Tesla shareholders approve CEO Elon Musk's pay package

Tesla shareholders have reaffirmed payouts of more than $45 billion to CEO Elon Musk, after she was fired in a legal challenge.

The result of the vote, announced at Tesla's annual meeting at its headquarters in Austin, Texas, on Thursday, is a strong sign that shareholders still believe in Mr. Musk, and could persuade the judge who invalidated the award to reinstate it.

Supporting the pay award, made up of stock options, would come as a relief to Mr. Musk's fans, who fear a rejection could prompt him to spend less time running Tesla or even quit.

“We believe Elon is critical to Tesla’s success,” said Tasha Kenney, director of investment analysis at ARK Invest, which counts the automaker among its largest holdings. “I think it's very important that Elon stays at the helm.”

The vote was a setback for investors who had hoped it would send a message about CEO accountability and limits on their pay.

“It's a higher pay package than we've seen in the U.S. and I don't think it sets a good precedent,” said Christine Hall, founder and chief investment officer of Nia Impact Capital, which has pushed Tesla to improve working conditions at the company. Its factories.

The result may also help Mr Musk qualify as the world's richest person, with a fortune of more than $200 billion.

In his speech to shareholders after the vote, he promised that he was committed to Tesla. The salary package “isn't actually cash, and I can't run away, nor do I want to,” he said.

Tesla shares rose on Thursday ahead of the official results announcement after Mr Musk said on X that the pay plan passed by a wide margin.

Tesla's board of directors had called the vote in response to the ruling by Counsel Kathleen St. J. McCormick of the Court of Chancery in Delaware, where Tesla is registered as a company. In January, Chancellor McCormick agreed with a group of frustrated Tesla shareholders who claimed in a lawsuit that the 2018 pay package was grossly excessive.

The board had hoped that shareholder approval would help again address Chancellor McCormick's finding that the 2018 vote in favor of the pay package was tainted because board members failed to disclose conflicts of interest arising from their personal and financial relationships with Mr. Musk.

“The legal battle over the compensation plan is far from over, but we believe the vote significantly strengthens Tesla’s case,” Garrett Nelson, an equity analyst at CFRA Research, said in a research note on Thursday.

But some legal experts questioned whether a yes vote would lead McCormick to review her ruling, and Tesla acknowledged that a vote would not necessarily resolve the case.

With the 2018 pay award, Mr. Musk owns 20.5% of Tesla, and just under 13% he does not own.

Shareholders also approved a proposal to move Tesla's registration to Texas, a reaction to what Mr Musk and the board viewed as unfair treatment by Delaware courts. This move will have no impact on the Delaware case.

They rejected a measure proposed by shareholders that called for Tesla not to interfere with workers trying to organize a union, and to bargain in good faith if they do. Mr. Musk has often expressed hostility toward organized labor. In Sweden, Tesla refused to negotiate with the mechanics working for the company who have been on strike for nearly six months.

Tesla did not immediately reveal vote totals for any of the proposals.

The compensation vote pitted those who regard Mr. Musk as a genius who revolutionized the auto industry against those who took issue with his polarizing statements about X and the recent stagnation in Tesla's sales and profits.

Robin Denholm, Tesla's chairman, said investors had become rich because of Mr. Musk's leadership, and that the company had an obligation to give him what he promised.

“Elon is not only a visionary, he is a CEO with a proven ability to execute on our mission and deliver incredibly ambitious business results that have generated extraordinary value for you,” she said in a letter to shareholders before the vote.

But other shareholders have been dismayed by recent declines in Tesla's sales and profits and by Mr. Musk's polarizing statements on X, in which he has endorsed some right-wing conspiracy theories and offended large numbers of buyers.

Several large institutional investors voted against the pay package, including Norges Bank Investment Management, which manages Norway's oil wealth and is the largest sovereign wealth fund. He also opposed the California Public Employees Retirement System, or CalPERS, the largest pension fund in the United States.

Tesla shares have fallen more than 25 percent this year, even as the broader stock market has risen 14 percent. At the peak of its stock price in 2021, Tesla had a market cap of $1.2 trillion, putting it amidst tech giants like Microsoft, Apple and Google. Its value has since fallen to about $580 billion.

The package gave Mr. Musk stock options worth tens of billions of dollars if he met certain revenue or profit benchmarks and increased the value of the company's stock to $650 billion.

Most of these goals were considered out of reach when the plan was approved in 2018. Tesla was struggling to produce its first moderately priced car, the Model 3 sedan. Soon after, Tesla's business took off, and under the plan, its market cap remained above the target. $650 billion long enough for Mr. Musk to collect options.

To overcome legal challenges, the pay measure requires approval by a majority of voting shares, excluding those owned by Mr. Musk or his brother, Kimbal Musk.