Elon Musk says Tesla shareholders voting yes to his $75 billion pay package

San Francisco - Tesla shareholders are voting to approve a US$56 billion (S$75.5 billion) pay package for co-founder Elon Musk and to move its legal home to Texas, Mr Musk said on social media platform X on June 12, adding that the passage was by wide margins.

Overwhelming shareholder approval of the largest remuneration terms in US corporate history could allay investor concerns about Mr Musk’s future at the company while giving the electric carmaker ammunition in its fight to reverse a court decision to void the pay package.

Mr Musk would still face a lengthy legal battle to convince the Delaware judge who said the Tesla board was “beholden” to him, while potentially fielding fresh lawsuits over the latest vote.

“Even if the shareholders do approve the old package, it is not clear that the Delaware court will allow that vote to be effective,” said UC Berkeley law professor Adam Badawi.

The result will be announced at a meeting at Tesla’s headquarters in Texas at 9.30pm GMT on June 13.

A person familiar with the preliminary voting tally said a combination of big institutional investors and retail investor votes got the “yes” result over the line.

Shareholders are allowed to change their vote up to the start of the annual meeting.

Tesla shareholders also cast ballots on other proposals, including the move of Tesla’s legal headquarters from Delaware to Texas, as well as the re-election of two board members: Mr Musk’s brother Kimbal Musk and Mr James Murdoch, son of media mogul Rupert Murdoch.

Some investors viewed the vote on Mr Musk’s pay as a test of confidence in his leadership. While he is undoubtedly Tesla’s driving force and is credited with much of its success, the company has seen slowing sales and profits in the last few years.

Tesla’s stock has lost nearly 60 per cent of its value from its peak in 2021, when Mr Musk started selling billions of dollars worth of his stake partly to help finance his purchase of social media giant Twitter, sparking concerns that he would be spread too thin.

He now runs six companies, including rocket-builder SpaceX, X – formerly Twitter – and the artificial intelligence (AI) company xA1, which Mr Musk created in 2023.

Mr Musk’s outspokenness and knack for creating controversy have also weighed on Tesla’s reputation and sales.

Shareholders, led by major institutional investors, call such compensation far too generous for a leader who is splitting his time between six companies and is now presiding over falling sales and a strategic upheaval at Tesla.

The pay package would enable Mr Musk to strengthen ownership “at the expense of diluting the value of those belonging to other shareholders”, Ms Marcie Frost, chief executive of the California Public Employees’ Retirement System, said on June 12.

Tesla has been drumming up support for Mr Musk’s pay package, especially from retail investors, who make up an unusually high percentage of its ownership base but who often do not vote.

Company executives have posted messages on X, saying Mr Musk is critical to Tesla’s success. Tesla has run social media ads, and Mr Musk has promised a personal tour of Tesla’s factory in Texas to some shareholders who cast votes.

The board said the world’s richest person deserves the package because he hit all the ambitious targets on market value, revenue and profitability.

The pay package is also needed to keep Mr Musk devoted to Tesla, the board said, even though the Delaware judge said the 2018 pay plan failed to make sure that Mr Musk committed a substantial amount of time to Tesla.

Mr Musk has threatened to build AI and robotics products outside Tesla if he fails to gain enough voting control, which requires the 2018 pay package to be approved.

The Delaware court that invalidated the compensation package had said the plan was proposed by a conflicted board with close personal and financial ties to its top executive.

The board held the shareholder vote as a way to bolster its appeal of the ruling, in which the judge cited the board’s failure to fully inform shareholders before approving the pay package in 2018.

Tulane University corporate law professor Ann Lipton said: “How the shareholders vote now doesn’t really answer the question as to whether the board violated its duties in 2018, and that’s the issue on appeal.”

Mr Musk will have to wait months or years to get his pay package restored as appeals wind their way up to Delaware’s Supreme Court. REUTERS