Tesla shareholders approve Elon Musk’s record pay deal and move to Texas

Tesla shareholders have voted both to reapprove a pay package for chief executive Elon Musk once valued at $56bn and to reincorporate the electric-vehicle maker in Texas, handing him significant victories as he seeks to reassert control over the company.

The preliminary results, announced at Tesla’s annual meeting in Austin on Thursday, will strengthen the company’s hand as it attempts to overturn a January decision by a Delaware court to void the 2018 package of stock options — the largest in US history — due to concerns about its value and the independence of the board.

While the vote does not supersede the court’s decision, the ratification could prove instrumental in persuading the judge to reverse or amend her stance. Musk’s grip on the company would be tightened, boosting the chief executive’s stake to more than 20 per cent from his current 13 per cent.

After the polls closed just after 4pm in Austin, Musk emerged on stage to address a rapturous crowd chanting his name, jumping up and down in celebration in front of a blue and pink neon sign in the shape of Texas.

“Hot damn I love you guys,” he said to the audience of carefully-selected retail investors. “We have the most awesome shareholder base of any public company . . . we are not starting a new chapter, but opening a new book.”

The jubilant CEO cracked jokes, noting during his speech “what do you know, it’s 4:20pm”, harking back to a 2018 tweet about taking Tesla private at $420 a share. Many interpreted the price as a reference to 4/20, with April 20 a day celebrated by marijuana smokers.

The “cyber roundup” event was the culmination of a months-long campaign by Musk and the board to rally shareholders to back the two resolutions, in what amounted to a referendum on the mercurial leadership of one of the world’s richest people.

The votes were also validation of Tesla repositioning itself as an artificial intelligence and robotics company. Musk extemporised about plans to develop a connected fleet of millions of fully autonomous cars and outlined a future with tens of billions of humanoid robots, which together could drive Tesla’s revenue to a trillion dollars or more, he claimed.

Mobilising Tesla’s retail investors was particularly important because they own about 30 per cent of the stock, an abnormally high proportion for a public company. Musk also successfully lobbied institutional investors to go against the guidance of proxy advisers ISS and Glass Lewis, who criticised his pay as “outsized” and “excessive”.

In another win, two of Musk’s crucial allies on the board were re-elected despite opposition from proxy advisers: former 21st Century Fox chief executive James Murdoch and Musk’s brother Kimbal.

The victories were not unexpected after Musk posted on X on Wednesday night that both resolutions were “currently passing by wide margins!”

Tesla shares rose 3 per cent on Thursday after his post, but the stock’s recent performance has been disappointing. It is down 29 per cent in the past year, leaving it valued at $571bn, closer now to JPMorgan and Walmart than its fellow “Magnificent Seven” tech giants such as Microsoft and Nvidia, which are worth more than $3tn.

The decline also means that Musk’s 2018 stock options are worth $48bn compared with $56bn previously.

Nevertheless, the results are a vindication for the previously taciturn Tesla chair Robyn Denholm, who emerged as the voice of the shareholder outreach social media campaign in the past few months. She lent heavily on the slogan “a deal is a deal”, arguing that Musk hit share price and financial targets in the original 2018 package that were considered “ludicrously ambitious”.

Her reputation was on the line after being criticised by the Delaware judge for having a “lackadaisical approach to her oversight obligations” and running a board that acted as “supine servants of an overweening master”.

Behind the scenes, Denholm warned asset managers that Tesla risked losing Musk if he did not receive his shares. The Australian ex-accountant said the options were essential to keep him motivated because “his passion and hobby is interplanetary space travel”, one of the people said.

Musk runs SpaceX, the most valuable private company in the world that has a near-monopoly on reusable rockets. Other ventures include social media platform X, brain implant start-up Neuralink and AI group xAI. He has publicly threatened to develop future AI products outside Tesla if his stake does not increase, saying he needs at least 25 per cent to protect the company from activists or a hostile takeover.

“Autonomy is critical to the future of Tesla . . . [and] in order to cross that finish line it is essential for Elon to be at the helm,” said Tasha Keeney, director of investment analysis and institutional strategies at Cathie Wood’s Ark Investment Management.

“We invest in disruptive innovation, achieving something that looks impossible to achieve means you have to have compensation to match that difficult goal,” she added.

While the final voting data will probably be released on Friday, there has already been one big coup. Vanguard, Tesla’s largest shareholder with a 7.3 per cent stake, flipped its stance on pay, having opposed it in 2018, according to a person familiar with the results. BlackRock, the second-biggest, also supported both resolutions. BlackRock declined to comment, and Vanguard did not respond to requests for comment.

Other prominent shareholders, including Nordea Asset Management and the California Public Employees’ Retirement System, publicly opposed the reapproval. 

The next stage of the pay saga is a hearing in Delaware early next month, when the judge, Kathaleen McCormick, will consider a $5.2bn fee request made by the winning lawyers. After her ruling, Tesla can appeal the pay decision to the Delaware Supreme Court. 

While Tesla can swiftly file paperwork to reincorporate in Texas, it is not expected to have a bearing on the pay decision as local courts will still have to respect the Delaware ruling.

The remaining hurdles did little to spoil the celebratory mood in Austin, where attendees lined up to sign a “Don’t mess with Tesla retail shareholders” flag.

Musk answered questions for more than an hour on a range of topics from his shoes to whether six-year-olds should be allowed to tour Tesla’s gigafactory. One shareholder was visibly shaking as he posed a question to his “idol”.

Musk also claimed to have had two “homicidal maniacs” threaten his life in the past 12 months and spoke about calls “out of the blue” from Donald Trump, who he said was a fan of the Cybertruck and with whom he has been linked for an advisory role if the former US president is re-elected in November.

The plaudits also flooded in online.

“Congrats Elon on getting the pay you were promised and on your new incorporation in Texas,” the state’s Republican governor, Greg Abbott, posted on X. “Welcome to a state that has neither a personal nor a corporate income tax.”

Additional reporting by Patrick Temple-West and Sujeet Indap