Elon Musk wins Tesla shareholder approval for $56 billion pay package

Tesla’s shareholders voted to reinstate CEO Elon Musk’s $55.8 billion (€52 billion) pay package, which was rejected by a judge in Delaware earlier this year. Investors also approved the relocation of the company’s incorporation to Texas.

Shareholders of Tesla voted to reinstate CEO Elon Musk’s $55.8 billion(€52 billion) pay package which was nullified by a judge in Delaware in January. Now the value of the package plan dropped to $48.4 billion (€45 billion) due to a 26% decline in Tesla’s shares this year, despite a 2.9% increase on Thursday. Tesla’s investors have also voted in favour of moving the company’s incorporation to Texas from Delaware. Both resolutions were “passing by side margins” as posted by Elon Musk on his privately owned social media platform X, formerly known as Twitter.

The mammoth compensation plan, initiated in 2018, would boost Musk’s holdings to approximately 21% of the company if he exercised the options, highlighting confidence in Elon’s leadership of Tesla. The voting result, however, does not guarantee Musk will receive the compensation, as it only serves as public support to help him overturn the court’s ruling.

Elon Musk overseas six companies, including Tesla, SpaceX, xAI, X Corp, Neuralink, and OpenAI. He threatened to develop his AI products outside of the company if he did not secure a 25% stake. Shareholders are also concerned he would leave the company if the pay package were rejected.

Elon Musk’s 2018 pay plan

Tesla’s board approved CEO Elon Musk’s pay plan in 2018, which was a performance-based compensation package. To summarise, Musk would not receive any guaranteed salary or cash bonuses, instead, he was granted the option to buy 20.3 million Tesla shares, roughly 12% of the company’s outstanding shares at that time over a period of 10 years. The options were divided into 12 tranches, with each vesting contingent on Tesla’s capitalisation milestones, starting from $100 billion and increasing in $50 billion increments up to $650 billion, as well as operational milestones including increasing revenue to $175 billion and adjusted gross earnings to $14 billion. The plan gives Elon Musk stock options worth $56 billion if all performance targets are met.

In January, a Delaware court ruled against the package, stating that shareholders were not fully informed during the initial approval process. Although shareholders have ratified the pay plan, this does not necessarily guarantee the court would withdraw the ruling. However, if Tesla moved its incorporation to Texas, it would allow the company to avoid the Delaware court jurisdiction over the pay plan.