In the history of the U.S. corporate pay packages, there have been plenty of massive payouts worth almost $1 billion in today’s dollars. But none comes close to the $46 billion pay deal Tesla shareholders on Thursday handed to CEO Elon Musk.
The results of the shareholder vote, which concluded today, were announced during Tesla’s annual meeting, prompting a standing ovation from shareholders attending the Thursday event at Tesla’s headquarters in Austin, Texas. Musk had already declared victory, writing late Wednesday on his social media platform X that shareholders were voting to approve the pay package by “wide margins.”
“Hot damn, I love you guys,” an exultant Musk said at the shareholder meeting after the vote results were announced. He also capitalized on the occasion to tout Tesla’s success in selling electric vehicles and what that means for the fight against climate change.
“It’s incredible. I think we’re not just opening a new chapter for Tesla, we’re starting a new book,” he said, adding, “We’re starting to make a real noticeable dent in carbon emissions.”
Tesla said in a Friday regulatory filing that 72% of voting shares supported Musk’s pay package, excluding shares voted by himself and his brother, Kimbal Musk, who served on Tesla’s board.
The pay package has become a lightning rod over executive pay, with some critics calling the package “excessive.” Supporters argue that such a deal is necessary to tether Musk to Tesla and ensure he doesn’t decamp to start another business. Along with Tesla, the billionaire currently owns five additional businesses including X (formerly Twitter), Neuralink and SpaceX, the latter of which he is also CEO.
With Musk trumpeting his apparent win ahead of the final tally, shareholders sent the stock up 3% in Thursday trading, indicating that many view the pay package as essential to ensure Musk’s future at the company.
“It is a pop-the-champagne moment for Musk and Tesla shareholders,” noted Wedbush Securities analyst Dan Ives in a Thursday research note about the preliminary vote results. “[L]arge shareholders at the end of the day knew that voting no would risk Musk may eventually leave as CEO.”
Ives said he believes Musk is now likely to pledge to remain CEO of Tesla for another three to five years, given the apparent approval of his pay package.
Still, questions remain about whether Tesla will be able to actually deliver the pay package to Musk, given a Delaware court ruling earlier this year that struck down the plan’s earlier 2018 shareholder approval. Meanwhile, Tesla shareholders on Thursday also approved a proposal to move the company’s legal jurisdiction from Delaware to Texas, which could play a part in whether Musk’s payout materializes.
For instance, with Tesla shareholders approving the move to Texas, reapproval of the pay package could now be handled as a Texas corporation, which means the issue could fall under the purview of Texas courts.
Why does the pay package need to be voted on?
The vote on Musk’s payout stems from a court ruling in January that struck down his previous pay deal, worth almost $56 billion earlier this year. The value has since declined due to a slide in Tesla’s share price.
That package, approved in 2018 by Tesla shareholders, sparked a shareholder lawsuit that accused Musk and Tesla’s board of directors of breaching their duties and unjustly enriching the billionaire. A Delaware judge ruled that Musk and his company failed to prove that the massive payout was fair.
Because that initial pay deal was struck down, Tesla said in April that it would once again take the issue to its shareholders, asking them to re-ratify the package.
How much does Musk earn from Tesla?
Tesla hasn’t paid Musk a base salary since 2019, according to the company’s regulatory filings. Instead, his compensation has been paid through “performance awards” of stock options that are based on Tesla hitting certain milestones, such as vehicle production or increasing the company’s market value.
After the pay package was struck down by the Delaware court, Tesla Chairwoman Robyn Denholm wrote to shareholders that they should re-ratify the package as “Elon has not been paid for any of his work for Tesla for the past six years that has helped to generate significant growth and stockholder value.”
