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Elon Musk, Chief Executive Officer of SpaceX and Tesla, 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
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New York: Tesla shareholders on Thursday approved a massive pay package 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 technologies around artificial intelligence and robotics — is a key factor, a Tesla official said at the company’s annual meeting.
“I just want to say a heartfelt thank you to everyone who supported the shareholder vote,” an elated Kasturi told the gathering. “I appreciate that.”
Cheers for “Alon” erupted after the results of the vote were announced at the rally, which was held at the company’s factory in Austin.
Musk has emerged as a lightning rod figure, in part because he embraces right-wing politicians, including President Donald Trump. But Thursday’s vote marked the latest demonstration of the billionaire entrepreneur’s resonance with investors.
The package aims to ensure that Musk stays at Tesla for at least seven and a half years. When the package was introduced in September, it would have lifted Musk’s holding in Tesla from about 12 percent.
Musk almost bessed Tesla’s potential growth in July, saying it would “be the most valuable company in the world by far” if it delivers on envisioned advances in autonomous driving and AI.
But Musk himself has indicated that he may leave Tesla or take a back seat if his ownership stake is not raised enough to give him the influence over its future that he desires.
Urging shareholders to back the proposal, Tesla Chair Robin Denholm argued that keeping Musk is essential to Tesla’s future, warning that the company’s stock could dive if he pulls out.
The board has brushed off criticism that its acceptance of controversial political figures by billionaires is weighing on sales.
Basis of shareholder support
Tesla investors have been Musk’s staunch supporters in past votes on Musk’s pay packages, including a 2018 deal worth about $55.8 billion that has been repeatedly blocked by Delaware courts in response to shareholder lawsuits.
After Delaware’s latest decision, Denholm and the rest of Tesla’s board went back to the drawing board, first approving an “interim” compensation award of about $29 billion for Musk in August and then unveiling the larger plan in September.
Once again on Thursday, Tesla shareholders signed off on a stratospheric paycheck for Musk and handed the company victories on other key votes, including the re-election of board members.
But Tesla Talkdown, an activist group, blasted the vote’s results, noting the company’s decline in auto sales in recent quarters.
“Elon Musk just got a trillion dollars for failing,” said the group, which rallied against the project in downtown Austin on Wednesday.
“Sales are down, security risks are out and their politics are alienating consumers. This isn’t leadership – it’s the world’s most expensive participation trophy.”
On the other hand, Wedbush analyst Dan Ives said the clean vote in favor of Musk has won his position because “the AI revolution has given us more confidence in the Tesla story going forward.”
Musk, whose net worth is more than $500 billion, is already the richest person in the world, according to Forbes’ real-time list of billionaires.
He has to hit 12 milestones related to market capitalization to get the full pay package. The first tranche will be available when Tesla reaches $2 trillion in market value, up from its current $1.5 trillion.
The plan also includes a series of operating profit and product goals, such as delivering 20 million Tesla vehicles.
The pay proposal was blocked by Glass Lewis and Institutional Shareholder Services (ISS).
An ISS analysis of ISS last month criticized the rationale for the potential windfall, saying Musk’s financial interests are already closely tied to Tesla’s fortunes.
As structured, “separating the overall package into “extraordinary” value” destinations could undermine the need to understand all of the goals,” said ISS, who also flagged the lack of clear requirements Musk has focused on Tesla.
