Elon Musk wins Tesla shareholder battle to keep his record-breaking salary

Tesla (TSLA) shareholders reapproved Elon Musk’s record-breaking compensation pact and signed a new incorporation in Texas, a show of support for the CEO as he wages a legal battle on multiple fronts.

“Damn, I love you guys,” Musk said after the votes were tallied, speaking at the company’s annual shareholder meeting in Austin, Texas.

The company did not immediately disclose the percentage of shareholders who voted for or against a $56 billion compensation package awarded in 2018 and subsequently nullified by a Delaware judge this year. The pay plan is now valued at about $48 billion.

When the pact was first approved six years ago, it received 73 percent support.

Tesla shares rose slightly in after-hours trading. It rose 3% during market hours on Thursday after Musk previewed this end result, saying both proposals “passed by wide margins.”

Musk this year became the latest of many bosses to successfully defeat attempts to cut their pay.

According to ISS-Corporate, only two of the 340 companies that had such shareholder votes as of June 6 had their executive compensation packages rejected. That 0.6% failure rate is lower than any full year since 2020.

But Thursday’s results may not mark the end of the corporate governance drama at Tesla.

First, shareholders unhappy with the outcome could challenge its legality in the same Delaware court that voided Musk’s pay earlier this year.

One shareholder already filed a lawsuit in that state last week against both Tesla’s wage and redomestication proposals, claiming Musk used “strong, coercive tactics” in his efforts to convince shareholders to ratify the proposals.

“It is likely that Tesla will appear again in the Delaware courts to defend the package against lawsuits,” Jerry Comizio, a business law professor at American University’s Washington College of Law, told Yahoo Finance.

Comizio said shareholders could argue that the process leading to Thursday’s vote suffered from the same type of disclosure, corporate governance and fiduciary duty deficiencies that caused a Delaware judge to invalidate the 2018 vote.

That judge, Kathaleen McCormick, ruled that Tesla’s board did not act “in the best interests” of Tesla shareholders in approving the $56 billion deal.

The central thrust of McCormick’s decision, according to Anat Alon-Beck, a business law professor at Case Western Reserve University School of Law, was that Tesla’s board failed to follow proper procedures and disclosures, or address numerous conflicts of interest with Musk.

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“They always had the option to do that, but chose not to,” Alon-Beck said. “Instead, they have effectively failed to comply with the disclosure obligations to shareholders that have been the central tenants of Delaware law for decades.”

But corporate compensation and governance attorney Bob Lamb said it’s possible the company has disclosed enough this time to protect itself from additional lawsuits.

“[Y]You can’t make everything public,” Lamm said. “At some point the court has to say, ‘Tesla, you did your job.'”

‘Motivational’ Musk

The ongoing drama surrounding the election intensified in recent weeks as Tesla Chairman Robyn Denholm and Musk argued forcefully for a newly submitted pay package similar to the original 2018 award, which was invalidated by the judge.

Denholm publicly filed an open letter calling on shareholders to approve Musk’s compensation package.

“Honesty and respect require that we fulfill the collective promise we made to Elon – a promise that was, and fundamentally still is, about keeping Elon’s attention and motivating him to focus on achieving amazing growth for our company,” Denholm wrote in her letter.

Denholm’s choice of words – “capture Elon’s attention and motivate him” – raised eyebrows, as most independent board chairs generally do not write open letters urging, let alone claiming, shareholder approval of management compensation packages that the compensation is necessary to keep the CEO motivated.

Even before the 2018 pay package was invalidated by a Delaware court, Musk threatened shareholders with his divided attention because he leads or spends significant amounts of time at SpaceX, X.com (formerly Twitter) and the Boring Co. other companies.

“I feel uncomfortable helping Tesla become a leader in AI and robotics without having 25% voting control. Enough to be influential, but not so much that I can’t be overthrown,” he says. Musk said from his X account in January. “Unless that is the case, I would prefer to build products outside of Tesla.”

An example: Tesla recently faced reports that Musk had ordered AI chips from Nvidia (NVDA) that were intended to redirect Tesla to X.com. Musk defended the move after the report’s publication, claiming Tesla had no space to use the chips, and otherwise they would have sat in a warehouse.

In the days leading up to the vote, there were even more legal distractions for Musk and Tesla.

On Tuesday, the Employees’ Retirement System of Rhode Island (ERSRI) filed another lawsuit in Delaware, accusing Musk and his brother Kimbal Musk of jointly selling $30 billion worth of stock based on inside information. purchase of Twitter (now X) and that two brothers were also aware that Tesla’s vehicle deliveries had fallen below expectations.

The Wall Street Journal also published a story late Tuesday night alleging that Musk had numerous inappropriate relationships with employees of SpaceX, the rocket and spaceship company that Musk founded and where he still serves as CEO.

Then on Wednesday, eight former SpaceX employees separately filed a lawsuit against Musk for sexual harassment and retaliation in California state court, alleging that Musk created an “unwelcome hostile work environment” based on his conduct, among other things.

‘Keyman risk’

Musk was apparently involved in some attempts to get major shareholders on Tesla’s side.

He reportedly participated in recent meetings with proxy advisor Glass Lewis and money management giants Vanguard Group, State Street and BlackRock, all of which are among Tesla’s top five institutional holders.

Glass Lewis and another proxy advisor, ISS, recommended that shareholders vote against the pay.

But Tesla’s lobbying campaign was apparently successful with at least some of those giant investors. The New York Times reported Thursday that both BlackRock and Vanguard voted in favor of the pay package.

This time, Tesla shareholders had slightly more information than before the vote on Musk’s pay six years ago.

At the time, in 2018, no one knew that Musk would achieve all the revenue and operating milestones from the deal that unlocked his right to buy Tesla options for $70.

Had Musk failed to meet escalating revenue and market capitalization demands, his stock option-based CEO compensation would have been zero.

There were some smaller shareholder groups that spoke out against Musk’s pay package, as well as one big one: Norway’s $1.7 trillion sovereign wealth fund.

“We remain concerned about the overall size of the reward, the structure given performance triggers, dilution and the lack of mitigation of key person risk,” said Norges Bank Investment Management (NBIM), the fund’s operator.

The fund, which also opposed Musk’s pay package in 2018, has a $5.6 billion stake, consisting of 31.57 million shares, or 0.99% of all outstanding shares, making it the seventh largest, according to Capital IQ is a Tesla shareholder.

And the California State Teachers’ Retirement System (CalSTRS) also said it would vote against Musk’s pay package, with the pension fund’s chief investment officer telling CNBC that the stock awards were “ridiculous.” CalSTRS owns approximately 4.7 million Tesla shares.

But some of Musk’s supporters doubled down on the argument that his presence is necessary for Tesla’s future.

Former Tesla shareholder Baillie Gifford said it would vote in favor of Musk’s package, according to Bloomberg sources, reasoning that the package was in line with shareholder returns.

“Elon is the ultimate ‘key man’ of key man risk,” billionaire Tesla investor Ron Baron wrote in an open letter last week advocating for approval of the pay package. “Without his relentless drive and uncompromising standards, there would be no Tesla.”

Some small shareholders took to social media to rally votes and support for Musk. Someone posting on

“Don’t mess with Tesla Retail shareholders.”

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