Tesla shareholders have reaffirmed a pay award of more than $45 billion for Elon Musk, the chief executive, after it was dismissed in a legal challenge.
The vote result, announced at Tesla's annual meeting in Austin, Texas, on Thursday, is a strong sign that shareholders still believe in Musk and could persuade the judge who overturned the award to reinstate it.
Support for the pay plan will come as a relief to Musk's admirers, who feared rejection would lead him to spend less time managing Tesla or even quit. The vote was a setback for investors who had hoped it would send a message about CEO accountability and the limits on executive pay.
The result may also help Musk qualify as the richest person in the world, worth more than $200 billion.
Tesla shares rose on Thursday ahead of the official earnings announcement after Musk said on x that the payment plan was passing by a wide margin.
Tesla's board of directors had called the vote in response to a ruling by Chancellor Kathaleen St. J. McCormick of the Delaware Court of Chancery, where Tesla is registered as a corporation. In January, Chancellor McCormick agreed with a group of disenchanted Tesla shareholders who argued in a lawsuit that the 2018 pay package was grossly excessive.
The board hoped that shareholder approval for a second time could help address Chancellor McCormick's conclusion that a 2018 vote in favor of the pay package was tainted because board members failed to disclose conflicts of interest stemming from their personal ties. and financial with Musk.
But legal experts questioned whether a yes vote would cause Chancellor McCormick to review his ruling. “It doesn't change anything,” said Charles Elson, founding director of the Weinberg Center for Corporate Governance at the University of Delaware.
Tesla has acknowledged that the vote would not necessarily resolve the case.
Shareholders also approved a proposal to move Tesla's corporate registration to Texas, a reaction to what Musk and the board perceived as unfair treatment by Delaware courts. The measure will have no effect in the case of Delaware.
They rejected a proposed shareholder measure requiring Tesla not to interfere with workers trying to organize a union and to negotiate in good faith if they do. Musk has often expressed hostility toward unions. In Sweden, Tesla has refused to negotiate with mechanics who work for the company and have been on strike for almost six months.
The compensation vote pitted those who view Musk as a genius who has revolutionized the auto industry with those antagonized by his polarizing statements about x and Tesla's recent declines in sales and profits.
Robyn Denholm, Tesla's chairman, argued that investors became rich thanks to Musk's leadership and that the company was obligated to give him what he 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 extraordinary value for you,” he said in a letter to shareholders before the vote.
But other shareholders are dismayed by recent declines in Tesla's sales and profits and by Musk's polarizing statements on x, where he has endorsed some 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 have fallen more than 25 percent this year, even as the broader stock market is up 14 percent. At its peak share price 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 plummeted to around $580 billion.
The package gave Musk stock options worth tens of billions of dollars if he met demanding revenue or profit benchmarks and increased the company's stock value to $650 billion.
Most of these goals were thought to be out of reach when the plan was approved in 2018. Tesla was struggling to produce its first moderately priced car, the Model 3 sedan. Soon after, however, Tesla's business took off and, Under the plan, the market value stayed above the $650 billion target long enough for Musk to cash in the options.
With the 2018 pay award, Musk owns 20.5 percent of Tesla, and just under 13 percent without it.
To survive legal challenges, the wage measure required approval of a majority of Tesla's voting shares, not including those of Musk or his brother, Kimbal Musk.
