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Elon Musk's pay package secures overwhelming support

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Tesla shareholders have voted to approve a $56 billion pay package for CEO Elon Musk, marking one of the highest reward accords in US business history. Musk revealed the decision on social media site X on Wednesday, and it includes shifting the electric vehicle maker's legal headquarters to Texas. Musk expressed gratitude for the support, adding, "Thanks for your support!!" in his message.

Implications for tesla and legal challenges

The shareholder approval may allay investor fears about Musk's future at Tesla, giving the firm leverage to defend a recent court verdict that overturned the pay package. Despite the overwhelming support, Musk faces a protracted legal struggle to persuade the Delaware judge who previously disqualified the package owing to Musk's improper influence on the Tesla board. Legal experts warn that the Delaware court may not recognise the most recent shareholder vote as effective.

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Shareholder meeting and voting dynamics

The results will be announced at Tesla's headquarters in Texas at 4:30 p.m. (2130 GMT) on Thursday. Preliminary results showed major backing from institutional and retail investors. Despite resistance from prominent proxy companies such as Glass Lewis and Institutional Shareholder Services (ISS), as well as dissent from key investors such as Norway's sovereign wealth fund, the 'yes' vote was successful.

Other suggestions discussed at the meeting included Kimbal Musk's and James Murdoch's re-election to the board, as well as a transfer in legal domicile to Texas. Texas Governor Greg Abbott applauded Tesla's legal manoeuvring, citing the state's lack of personal and corporate income taxes.

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Investor confidence and market reactions

Some investors interpreted the decision on Musk's compensation as a referendum on his leadership. While Musk is praised for Tesla's success, his involvement in several ventures, including SpaceX and social media company X, has generated questions about his focus on Tesla. The company's stock, which has fallen over 60 per cent since its 2021 top, rose 3.9 per cent on Wednesday ahead of the shareholder meeting.

Regardless of his controversial image, Musk's leadership is seen as critical to Tesla. The board justified Musk's large pay package by emphasising his attainment of aggressive targets in market value, revenue, and profitability. They also stated that the package was required to maintain Musk's devotion to Tesla despite his involvement in other businesses.

Future legal and corporate developments

The shareholder vote intends to strengthen Tesla's appeal against the Delaware court's judgment, which criticised the 2018 pay package for not providing appropriate shareholder transparency. The court's decision highlighted the board's conflicts of interest because of its tight relationship with Musk.

Musk's efforts to reinstate his remuneration package might take months or years as the appeals process plays out. The protracted legal dispute highlights the challenges of executive compensation and corporate governance at one of the world's largest electric vehicle manufacturers.

(With inputs from Agencies)