NEW YORK: Tesla shareholders on Thursday overwhelmingly approved a massive compensation plan for CEO Elon Musk that could reach $1 trillion.
The pay package — designed to ensure Musk’s continued service to Tesla as the company pursues breakthrough technology in artificial intelligence and robotics — won the support of more than 75% of shareholders, a Tesla official said at the company’s annual meeting.
“I would just like to say a big thank you to everyone who supported the shareholder votes,” a euphoric Musk told the meeting. “I appreciate it immensely.”
Cheers for “Elon” erupted after the vote result was announced at the rally held at the company’s Austin factory.
Musk has become a lightning rod figure, thanks in part to his support for right-wing politicians, including President Donald Trump. But Thursday’s vote marked the latest demonstration of the entrepreneurial billionaire’s interest among investors.
The plan aims to ensure that Musk stays at Tesla for at least seven and a half years. This would increase Musk’s stake in Tesla from around 12% when the plan was introduced in September to potentially more than 25%.
Musk has described Tesla’s growth potential as nearly limitless, saying in July that it “will be the most valuable company in the world by far” if it achieves planned advances in autonomous driving and AI.
But Musk himself has hinted that he might leave Tesla or move into the background if his ownership stake isn’t increased enough to give him the influence he wants over its future.
In urging shareholders to support the proposal, Tesla Chairman Robin Denholm argued that keeping Musk was essential to Tesla’s future, warning that the company’s shares could plunge if he stepped down.
The board ignored criticism that the billionaire’s embrace of controversial political figures weighed on sales.
Shareholder Support Base
Tesla investors have been reliable supporters of Musk in past votes on Musk’s salaries, including a 2018 deal worth about $55.8 billion that was repeatedly blocked by a Delaware court in response to shareholder litigation.
Following Delaware’s latest ruling, Denholm and the rest of Tesla’s board went back to the drawing board, first approving “interim” compensation worth about $29 billion for Musk in August and then unveiling the broader plan in September.
Once again on Thursday, Tesla shareholders approved stratospheric compensation for Musk and also gave the company victories on other key votes, including the re-election of board members.
But Tesla Takedown, an activist group, blasted the vote’s outcome, pointing to the company’s declining auto sales in recent quarters.
“Elon Musk just got a trillion dollars for his failure,” said the group, which rallied behind the project Wednesday in downtown Austin.
“Sales are down, safety risks are increasing, and his policies are scaring away customers. That’s not leadership, it’s the most expensive participation trophy in the world.”
For his part, Dan Ives, an analyst at Wedbush, said the overwhelming vote in favor of Musk solidifies his position as “the AI revolution takes hold, giving us greater confidence in the Tesla story.”
Musk, with a net worth of more than $500 billion, is already the richest person in the world, according to Forbes’ real-time list of billionaires.
He must achieve 12 market capitalization-related milestones to receive full compensation. The first tranche would be available when Tesla reaches $2 trillion in market value, up from $1.5 trillion currently.
The plan also involves a series of operating profit and product targets, such as delivering 20 million Tesla vehicles.
The compensation proposal was rejected by Glass Lewis and Institutional Shareholder Services (ISS).
An ISS analysis from last month criticized the rationale for this potential windfall, noting that Musk’s financial interests are already intertwined with Tesla’s fate.
As structured, separating the entire program into “unprecedented” value tranches “could undermine the need to achieve all goals,” said ISS, which also pointed to the lack of explicit requirements that the busy Musk remain focused on Tesla.
