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    • Tesla shareholders approve CEO Musk's US$56 billion pay, company's move to Texas

    Twitter, now X. Corp, and Tesla CEO Elon Musk meets France's Finance Minister Bruno Lemaire, unseen, during the 6th edition of the "Choose France" summit, in Versailles, outside Paris, France, Monday, May 15, 2023. (Ludovic Marin/ Pool Photo via AP) Twitter, now X. Corp, and Tesla CEO Elon Musk meets France's Finance Minister Bruno Lemaire, unseen, during the 6th edition of the "Choose France" summit, in Versailles, outside Paris, France, Monday, May 15, 2023. (Ludovic Marin/ Pool Photo via AP)
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    Tesla shareholders approved CEO Elon Musk's US$56 billion pay package, the electric vehicle-maker said on Thursday, a big thumbs-up to his leadership and an enticement for keeping his focus on his biggest source of wealth.

    Shareholders also approved a proposal to move the company's legal home to Texas from Delaware, Tesla said at its annual shareholder meeting in Austin, Texas. They also approved other proposals including the re-election of two board members: Musk's brother Kimbal Musk and James Murdoch, son of media mogul Rupert Murdoch.

    Shareholders did increase the level of investor control by passing proposals in favour of shortening board terms to one year and lowering voting requirements for proposals to a simple majority, despite board opposition to both.

    Onstage at the meeting, Musk described himself as pathologically optimistic. "If I wasn't optimistic this wouldn't exist, this factory wouldn't exist," Musk said to applause. "But I do deliver in the end. That's the important thing."

    Musk had tipped off late on Wednesday that the proposals were garnering huge support and thanked shareholders. A chart on his social media platform X showed the resolutions were set to pass by wide margins. Tesla on Thursday did not disclose the voting tallies, which are expected to be revealed in coming days.

    At least a half-million viewers watched the meeting on the livestream on social media platform X, and about 40,000 watched on YouTube. The approval also underscores the support that Musk enjoys from Tesla's retail investor base, many of whom are vocal fans of the mercurial billionaire. The proposal passed despite opposition from some large institutional investors and proxy firms.

    "This is, firstly, a message that Tesla's retail shareholders do approve of what's going on. It will be interesting to see what the exact percentages of the votes are," said Lindsey Stewart, a director at Morningstar Sustainalytics.

    Tesla had been drumming up support for Musk's pay package, especially from retail investors, who make up an unusually high percentage of its ownership base but who often do not vote. The Tesla CEO could still face a long legal fight to convince a Delaware judge who invalidated the package in January, describing it as "unfathomable." He may also face fresh lawsuits on the package, which would be the largest in U.S. corporate history.

    "This doesn't end the (legal) question. There's still is a lawsuit pending in Delaware where there's no final judgment yet," said John Lawrence, a partner at law firm Baker Botts.

    "This will be fought in that court case immediately and probably for the next several months."

    'Deal is a deal'

    Shareholder approval for the compensation serves as both an endorsement of Musk's tenure and an acknowledgment that investors do not want to risk the company's future.

    In January, Musk threatened to build AI and robotics products outside of Tesla if he failed to gain enough voting control, which essentially required the 2018 pay package to be approved.

    He shifted the company's focus to robotaxis, shelving cheaper mass-market electric cars, to the concern of some investors who feared the autonomous technology will be hard to perfect.

    Tesla's share price has dropped about 60 per cent from its 2021 peak as EV sales have slowed and Musk's attention has wavered between Tesla and other companies he runs. The stock closed up 2.9 per cent on Thursday.

    "Shareholders once again endorsed the terms of the contract, sending a strong signal that 'a deal is a deal' and Musk deserves to be rewarded for meeting the lofty thresholds of an entirely incentive-based contract," said Garrett Nelson, analyst at CFRA Research.

    "The news lifts a major overhang on the shares, although we wouldn't be surprised by a "sell the news" reaction on Friday following big gains over the past two trading sessions as the likely outcome became clearer."

    The board had said that Musk deserves the package because he hit all the ambitious targets on market value, revenue and profitability. Large investors including the California Public

    Employees' Retirement System had called the pay package "excessive."

    Referendum

    While Musk is undoubtedly Tesla's driving force, and is credited with much of its success, the company's sales and profit have slowed. There are concerns that he is spreading himself too thin.

    Musk has added two more companies to his roster since the pay package was approved in 2018. He now runs or owns six firms, including rocket-builder SpaceX, social media giant X - formerly Twitter - and the artificial-intelligence firm xAI, which Musk created in 2023.

    The approval suggests shareholders "think he's the only person with the best strategy to implement going forward," said Jason Schloetzer, a business professor at Georgetown University with expertise in corporate governance.

    "They are brushing aside essentially key man risks, where Tesla has become even more dependent on Musk going forward," he said, citing high-profile executive departures in the past few months.

    The Delaware judge who ruled against the package criticized Tesla's board as "beholden" to him, saying the plan was proposed by a conflicted board with close personal and financial ties to its top executive.

    (Reporting by Hyunjoo Jin and Abhirup Roy in San Francisco and Ross Kerber in Boston, Greg Roumeliotis in New York and Abinaya Vijayaraghavan in Bengaluru; Writing by Sayantani Ghosh; Editing by David Gaffen, Miral Fahmy, Mark Potter, Peter Henderson and Matthew Lewis) 

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