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In a crunch vote that had been expected to swing either way, Tesla\u2019s shareholders have granted a request from their board to restore Elon Musk\u2019s 2018 pay package, dubbed the largest in human history, over the objections of critics who said it was excessive and unreasonable. <\/p>\n
Dispensing with the usual custom of waiting until polls were closed and ballots tabulated, Musk took to his social media platform X<\/a> to declare victory for both his personal compensation estimated at\u00a0around $55 billion<\/a>\u00a0as well as a move of the company\u2019s legal domicile from\u00a0Delaware to Texas<\/a>.\u00a0<\/p>\n \u201cBoth Tesla shareholder resolutions are currently passing by wide margins!\u201d he tweeted hours before the start of the annual shareholder meeting, posting graphs showing their approval above the minimum threshold required. \u201cThanks for your support!\u201d\u00a0<\/p>\n The saga around his compensation deal opened up deep divisions in the once closely-knit investor base. It pitted supporters of the company\u2019s visionary yet often\u00a0distracted<\/a>\u00a0CEO against a growing minority that felt Musk had become too much of a liability now that its\u00a0halcyon days<\/a>\u00a0of 50% growth were\u00a0over<\/a>.<\/p>\n Both Tesla shareholder resolutions are currently passing by wide margins!<\/p>\n \u2665\ufe0f\u2665\ufe0f Thanks for your support!! \u2665\ufe0f\u2665\ufe0f pic.twitter.com\/udf56VGQdo<\/a><\/p>\n \u2014 Elon Musk (@elonmusk) June 13, 2024<\/a><\/p><\/blockquote>\n In the run-up, Tesla mounted an\u00a0unprecedented campaign<\/a>\u00a0to lobby on his behalf, with critics like asset manager Gerber Kawasaki\u00a0suggesting<\/a>\u00a0the company spent more on advertising for their CEO\u2019s pay package than it did for their own cars.\u00a0<\/p>\n Musk effectively turned the shareholder meeting into an\u00a0all-or-nothing confidence vote<\/a>\u00a0that risked undermining his authority and that of the entire board should the vote not go their way.\u00a0<\/p>\n Big institutional shareholders like CalPERS, the nation\u2019s largest manager of public pension assets, and Norway\u2019s $1.7 trillion pledged to oppose Musk, while other long-term investors like Baillie Gifford and T. Rowe Price<\/a> supported him.\u00a0<\/p>\n The two big unknowns going into today\u2019s meeting were how the major index funds like Vanguard<\/a>, BlackRock<\/a> and State Street<\/a> might vote, as well as how many of Musk\u2019s\u00a0retail shareholders<\/a>\u00a0would actually cast their ballot remotely via a dedicated website.<\/p>\n \u201cIt\u2019s a pop the champaign moment for Musk and Tesla shareholders,\u201d wrote Wedbush Securities tech analyst Dan Ives in a research note to clients on Thursday. \u201cThis removes a $20-$25 overhang on the stock in our opinion that has weighed on shares since the head-scratching Delaware ruling set this Twilight Zone soap opera on earlier this year.\u201d\u00a0<\/p>\n With the uncertainty over the vote now removed, shares are set to open more than 6% higher on Thursday at $189 each, their highest level since May 21.<\/p>\n At the time the compensation deal was first conceived six years ago, it was a high-stakes gamble that in lieu of a salary gave Musk the right to buy up to 304 million shares at a steep discount should he achieve more than dozen milestones.\u00a0<\/p>\n Although overwhelmingly approved at the time and subsequently met in full, it was\u00a0struck down<\/a>\u00a0in January by a Delaware court on the basis that Musk\u2019s friends and family on the board had failed to reveal to shareholders they gave him wide berth to set his own terms.\u00a0<\/p>\n Re-ratifying the package won\u2019t change the ruling, expected to being challenged by Tesla on appeal. But it does lend credence to his legal team\u2019s argument that investors are now sufficiently informed about the scale of their company\u2019s governance issues.\u00a0<\/p>\n There were good reasons for investors to ratify the deal at this year\u2019s shareholders meeting. Chief among them was the risk that Musk could simply fly the coop. The volatile entrepreneur is known for his take-no-prisoners \u201cdemon mode\u201d, during which he tends to make\u00a0extreme decisions<\/a>. Resigning was a distinct possibility as losing the vote would have suggested that he no longer enjoyed the support of a majority of his investors.<\/p>\n While some believed this could be a blessing in disguise, the risk is, without Musk, Tesla would lose its hunger to disrupt the industry, much like when Apple<\/a> kicked out Steve Jobs.\u00a0<\/p>\n\n
All-or-nothing confidence vote in Musk<\/h2>\n
No obvious alternative as successor after Musk purged rivals<\/h2>\n