Tesla shareholders have reaffirmed a reward of more than $45 billion for Elon Musk, the chief executive, after he was kicked out in a legal challenge.
The result of the vote, announced at Tesla’s annual meeting at its headquarters in Austin, Texas, on Thursday, is a strong sign that shareholders still believe in Mr. Musk and could persuade the judge who struck down the award to reinstate him. .
The support for the payout price, made up of stock options, will come as a relief to Mr Musk’s admirers, who feared the rejection would prompt him to spend less time managing Tesla or even leave . The vote was a setback for investors who had hoped it would send a message about chief executive accountability and limits on executive pay.
The result could also help Mr Musk qualify as the world’s richest person, worth more than $200 billion.
Addressing shareholders after the vote, he pledged his commitment to Tesla. The pay packet, he said, “isn’t really cash and I can’t cut and run, nor would I want to.”
Tesla shares rose on Thursday ahead of the official results announcement after Mr Musk said on X that the pay plan was going ahead by a wide margin.
Tesla’s board had called the vote in response to a decision by chancellor Kathaleen St. J. McCormick of the Court of Chancery in Delaware, where Tesla is registered as a corporation. In January, Chancellor McCormick settled with a group of disgruntled Tesla shareholders who claimed in a lawsuit that the 2018 pay package was grossly excessive.
The board hoped that second-time shareholder approval could help address Chancellor McCormick’s finding that a 2018 vote in favor of the pay package was tainted because board members failed to disclose conflicts of interest arising from corporate ties. their personal and financial relationship with Mr. Musk.
“The legal battle over the compensation plan is far from over, but we think the vote greatly strengthens Tesla’s case,” Garrett Nelson, a stock analyst with CFRA Research, said in a research note Thursday.
But some legal experts questioned whether a yes vote would cause Chancellor McCormick to reconsider her decision, and Tesla has acknowledged that the vote would not necessarily resolve the issue.
At 2018 pay, Mr. Musk owns 20.5 percent of Tesla and just under 13 percent without.
Shareholders also approved a proposal to move Tesla’s corporate registration to Texas, a reaction to what Mr. Musk and the board perceived as unfair treatment by Delaware courts. The move will have no effect on the Delaware case.
They rejected a measure proposed by shareholders that would have required Tesla not to interfere with workers trying to organize a union and to bargain in good faith if they do. Mr. Musk has often expressed hostility toward organized labor. In Sweden, Tesla has refused to negotiate with mechanics who work for the company and have been on strike for nearly six months.
The offset vote pitted those who regard Mr. Musk as a genius who has revolutionized the auto industry against those who are antagonized by his polarizing statements about the X and recent declines in Tesla’s sales and profits.
Robyn Denholm, the chairman of Tesla’s board, argued that investors became rich because of Mr. Musk’s leadership and that the company was obligated to give him what was promised.
“Elon is not only a visionary, but a CEO with a proven ability to execute our mission and achieve incredibly ambitious business results that have generated tremendous value for you,” she said in a letter to shareholders ahead of the vote.
But other shareholders have been worried by Tesla’s recent decline in sales and profit and by Mr Musk’s polarizing statements at X, where he has espoused several right-wing conspiracy theories and offended a significant number of buyers.
Several large institutional investors voted against the pay package, including Norges Bank Investment Management, which manages Norway’s oil wealth and is the largest sovereign wealth fund. Also opposed was the California Public Employees’ Retirement System, or CalPERS, the largest pension fund in the United States.
Tesla shares are down more than 25 percent this year, even as the broader stock market is up 14 percent. At its stock price peak in 2021, Tesla’s stock market value was $1.2 trillion, putting it in the company of tech giants like Microsoft, Apple and Google. Its value has since fallen to around $580 billion.
The package gave Mr. Musk stock options worth tens of billions of dollars if he met required revenue or profit benchmarks and boosted the value of the company’s stock to $650 billion.
Most of these goals were thought to be out of reach when the plan was approved in 2018. Tesla was trying to produce its first mid-priced car, the Model 3 sedan. Soon after, however, Tesla’s business took off and according to the plan , the market value remained above the target of $650 billion as long as Mr. Musk collected the options.
To survive legal challenges, the pay-out measure required approval by a majority of Tesla’s voting shares, not including those owned by Mr. Musk or his brother, Kimbal Musk.