Tesla shareholders have confirmed a pay-out of more than $45 billion for Elon Musk, the chief executive, after he was rejected in a legal challenge.
The result of the vote, announced at Tesla’s annual meeting at its Austin, Texas, headquarters on Thursday, is a strong sign that shareholders still have faith in Mr. Musk and could persuade the judge who overturned the award to brings it back.
The support for the pay award, which consists of stock options, will be a relief to Mr. Musk’s fans, who had feared the rejection would prompt him to spend less time running Tesla or even quit. The vote was a setback for investors who had hoped it would send a message about executive accountability and caps on executive pay.
The result may also help position Mr Musk as the world’s richest man, worth more than $200 billion.
Addressing shareholders after the vote, he promised he was committed to Tesla. The pay package, he said, “isn’t really cash and I can’t cut and run, nor would I want to.”
Shares in Tesla rose on Thursday ahead of the official results announcement after Mr Musk told X that the compensation plan was going well.
Tesla’s board had called for the vote in response to Chancellor Kathaleen St.’s decision. J. McCormick of the District Court in Delaware, where Tesla is incorporated. In January, Chancellor McCormick settled with a group of disgruntled Tesla shareholders who argued in a lawsuit that the 2018 pay package was grossly excessive.
The board had hoped that shareholder approval a second time could help address Chancellor McCormick’s finding that the 2018 pay package vote was tainted because board members failed to disclose personal conflicts of interest. and their financial ties to Mr. Musk.
“The legal battle over the compensation plan is far from over, but we believe the vote significantly strengthens Tesla’s case,” Garrett Nelson, an equity analyst at CFRA Research, said in a research note Thursday.
But some legal experts questioned whether a yes vote would force Chancellor McCormick to reconsider her decision, and Tesla has acknowledged that the vote would not necessarily resolve the case.
With the 2018 pay award, Mr Musk owns 20.5 per cent of Tesla and just under 13 per cent without.
Shareholders also approved a proposal to move Tesla’s corporate registration to Texas, a reaction to what Mr. Musk and the board saw as unfair treatment by Delaware courts. The move will have no effect on the Delaware case.
They rejected a measure proposed by shareholders that would have asked Tesla not to interfere with workers trying to organize a union and to bargain in good faith if they do. Mr. Musk has often expressed hostility toward organized labor. In Sweden, Tesla has refused to negotiate with engineers who work for the company and have been on strike for nearly six months.
The compensation vote pitted those who see Mr. Musk as a genius who has revolutionized the auto industry against those challenged by his polarizing statements about the X and Tesla’s recent decline in sales and profits.
Robyn Denholm, the chairman of Tesla’s board, argued that investors had become rich because of Mr Musk’s leadership and that the company was obliged to give him what he had been promised.
“Elon is not only a visionary, but a CEO with a proven ability to execute our mission and achieve incredibly ambitious business results that have created exceptional value for you,” she said in a letter to shareholders ahead of the vote.
But other shareholders have been dismayed by Tesla’s recent declines in sales and profits and by Mr. Musk’s polarizing statements at X, where he has espoused some right-wing conspiracy theories and offended a significant number of buyers.
Several large institutional investors voted against the pay package, including Norges Bank Investment Management, which manages Norway’s oil wealth and is the largest sovereign wealth fund. Also opposed was the California Public Employees’ Retirement System, or CalPERS, the largest pension fund in the United States.
Tesla shares are down more than 25 percent this year, even as the broader stock market is up 14 percent. At its peak stock price in 2021, Tesla’s market value was $1.2 trillion, placing it in the company of tech giants like Microsoft, Apple and Google. Its value has since fallen to around $580 billion.
The package gave Mr. Musk stock options worth tens of billions of dollars if he hit demanding revenue or profit benchmarks and boosted the company’s stock value to $650 billion.
Most of these goals were thought to be out of reach when the plan was approved in 2018. Tesla was struggling to produce its first moderately priced car, the Model 3 sedan. Soon after, however, Tesla’s business took off and according to the plan , the market cap remained above the $650 billion target long enough for Mr. Musk to collect the options.
To survive legal challenges, the pay measure required approval by a majority of Tesla’s voting shares, not including those held by Mr. Musk or his brother, Kimbal Musk.