Elon Musk secures shareholder approval for historic £44 billion Tesla Pay package

Tesla CEO Elon Musk has received shareholder approval to reinstate his unprecedented $56 billion (£44 billion) pay package, the largest in corporate America history.

Tesla confirmed that proposals to ratify Musk’s compensation deal and move the company’s legal headquarters to Texas were endorsed by shareholders. Enthusiastic chants of “Elon Musk, Elon Musk” filled the air as preliminary results were unveiled at the company’s annual meeting at its headquarters in Austin, Texas.

Musk expressed his gratitude to shareholders and exclaimed, “Damn, I love you.”

Musk has sought to claw back the payout, initially agreed to in 2018, after a Delaware judge declared the deal void in January over concerns about the board’s transparency and independence during the approval process.

Over the past two months, Musk and Tesla’s boards have tried to convince shareholders to support the deal, aiming to strengthen their appeal against Delaware’s ruling.

Wall Street sees the vote as a barometer of confidence in Musk’s leadership at Tesla. The automaker’s shares have tumbled about 60 percent since their peak in 2021 due to a slowdown in electric vehicle sales. This led to criticism that Musk’s attention was too fragmented between Tesla and his other companies. Tesla’s board has argued that Musk deserves the package because he has met all the ambitious targets for market value, revenue and profitability.

Following the announcement, Tesla shares rose 2.9 percent, or $5.18, to close at $182.47 on Thursday after Musk indicated key proposals had been approved by “wide margins.”

This shareholder approval represents a major triumph for Musk, who this week is facing accusations of pursuing several female employees at his company SpaceX. Musk has not responded to the allegations, as detailed in a Wall Street Journal report.

Despite investor support, Musk still faces a legal battle to secure final approval for the payout. “Even if shareholders approve the old package, it is not clear that the Delaware court will allow that vote to be effective,” said Adam Badawi, a law professor at UC Berkeley, ahead of the annual meeting.

Tesla Chairman Robyn Denholm had hinted that Musk could leave the company if investors voted against the pay deal, and urged shareholders to ensure Musk remains motivated to dedicate his energy and vision to Tesla. Conversely, Musk had threatened to develop AI and robotics products outside of Tesla if he failed to secure sufficient voting control, conditional on the approval of the 2018 pay package.

The record-breaking payout has polarized shareholders. Supporters included Ron Baron of Baron Capital, who praised Musk’s “relentless drive and uncompromising standards” as essential to Tesla’s success. Other supporters included Baillie Gifford & Co, the Scottish asset manager, and Ark Investment Management, led by well-known US fund manager Cathie Wood. However, Norges Bank, Norway’s sovereign wealth fund, and the California Public Employees’ Retirement System opposed Musk’s proposed compensation.

Shareholder advisory firms Glass Lewis and Institutional Shareholder Services also recommended rejecting the compensation package.

Daniel Ives, a technology analyst at Wedbush Securities, described the vote as a “pop-the-champagne moment for Musk and Tesla shareholders.” Ives noted in a note Thursday: “If this proposal had failed, it could have led to many negative scenarios, including Musk’s resignation as CEO of Tesla. Instead, it’s a holiday in Austin, although demand issues remain, marking a crucial period for Tesla.

“Tesla is Musk and Musk is Tesla. Shareholders have spoken loudly.”