SAN FRANCISCO, June 14 — Tesla will use yesterday’s strong support for Elon Musk’s US$56 billion (RM264 billion) pay package to try to win over a Delaware judge that invalidated his 2018 agreement, the company’s board president said today.

The long process to reaffirm the largest-ever corporate pay package ended yesterday, when nearly three-quarters of shareholders — excluding Musk and his brother — voted in favour of the deal, overcoming opposition from a number of institutional investors and proxy advisory firms.

The support was roughly in line with 2018’s vote that was invalidated in January by Delaware judge Kathaleen McCormick. The legal fight to recognise yesterday’s vote could start on Friday, as the approval does not resolve that lawsuit.

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The decisive vote confirms the company’s commitment to the 2018 deal, Tesla board chair Robyn Denholm said in a letter to shareholders today. “We intend to put it back in front of the court in Delaware to ensure that your voices as owners of our company are heard,” she wrote.

McCormick in January called the package an “unfathomable sum” granted by a conflicted board with close personal and financial ties to CEO Musk.

Vanguard, Tesla’s largest shareholder after CEO Musk, voted in favour and played a major role in passing the pay deal after first disapproving it in 2018, a note seen by Reuters showed.

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Investors hope the win will help Musk focus his attention more on Tesla, whose shares have slumped as sales of electric vehicles slowed and Musk purchased social media platform Twitter, later renamed X. Tesla shares fell nearly 2 per cent in trading today.

Tesla listed several voting thresholds needed to approve Musk’s pay package. Under the strictest standard, which excluded the votes of shares held by Musk and his brother Kimbal Musk, it received 72 per cent of votes cast, compared with 73 per cent in 2018 under the same standard.

Under a looser measure of all votes cast, it received 77 per cent support, according to Tesla’s filing.

The legal case

Legal experts were split as to whether it would hold sway in the case, which could stretch out for months. Some suggested that the original case’s arguments that Tesla’s shareholders were not fully aware of how quickly Musk would achieve the 2018 goals was no longer relevant.

“Now that shareholders have voted for it a second time with all of the facts out in the open, the entire crux of the judge’s argument becomes invalid,” said Natela Shenon, a partner at Grant Shenon in Los Angeles, yesterday evening.

The filing did not break down the vote based on the type of investor, but it underscored the support that Musk enjoys from retail investors, many of whom are vocal fans of the mercurial billionaire.

“We have the most awesome shareholder base. I mean, it’s just incredible,” Musk said at a shareholder meeting yesterday.

Some large investors argued that the package will hurt existing shareholders and that the board still lacks independence.

“Instead of continuing to try to defend it in court, the board should hire a compensation consultant, and renegotiate Musk’s incentive plan so that it is appropriate and not dilutive to shareholders,” said New York City Comptroller Brad Lander, who oversees the city’s public retirement funds.

Musk, who also owns an AI startup, xAI, previously said he prefers to build artificial intelligence and robotics products outside of Tesla if he cannot get 25 per cent voting power, which would require the stock compensation.

The proposal to reincorporate Tesla in Texas from Delaware received about 84 per cent of votes, excluding those of board members Elon and Kimbal Musk.

Tesla directors James Murdoch and Kimbal Musk won re-election with the support of 69 per cent and 79 per cent of votes cast, respectively, the filing showed.

Those votes were in line with their previous support rates but lower than average for US corporate directors. Support for directors at Russell 3000 companies has averaged around 95 per cent in recent years, according to shareholder engagement firm Georgeson. — Reuters