensation package in 2018.
“Even if shareholders had approved the old package, it’s not clear that a Delaware court would recognize that vote as valid,” said Adam Badawi, a law professor at the University of California, Berkeley who specializes in corporate governance.
With the appeal reaching the Delaware Supreme Court, Musk could wait months or years for his compensation package to be restored.
