Elon Musk Wins Shareholder Battle To Keep His Compensation Plan

Elon Musk celebrates yes vote by Tesla shareholders that secures his record-setting compensation plan after a judge in Delaware voided the proposed pay package in January.

Tesla CEO Elon Musk was determined to keep his $56 billion dollar pay package despite a judge in Delaware voiding the package in January. due to the original agreement not having the proper disclosures in place. Tesla’s board of directors used the company’s annual shareholders meeting to present an amended version of the plan to be voted on by Tesla shareholders.

This new pay package was promptly re-approved by voters and it also came with separate approval to move its corporation status from Deleware to Texas with the vote being a strong sign of support for the controversial CEO as he fights legal battles on multiple fronts.

Elon Musk keeps his pay package

Tesla laid out five main proposals for its shareholders to consider but two key ones were Proposals 2 and 3 which covered Musk’s $56 billion pay package as well as a plan to move the company’s incorporation from Delaware to Texas. Proposal 2 was arguably the one that most observers were following with Elon Musk himself openly confident that the measure would pass with multiple posts on X (formerly known as Twitter) appearing to celebrate its apparent approval ahead of the final vote announcements. Musk supporters feared that rejection of the plan would cause him to either reduce his time managing the company or quit altogether with the latter potentially creating a power vacuum within the company.

After the proposal was approved Musk was quick to thank shareholders for their support stating “I just want to say, ‘Hot damn, I love you guys!’ We have the most shareholder base of any public company. It’s incredible,” He also revealed that the future for Tesla is bright saying “We’re not just opening a new chapter for Tesla. We’re starting a new book.”

Robyn Denholm the chair of Tesla’s board of directors argued that investors became wealthy because of Musk’s leadership and that the company was obligated to give him what he was promised. While the majority of shareholders were in support of the plan, others spoke out against it with these individuals citing Musk’s polarizing comments on X as well as recent slumps in Tesla’s stock price being key reasons for their resistance towards the plan. Prominent parties in that camp included Norges Bank Investment Management and the California Public Employee’s Retirement System which both voted no on the measure.

In addition to the approved pay package, shareholders also passed a proposal to re-incorporate Tesla into Texas and out of Delaware. This move is partly seen as a snub to the Delaware legal system for voiding the original pay package in court back in January. However, there’s also a practical reason for the move as well with Tesla recently completing work on the Giga Texas factory in Austin. The facility was originally supposed to be the second-biggest factory in the world when Tesla began work on it in 2020.

However, the 2,500-acre facility along the Colorado River rapidly became its most important location when the EV maker confirmed that it was moving its world headquarters to Austin, Texas from California after Musk spoke out against the state’s regulation and tax policies. Tesla also chose to not immediately release the final vote totals after voting was completed which is an unusual decision when compared to what happened during last year’s meeting where the vote totals were promptly released.

Reaction to the vote was swift

After the votes were tallied, reaction to Elon Musk’s approved pay plan was swift but feelings about it depended on who you asked. Mathieu Shapiro the managing partner at Obermayer said “I think voting on the package after it was overruled by the court is a fairly unprecedented move. I don’t think this automatically invalidates what the judge did the first time around January. This will try to be used on either appeal or further proceedings with the judge. But again, that’s fairly new territory and nobody knows how that’s going to go.

Meanwhile, Douglas Chia, President of Soundbaord Governance offered an expanded reaction to the vote stating “The vote would imply that the large institutional investors voted for the Texas reincorporation and ratification of pay, which indicates that investors don’t really care about either or don’t see a real downside to either one. It’s well-known that institutional investors don’t generally object to pay packages and now we’ve seen that the sky’s the limit. With the except of CalPERS and whoever else. “You need to look at the (exact) votes that the directors got. If people really think there needs to be a check and the board isn’t doing its job, that’s where they’ll vote.”

Ivan Frishberg, Chief Sustainability Officer for Amalagated bank pulled no punches when asked his opinion about the approved pay plan and had plenty to say about the board of directors stating “”Elon Musk and Chair (Robyn) Denholm have made this about CEO loyalty and presented the votes as a decision about whether the company can keep Musk. That is a lot of pressure but it doesn’t change the fact that good governance is good for the bottom line of a company, and the Tesla board is consistently and clearly deficient on that front.”

More Tesla News

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What’s next for Tesla and Elon Musk?

With his pay package secured, Elon Musk can now shift his attention to a slew of legal issues that have been a thorn in Tesla’s side for the past few years. They include recent probes by the National Highway Traffic and Safety Administration into Tesla’s Autopilot and Full Self-Driving Systems with the NHTSA saying that both systems fail to keep drivers and occupants safe on the road despite updates Tesla made in an attempt to try and remedy these issues.

In addition to the company’s legal issues, Musk is also facing renewed pressure from workers in some of its facilities pressing for union representation. Tesla shareholders rejected a proposal in the meeting that would have seen the company not interfere if workers wanted union representation in its facilities. Musk has always been a prominent voice against organized labor and the rejected proposal is an indicator that many voters also shared his view when it came to that issue. However, with the UAW recently getting a representation victory at Volkswagen’s Chattanooga, Tennessee assembly plant, look for the company to potentially face more pressure from unions trying to get a foothold in key facilities over the next few years.

Tesla’s stock rose 2.9% to $182.47 a share after Musk posted on X that Proposal 2 was set to be approved. However, while this gain is a glimmer of good news for Tesla investors, the stock is still down 27% for the year. Tesla says this slump is due to its aging lineup of electric vehicles as well as increased competition from Chinese EV companies in the Chinese vehicle market.