Tesla Shareholders Approve CEO Elon Musk’s $56 Billion Compensation

The pay package shareholders voted to approve was initially granted by Tesla to Mr. Musk in 2018.
Tesla Shareholders Approve CEO Elon Musk’s $56 Billion Compensation
This illustration image created on June 12, 2024, in Los Angeles, shows businessman Elon Musk's campaign launched on X ahead of Tesla shareholders meeting in front of his picture on a screen. (Chris Delmas/AFP via Getty Images)
Katabella Roberts
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Shareholders at Tesla on June 13 voted to ratify CEO Elon Musk’s $56 billion compensation package and approved a plan to move the electric vehicle maker’s legal headquarters to Texas.

On the social media platform X, which he owns, Mr. Musk shared what appeared to be two charts showing the results of the vote ahead of Tesla’s annual meeting in Austin, Texas.

The Space X founder said both shareholder resolutions were “currently passing by wide margins” but stopped short of disclosing the exact results of the vote.

“Thanks for your support,” he wrote.

The pay package shareholders voted to approve was initially granted by Tesla to Mr. Musk in 2018.

Under the compensation plan, Mr. Musk could secure 12 tranches of Tesla stock options, which would vest if Tesla achieved various market capitalization and operational “milestones,” such as a $50 billion increase in its market capitalization.

Judge Nullifies Musk Pay Package

However, a Delaware judge in January nullified the package, ruling that the company’s board of directors failed to prove the plan was fair and stating that the process leading to its approval was deeply flawed.

That decision was in response to a lawsuit filed by Tesla shareholder Richard Tornetta, who argued the multi-billion-dollar pay package was overly excessive and that the key milestones Mr. Musk had to achieve in order to receive the pay package were widely expected to be achieved and not, as they were described in proxy disclosures, very difficult.

The lawsuit further claimed that Mr. Musk himself came up with the compensation plan himself and that a proxy statement issued by Tesla wrongly characterized the board’s compensation committee and the board as “independent when they were not.”

In her ruling, Chancery Court Judge Kathaleen McCormick said Tesla’s board of directors failed to show any evidence that they “ever discussed or negotiated” the compensation package with Mr. Musk.

The judge also found that Mr. Musk “enjoyed thick ties with the directors tasked with negotiating” on behalf of Tesla and that the businessman “dominated the process that led to board approval of his compensation plan.”

“At least as to this transaction, Musk controlled Tesla,” Judge McCormick wrote in her ruling.

In a proxy statement filed in April with the Securities and Exchange Commission asking shareholders to sign off on Mr. Musk’s pay, Tesla chair Robyn Denholm called the decision “fundamentally unfair, and inconsistent with the will of the stockholders.”

Shareholders Praise ‘Unprecedented Growth’

The Tesla chair further argued that Mr. Musk deserved the package because, under his leadership, Tesla had achieved its ambitious targets, and stockholders had also benefited from “unprecedented growth.”
Tesla CEO Elon Musk speaks during the official opening of the new Tesla electric car manufacturing plant near Gruenheide, Germany, on March 22, 2022. (Christian Marquardt/Getty Images)
Tesla CEO Elon Musk speaks during the official opening of the new Tesla electric car manufacturing plant near Gruenheide, Germany, on March 22, 2022. (Christian Marquardt/Getty Images)

Granting him the compensation package would ensure he “continues to be driven to innovate and drive growth at Tesla because the value of his shares will depend on it.”

After her ruling in January, Mr. Musk took to X, where he asked his followers if Tesla should change its state of incorporation to Texas, which is home to its physical headquarters.

Tesla then submitted the deal to another vote on Thursday, this time also asking shareholders to back the plan to reincorporate the company outside of Delaware.

Still, the latest vote to ratify the compensation plan does not override the ruling by Judge McCormick and it is not clear if the court will accept the re-vote and allow Tesla to restore the pay package for Mr. Musk.

While the package amounted to $56 billion when it was first introduced, the exact amount Mr. Musk may be awarded is dependent on the Tesla share price.

Shares of Tesla Inc. rose 3 percent on Thursday after Mr Musk’s announcement, although its stock is down 29 this year amid a drop in sales.

Elsewhere on Thursday, shareholders at Tesla also approved the re-election of two board members: James Murdoch, who is the son of media mogul Rupert Murdoch, and Kimbal Musk, who is Mr. Musk’s brother.

Reuters contributed to this report.