Tesla Shareholders Endorse $45 Billion Stock Package for Elon Musk

Elon Musk's $45 Billion Pay Award Reaffirmed by Tesla Shareholders

by Faruk Imamovic
Tesla Shareholders Endorse $45 Billion Stock Package for Elon Musk
© Getty Images/Apu Gomes

In a significant show of confidence, Tesla shareholders have reaffirmed a $45 billion pay award for Elon Musk, the company's CEO. This decision comes after a legal challenge initially nullified the award. The vote, revealed during Tesla’s annual meeting in Austin, Texas, demonstrates shareholders' belief in Musk’s leadership and may influence the judge who previously voided the award to reconsider her decision.

The shareholder approval brings relief to Musk's supporters, who feared a rejection might lead him to reduce his involvement with Tesla or potentially leave the company. The outcome is a setback for investors advocating for greater executive accountability and limitations on executive pay. Additionally, the approval may further solidify Musk's position as one of the world’s wealthiest individuals, with a net worth exceeding $200 billion.

Legal and Corporate Developments

The board of Tesla called for the shareholder vote following a ruling by Chancellor Kathaleen St. J. McCormick of the Court of Chancery in Delaware. In January, Chancellor McCormick sided with disenchanted Tesla shareholders, who argued in a lawsuit that the 2018 pay package was excessively generous. The board hoped that renewed shareholder approval would address the Chancellor’s findings, which cited undisclosed conflicts of interest among board members due to their personal and financial ties to Musk.

However, legal experts remain skeptical about the impact of this renewed vote. "It doesn’t change a thing," remarked Charles Elson, founding director of the Weinberg Center for Corporate Governance at the University of Delaware. Tesla has acknowledged that the vote might not resolve the legal issues at hand.

In addition to the compensation vote, shareholders also approved a proposal to move Tesla’s corporate registration to Texas. This move reflects Musk’s and the board's perception of unfair treatment by Delaware courts but will not affect the ongoing Delaware case.

A proposal that called for Tesla to refrain from interfering with workers attempting to organize a union and to negotiate in good faith was rejected by shareholders. Musk has historically been opposed to organized labor, a stance highlighted by Tesla's refusal to negotiate with striking mechanics in Sweden for nearly six months.

Tesla Shareholders Endorse $45 Billion Stock Package for Elon Musk
Tesla Shareholders Endorse $45 Billion Stock Package for Elon Musk© Getty Images/Justin Sullivan

Polarized Opinions Among Investors

The compensation vote underscored a deep divide among Tesla's investors. Some view Musk as a visionary who has revolutionized the automotive industry, while others are frustrated by his controversial statements on social media and recent declines in Tesla’s sales and profits.

Robyn Denholm, chair of Tesla’s board, defended the pay package, emphasizing the wealth generated for investors under Musk’s leadership. "Elon is not only a visionary but a CEO with a proven ability to execute our mission and achieve incredibly ambitious business results that have generated extraordinary value for you," she wrote to shareholders before the vote.

On the other hand, notable institutional investors like Norges Bank Investment Management, managing Norway’s oil wealth, and California Public Employees’ Retirement System (CalPERS), the largest U.S. pension fund, voted against the pay package.

Stock Market Performance and Future Implications

Tesla's stock has faced significant volatility. Despite a broader market uptrend, Tesla shares have fallen more than 25% this year. At its peak in 2021, Tesla’s market value soared to $1.2 trillion, aligning it with tech giants like Microsoft, Apple, and Google. However, its current market value has plummeted to around $580 billion.

The 2018 pay package offered Musk stock options worth billions if he met specific revenue or profit benchmarks and increased Tesla's stock value to $650 billion. While these targets seemed out of reach initially, Tesla’s subsequent growth allowed Musk to qualify for the options as the company’s market value exceeded the benchmark.

With the 2018 award, Musk holds 20.5% of Tesla's stock, and just under 13% without it. To survive legal challenges, the pay measure required a majority vote from shareholders excluding those held by Musk or his brother, Kimbal Musk.

Reactions from Musk's Supporters and Critics

On the social media platform X, owned by Musk, the reaffirmed pay award sparked lively reactions. Before the official announcement, Musk posted about the passing shareholder resolutions, thanking his supporters.

Musk’s followers, including retail investors and tech industry friends, celebrated the news. "Congrats on getting paid what you’re owed E!" wrote Jason Calacanis, a prominent tech investor. "The most important message of the vote is that Elon knows now he has the support of 90% of retail investors and more than 73% of all shares," commented Alex Voigt, a blogger and YouTube personality.

However, Musk's involvement with X has also drawn criticism from some Tesla investors, concerned that his focus on the platform detracts from his responsibilities at Tesla. Musk’s promotion of controversial content on X has alienated some employees and investors.

Despite the criticism, many of Musk’s supporters on X remained vocal. "Looks like Tesla shareholders are approving Elon’s CEO package by a wide margin — good for them," wrote Lulu Cheng Meservey, a tech executive. "The vast majority of Tesla shareholders approved Elon’s comp package in 2018 and have re-approved it now," noted David Sacks, a Silicon Valley tech investor.

In contrast, critics voiced their discontent. "It’s official — Tesla shareholders are the stupidest humans to walk the face of the planet," one poster wrote. However, many critics of the pay package remained silent following the vote.

Tesla Elon Musk