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June 14, 2024

Tesla Shareholders Endorse Musk’s $56 Billion Pay Package Amidst Controversy

FILE PHOTO: Elon Musk, Chief Executive Officer of SpaceX and Tesla and owner of Twitter, gestures as he attends the Viva Technology conference dedicated to innovation and startups at the Porte de Versailles exhibition centre in Paris, France, June 16, 2023. REUTERS/Gonzalo Fuentes/File Photo

Tesla shareholders have given a resounding thumbs-up to CEO Elon Musk’s monumental $56 billion pay package. This approval, announced on Thursday, reaffirms the electric vehicle maker’s confidence in Musk’s leadership and provides a hefty incentive to keep his focus on Tesla, his primary source of wealth. Despite significant opposition from large institutional investors and proxy firms, the vote reflects the strong support Musk enjoys from Tesla’s retail investor base.

During the annual shareholder meeting in Austin, Texas, Musk exuded his characteristic optimism. “If I wasn’t optimistic this wouldn’t exist, this factory wouldn’t exist,” he remarked to applause, highlighting his visionary drive and commitment. Musk had hinted the night before that the proposals were garnering significant support, setting the stage for the day’s events.

However, the approval is not the final word on Musk’s compensation package. A Delaware court had invalidated the package in January, labeling it “unfathomable.” The ongoing legal battle could extend for months, with the judge expected to scrutinize the vote closely to ensure there was no coercion or undue influence by Musk. Some experts predict fresh lawsuits could emerge, further complicating the matter.

“The process is far from over,” stated Brian Quinn, a professor at Boston College Law School. He noted that the Delaware judge will rigorously examine the vote and require Tesla to demonstrate that the process was free from improper influences.

Additionally, shareholders approved relocating Tesla’s legal headquarters to Texas from Delaware, and re-elected board members Kimbal Musk and James Murdoch. These approvals came despite efforts to increase investor control, such as shortening board terms to one year and reducing voting requirements for proposals to a simple majority, which passed despite board opposition.

Tesla has yet to disclose the specific voting tallies, which are anticipated to be revealed in the coming days. The meeting was watched by at least a half-million viewers on social media platform X and another 40,000 on YouTube, underscoring the high level of interest and engagement among shareholders.

“This vote sends a clear message that Tesla’s retail shareholders support the current direction of the company,” said Lindsey Stewart, a director at Morningstar Sustainalytics. “It will be interesting to see the exact percentages of the votes.”

Musk’s approval serves as both an endorsement of his leadership and a testament to shareholders’ desire to secure the company’s future. “They are essentially ignoring the risks associated with Musk’s central role, showing a strong reliance on his continued leadership,” commented Jason Schloetzer, a business professor at Georgetown University.

Earlier this year, Musk had threatened to develop AI and robotics products outside of Tesla if he did not gain sufficient voting control. He has shifted the company’s focus to robotaxis, causing concern among some investors who worry about the feasibility of perfecting autonomous technology.

In his update on Tesla’s performance, Musk revealed that the company recently shipped a record 1,300 Cybertrucks in a week and has plans for volume production of its Semi trucks. He also discussed at length the plans for autonomous cars, though he did not provide a specific timeline for their release.

Tesla’s share price, which has dropped about 55% from its 2021 peak due to slowed EV sales and Musk’s divided attention, closed up 2.9% on Thursday. “Shareholders’ approval reinforces the principle that ‘a deal is a deal,’ affirming Musk’s right to be rewarded for meeting the ambitious goals set in his incentive-based contract,” said Garrett Nelson, an analyst at CFRA Research.

Despite the approval, some institutional investors, like the California Public Employees’ Retirement System, have called Musk’s pay package “excessive.” Ivan Frishberg, chief sustainability officer at Amalgamated Bank, emphasized that the votes were presented as a referendum on Musk’s continued leadership, which put considerable pressure on shareholders but did not alter the need for good governance.

While Musk remains Tesla’s driving force, concerns persist about his increasing responsibilities, with two more companies added to his portfolio since the pay package was approved in 2018. Musk now oversees six firms, including SpaceX, social media giant X (formerly Twitter), and artificial intelligence firm xAI, created in 2023.

Musk’s ambitious plans and multifaceted ventures continue to stir both support and controversy among investors and industry observers alike.

Read more Business related news on R9 News
Jhumpa Lahiri

Jhumpa Lahiri

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