Tesla shareholders have given a resounding vote of confidence to CEO Elon Musk by approving his USD 56 billion compensation package, the largest in U.S. corporate history. The approval, announced by the electric vehicle-maker on Thursday, serves as a testament to the support Musk enjoys from the company’s retail investor base, many of whom are ardent supporters of the enigmatic billionaire.
Despite facing opposition from some large institutional investors and proxy firms, the proposal passed, highlighting the faith shareholders have in Musk’s ability to drive Tesla’s success. However, the approval does not resolve the ongoing lawsuit challenging the pay package in a Delaware court, which legal experts believe could continue for several months. The judge overseeing the case invalidated the package in January, describing it as “unfathomable” and criticising Tesla’s board as being “beholden” to Musk.
During the annual shareholder meeting in Austin, Texas, Musk, who described himself as pathologically optimistic, addressed the crowd, stating, “If I wasn’t optimistic this wouldn’t exist, this factory wouldn’t exist. But I do deliver in the end. That’s the important thing.” His words were met with applause from the audience.
In addition to the pay package, shareholders approved other proposals, including moving the company’s legal home from Delaware to Texas and re-electing Musk’s brother, Kimbal Musk, and James Murdoch, son of media mogul Rupert Murdoch, to the board. Shareholders also passed proposals to shorten board terms to one year and lower voting requirements for proposals to a simple majority, despite opposition from the board.
While Tesla did not disclose the exact voting tallies, the meeting garnered significant attention, with at least half a million viewers tuning in via social media platform X and another 40,000 watching on YouTube. Lindsey Stewart, a director at Morningstar Sustainalytics, noted that the approval sends a message that Tesla’s retail shareholders support the company’s direction, although the exact voting percentages remain to be seen.
The shareholder approval serves as both an endorsement of Musk’s tenure and an acknowledgment that investors are willing to overlook potential risks associated with the company’s dependence on Musk. Jason Schloetzer, a business professor at Georgetown University, commented that shareholders are “brushing aside essentially key man risks, where Tesla has become even more dependent on Musk going forward.”
Despite the approval, Tesla faces challenges, including slowing EV sales and Musk’s divided attention among the various companies he runs, including SpaceX, X (formerly Twitter), and the recently created artificial-intelligence firm xAI. Nonetheless, the vote of confidence from shareholders is expected to lift a major overhang on Tesla’s shares, although some analysts anticipate a potential “sell the news” reaction following the recent gains in the stock price.