Tesla shareholders approved CEO Elon Musk getting $56 billion pay package, the electric vehicle-maker said on Thursday, Jun 13. This record-breaking salary is a big thumbs-up to Musk’s leadership and an incentive to keep his focus on his biggest source of wealth.
(Image Credit: shutterstock)
The Tesla shareholder approval underscores the support that Musk enjoys from Tesla’s retail investor base. Many of the shareholders are vocal fans of the flamboyant billionaire. The proposal passed despite opposition from some large institutional investors and proxy firms.
Elon Musk’s pay approval
Musk while onstage at the annual shareholder meeting in Austin, Texas, described himself as pathologically optimistic. “If I wasn’t optimistic this wouldn’t exist, this factory wouldn’t exist,” he said to applause. “But I do deliver in the end. That’s the important thing.” He had tipped off late on June 12 that the proposals were garnering huge support.
The pay approval does not, however, resolve a lawsuit on the pay package in a Delaware court, which some legal experts think could stretch out for months. The judge invalidated the pay package in January, describing it as “unfathomable”.
Lawsuits on Musk pay package
Musk may also face fresh lawsuits on the package, which would be the largest in US corporate history. Shareholders had voted for this package in 2018.
The Delaware judge will scrutinize the vote and require Tesla to prove the process was not coerced or improperly influenced by Musk, he said.
The judge had criticized Tesla’s board as “beholden” to him, saying the plan was proposed by a conflicted board with close personal and financial ties to its top executive.
Tesla shareholder approval
On June 13, shareholders also approved a proposal to move the company’s legal home to Texas from Delaware.
They also approved other proposals, including the re-election of two board members: Musk’s brother Kimbal Musk and James Murdoch, son of media mogul Rupert Murdoch.
Shareholders did increase the level of investor control by passing proposals in favor of shortening board terms to one year and lowering voting requirements for proposals to a simple majority, despite board opposition to both.
Tesla on June 13 did not disclose the voting tallies, which are expected to be revealed in coming days.
At least half-a-million viewers watched the meeting on the live-stream on social media platform X, and about 40,000 watched on YouTube.
“This is, firstly, a message that Tesla’s retail shareholders do approve of what’s going on. It will be interesting to see what the exact percentages of the votes are,” said Morningstar Sustainalytics director Lindsey Stewart.
Musk ability to deliver
Shareholder approval for Elon Musk getting his pay package serves as both an endorsement of Musk’s tenure and an acknowledgment that investors do not want to risk the company’s future.
“They are brushing aside essentially key man risks, where Tesla has become even more dependent on Musk going forward,” said business professor Jason Schloetzer from Georgetown University, who has expertise in corporate governance.
Musk’s threat
In January, Musk threatened to build artificial intelligence and robotics products outside of Tesla if he failed to gain enough voting control.
He shifted the company’s focus to robotaxis, shelving cheaper mass market electric cars, to the concern of some investors who feared the autonomous technology will be hard to perfect.
In an update on Tesla’s performance, Musk said on June 13 that the company recently shipped a record 1,300 Cybertrucks in a week and that plans for volume production of its semi trucks were in place.
While Musk is undoubtedly Tesla’s driving force, and is credited with much of its success, the company’s sales and profit have slowed. There are concerns that he is spreading himself too thin.
Tesla’s share update
Tesla’s share price has dropped about 55 per cent from its 2021 peak as electric vehicle sales have slowed and Musk’s attention has wavered between Tesla and other companies he runs.
Telsa’s stock closed up 2.9% on June 13.
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