Tesla shareholders have voted to reinstate Elon Musk's $56 billion pay package, a decision that comes amidst significant controversy and legal challenges. Initially approved in 2018, the compensation plan is the largest ever for a CEO of a publicly traded company in the United States. The announcement was made by Tesla's general counsel, Brandon Ehrhart, at the company’s annual meeting in Austin, Texas, where it was met with cheers and applause from the assembled shareholders.
The vote to reinstate Musk’s pay package follows a tumultuous period that saw the package annulled by a Delaware judge in January. The judge ruled that Tesla’s board was not sufficiently independent of Musk’s influence and that the process leading to the approval of the pay package may have been flawed. Despite these concerns, Tesla's board and Musk launched an intensive campaign to secure shareholder support for reinstating the package.
At the meeting, Musk expressed his gratitude to the shareholders, stating, "I just want to start by saying, damn, I love you guys!" His exuberance was evident as he took the stage following the vote. For many shareholders and Tesla enthusiasts, Musk is seen as the driving force behind the company’s success. Ron Baron, head of Baron Funds, which has invested around $3 billion in Tesla shares, emphasized this sentiment, stating, "Tesla is better with Elon. Tesla is Elon."
In addition to the vote on Musk’s compensation, shareholders approved a measure to move Tesla's legal headquarters from Delaware to Texas. This decision is likely to have significant legal implications and could complicate ongoing and future disputes regarding the company and its management. The relocation aligns with Tesla’s operational headquarters, which moved to Austin, Texas, in recent years, reflecting the company’s growing presence in the state.
The intense campaign to secure the pay package vote saw Tesla engaging heavily with its individual shareholders. The company launched a dedicated website with a countdown and pleas for support, and even organized a sweepstakes offering fifteen tours of the Austin gigafactory, guided by Musk and Tesla’s chief designer, Franz von Holzhausen. Analysts from Wedbush noted the crucial role of small shareholders in the vote’s outcome, highlighting their significant influence despite opposition from larger institutional investors.
However, the approval of the pay package does not mean Musk will receive the funds without further hurdles. Legal experts anticipate a prolonged legal battle, with new lawsuits likely to emerge challenging the validity of the shareholder vote and the pay package itself. This ongoing legal uncertainty casts a shadow over what is otherwise seen as a victory for Musk and Tesla’s board.
The stakes are high for Tesla, as Musk’s leadership is often viewed as integral to the company’s identity and success. At the end of 2023, Musk held a 20.5% stake in Tesla, underscoring his significant influence over the company. The fear among some investors and board members is that without the incentive of the pay package, Musk might shift his focus to his other ventures, such as SpaceX, X (formerly Twitter), xAI, and Starlink. For many, Tesla’s future is closely tied to Musk’s continued involvement and leadership.
As the legal battles unfold, Tesla will need to navigate these challenges while continuing to innovate and expand in the highly competitive electric vehicle market. The outcome of these disputes will not only impact Musk’s compensation but could also shape the future governance and strategic direction of Tesla.
