Musk’s record pay deal backed by 77% of Tesla shareholders

Tesla revealed on Friday that chief executive Elon Musk had secured an emphatic victory in shareholder votes on his $56 billion (€52 billion) pay package and a proposal to move the company’s domicile from Delaware to Texas.

Musk’s package of stock options – the largest in US history – was reapproved by 77 per cent of votes cast at Tesla’s annual meeting in Austin on Thursday, according to a regulatory filing. Excluding shares owned by Musk and his brother Kimbal, the figure was 72 per cent.

The plan to reincorporate in Texas won the backing of 63 per cent of votes cast. The margins of victory surprised even those inside the company. Chair Robyn Denholm had compared the task to climbing “Mount Everest” during a frantic months-long campaign.

The results are a significant boost for Musk as he seeks to reassert control over Tesla. The votes became a referendum on his mercurial leadership, in particular his plans to recast Tesla as an artificial intelligence and robotics company.

The reaffirmation of his pay will also 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 over concerns about its value and the independence of the board.

Musk opted not to be magnanimous in victory. Early on Friday morning he posted on X a photo of a cake he said he planned to send to Delaware as a “parting gift”. It was decorated with the words “Vox Populi, Vox Dei” in icing, meaning “the voice of the people is the voice of God”.

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.

The day before, as the polls closed at 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 just opening a new chapter for Tesla, we are starting a new book.”

The jubilant chief executive 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; April 20 is a day celebrated by marijuana smokers.

Tesla moved quickly to leave the state. On Friday, Denholm said in a letter to shareholders that she had already filed the paperwork to reincorporate in Texas. The chair added the “decisive approval by our stockholders confirms our commitment to the [pay] deal” and “we intend to put it back in front of the court in Delaware to ensure that your voices… are heard”.

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

Greg Varallo, lead attorney for the plaintiff, said: “We believe that the ratification vote that Elon demanded and coerced is deeply flawed as a matter of law, legally ineffective and does not impact our case. We will respond to any arguments raised in due course.”

Key to Tesla’s success in the vote was persuading Vanguard, its largest shareholder with a 7.3 per cent stake, to flip its stance on pay, having opposed it in 2018.

While conceding that the share grant was a “substantial outlier” to any other in corporate history, Vanguard said “the unique circumstance of evaluating the plan retroactively eliminated our concerns”.

The $9.3 trillion asset manager said it had changed its position after meeting Mr Musk and Tesla directors. It concluded that “the strong alignment of executive pay with shareholder returns since 2018 and the benefits the board asserted related to the motivational value for the CEO in preserving the original deal” were enough to justify its shift.

BlackRock, the second-biggest, also supported both resolutions. BlackRock declined to comment. – Copyright The Financial Times


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