Musk says Tesla shareholders voting yes for his $56 billion pay package

By Hyunjoo Jin, Abinaya V and Greg Roumeliotis

(Reuters) -Tesla shareholders are voting to approve a $56 billion pay package for Elon Musk and to move the electric vehicle maker’s legal home to Texas, the CEO said on social media on Wednesday, adding that passage was by wide margins.

“Thanks for your support!!” Musk said in his post on X.

Overwhelming shareholder approval of the largest remuneration terms in U.S. corporate history could allay investor concerns about Musk’s future at the company, while giving the electric carmaker ammunition in its fight to reverse a court decision to void the pay package.

Tesla shares were up 6.6% in premarket trading on Thursday after rising 3.9% a day before the shareholder meet.

Musk would still face a lengthy legal battle to convince the Delaware judge who said the Tesla board was “beholden” to him, while potentially fielding fresh lawsuits over the latest vote.

“Even if the shareholders do approve the old package, it is not clear that the Delaware court will allow that vote to be effective,” said Adam Badawi, a law professor at UC Berkeley.

The result will be announced at a meeting at Tesla’s headquarters in Texas at 4:30 pm (2130 GMT) on Thursday.

A person familiar with the preliminary voting tally said a combination of big institutional investors and retail investor votes got the ‘yes’ result over the line.

Major proxy firms Glass Lewis and Institutional Shareholder Services (ISS) had urged shareholders to reject the pay package, and large investors including Norway’s sovereign wealth fund had said they would vote against it.

Shareholders are allowed to change their vote up to the start of the annual meeting.

Tesla shareholders also cast ballots on other proposals including the move of its legal headquarters from Delaware to Texas, as well as the re-election of two board members: Musk’s brother Kimbal Musk and James Murdoch.

Texas Governor Greg Abbott congratulated Musk after his post, saying on X: “Welcome to a state that has neither a personal nor a corporate income tax.”

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Some investors viewed the vote on Musk’s pay as a test of confidence in his leadership. While he is undoubtedly Tesla’s driving force, and is credited with much of its success, the company has recently seen slowing sales and profits.

Tesla’s stock has lost nearly 60% of its value from its peak in 2021, when Musk started selling billions of dollars’ worth of his stake partly to help finance his purchase of Twitter, sparking concerns that he would be spread too thin. He now runs six firms, including rocket-builder SpaceX, social media giant X – formerly Twitter – and the artificial intelligence firm xAI, which Musk created in 2023.

Musk’s outspokenness and knack for creating controversy have also weighed on Tesla’s reputation and sales.

The pay package would enable Musk to strengthen ownership “at the expense of diluting the value of those belonging to other shareholders,” Marcie Frost, CEO of the California Public Employees’ Retirement System said.

Tesla has been drumming up support for Musk’s pay package, especially from retail investors, who make up an unusually high percentage of its ownership base but who often do not vote.

Company executives have posted messages on X, saying Musk is critical to Tesla’s success. Tesla has run social media ads, and Musk has promised a personal tour of Tesla’s factory in Texas to some shareholders who cast votes.

The board said the world’s richest person deserves the package, because he hit all the ambitious targets on market value, revenue and profitability.

The pay package is also needed to keep Musk devoted to Tesla, the board said, even though the Delaware judge said the 2018 pay plan failed to make sure that Musk committed a substantial amount of time to Tesla.

Musk has threatened to build AI and robotics products outside Tesla, if he fails to gain enough voting control, which requires the 2018 pay package to be approved.

COURT BATTLE

The Delaware court that invalidated the compensation package had said its the plan was proposed by a conflicted board with close personal and financial ties to its top executive.

The board held the shareholder vote as a way to bolster its appeal of the ruling, in which the judge cited the board’s failure to fully inform shareholders before approving the pay package in 2018.

“How the shareholders vote now doesn’t really answer the question whether the board violated its duties in 2018, and that’s the issue on appeal,” Ann Lipton, a corporate law professor at Tulane University, said.

Musk has to wait months or years to get his pay package restored as appeals wind their way up to Delaware’s Supreme Court.

(Reporting by Hyunjoo Jin and Abhirup Roy in San Francisco, Greg Roumeliotis in New York and Abinaya Vijayaraghavan in Bengaluru; Editing by Nivedita Bhattacharjee and Miral Fahmy)