Tesla Shareholders Approve Elon Musk’s $56 Billion Compensation Package
Tesla CEO Elon Musk has secured enough shareholder votes to approve his 2018 stock option compensation package. Shareholders also approved the company’s decision to re-incorporate Tesla in Texas, moving away from Delaware, where Musk’s pay package had been challenged.
At Tesla’s annual meeting, held at the Texas gigafactory, attendees cheered and gave a standing ovation when general counsel Brandon Ehrhart announced the results. The margin of victory was not immediately clear.
“I just want to start off by saying: Hot damn, I love you guys,” Musk exclaimed as he leapt around on stage. “I think we’re not just opening a new chapter for Tesla, we’re starting a new book.”
While the votes in favor of Musk’s 2018 stock option award could mean a payout of up to $56 billion, the largest CEO compensation package in history, this doesn’t ensure he’ll receive it. A judge in Delaware, who decided to rescind the package, still has to issue her final ruling.
The judge’s post-trial opinion in January followed a years-long legal battle initiated by Tesla shareholder Richard Tornetta, who sued in 2019 to rescind Musk’s pay deal. Tornetta argued that Musk, being a part-time CEO, was receiving an unjust amount of money without the board demanding he focus entirely on Tesla.
Chancellor Kathaleen McCormick voided the pay package, ruling it was unfair and that shareholders weren’t fully informed at the time of the vote because Tesla didn’t properly disclose Musk’s control over the process.
Supporters of Tesla and Musk have recently posted extensively on social media in favor of the CEO’s pay package. Musk has engaged with many of these posts, leading to a flurry of regulatory filings as Tesla aimed to cover its proxy statement bases this time.
Despite the approval, shareholders are likely to sue Tesla and Musk for endorsing a pay package for a CEO whose time is divided between several other companies, including xAI, SpaceX, and Neuralink. In fact, Tesla and Musk have faced lawsuits this week: one from shareholders claiming Musk made billions selling Tesla stock using insider information, and another for starting xAI, a competing AI company, and diverting talent and resources to it.
The fear of Musk’s pay package being blocked by the courts may be why Tesla pushed to reincorporate in Texas, hoping for less judicial resistance. After Chancellor McCormick’s opinion, Musk posted on social media advising against incorporating in Delaware and conducted a poll asking if Tesla should change its state of incorporation to Texas, which has now been approved.
Additionally, none of the five shareholder proposals aimed at enhancing Tesla’s ESG (Environmental, Social, and Governance) efforts passed. These proposals included annual reporting on anti-harassment and discrimination efforts, adoption of collective bargaining, and integrating sustainability metrics into executive compensation plans. The board recommended voting against all of them, and shareholders typically follow the board’s recommendations.
Two stockholder proposals did pass: one reducing director terms to one year, and another requiring simple majority voting provisions in Tesla’s governing documents.
