Tesla shareholders have given the green light to CEO Elon Musk’s large pay package, the company announced on Thursday. This package is meant to reward Musk’s leadership and keep him focused on Tesla, which is his main source of wealth.
During Tesla’s annual shareholder meeting in Austin, Texas, shareholders also agreed to move the company’s legal base from Delaware to Texas. They also re-elected two board members: Kimbal Musk, Elon’s brother, and James Murdoch, son of media mogul Rupert Murdoch.
Shareholders made some changes to increase their control. They voted to shorten board terms to one year and lower the voting requirements for proposals to a simple majority.
“This is not just a new chapter for Tesla, but the start of a whole new book,” Musk said during the meeting.
Musk had hinted the day before that the proposals were getting strong support and thanked shareholders. According to a chart he shared on social media, the resolutions were expected to pass with wide margins.
In April, Tesla valued Musk’s pay package at $44.9 billion, although it was once valued as high as $56 billion before decreasing as Tesla’s stock price fell. Tesla’s stock rose 2.9% on Thursday.
The approval also shows the strong support Musk has from Tesla’s retail investors, many of whom are big fans of the billionaire CEO. The proposal passed despite opposition from some big institutional investors and proxy firms.
However, Musk might still face a legal battle. In January, a Delaware judge invalidated the pay package, calling it “unfathomable.” This could lead to more lawsuits, making it the largest in U.S. corporate history.
Approving Musk’s compensation shows that investors endorse his leadership and want to protect Tesla’s future. In January, Musk threatened to focus on building AI and robotics products outside Tesla if he didn’t gain enough voting control, which depended on approving the 2018 pay package.
Musk shifted Tesla’s focus to robotaxis, delaying cheaper electric cars. Some investors worried this could be difficult to perfect.
“This decision supports Musk and eases concerns about his decreasing focus on Tesla,” said Sandeep Rao, a senior researcher at Leverage Shares, which owns Tesla’s stock.
Tesla’s small retail investors celebrated the approval of Musk’s pay package. They have a larger share of Tesla than is usual, and they usually don’t vote much. But this time, many campaigned for weeks on social media to reinstate the CEO’s pay.
“An attempt to hurt Tesla was stopped by retail shareholders,” Omar Qazi wrote on social media after Musk’s update. “Tesla is safe,” said Qazi, who has more than 476,000 followers on the handle @WholeMarsBlog.
Big institutional investors were split on the decision. While some supported Musk’s pay, others like the California Public Employees’ Retirement System and proxy firms Glass Lewis and Institutional Shareholder Services told shareholders to reject it, calling it too much.
“When both big institutions and proxy advisory firms agree on something, it’s rare for the vote to go the other way,” said John Lawrence, a partner at law firm Baker Botts, to Reuters. “This shows the company knows the power of social media.”
Support from retail investors and some big institutions was important for Musk to win the vote, a source told Reuters.
“Musk has fans worldwide for growing Tesla and his other companies, like SpaceX,” said John Lawrence. But going against big investors who said “no” to his pay package needed more than just fan support.
Social media was busy for weeks with users like Alexandra Merz, who uses the handle @TeslaBoomerMama on X. She told people to vote. Non-U.S. banks and brokers let Tesla investors vote, which they couldn’t do before.
“Don’t mess with Tesla retail shareholders,” Merz said on Thursday. “Your votes will help a lot.”
Musk also used social media a lot to get support. He made a separate website to teach investors about the plans and how to vote. The board wrote to shareholders a lot about Musk’s importance and the risks if he lost interest after the pay package was turned down. Musk offered tours of Tesla’s factory to some investors who voted.
The plan worked. Musk said on X over the weekend that about 90% of the retail investors who voted liked it.
Musk has to work hard in court to get the Delaware judge’s approval, who said Tesla’s board was “too close” to him. Tesla could also face new lawsuits over the latest vote.
But small investors say they’ll keep supporting Musk.
“Shareholders have spoken, again, and now our votes can really count,” Alicia said on X. “@elonmusk, we’ve always been fans and always will. We’re with you!”
