Tesla Shareholders Back Musk’s $50B Pay Package

Elon Musk, the CEO of Tesla, revealed on Wednesday night that the company’s shareholders have voted overwhelmingly to reinstate his substantial 2018 compensation plan, which is estimated to be worth around $50 billion. This decision comes months after the plan was invalidated by a Delaware judge.

In a post on social media platform X, Musk stated that the shareholder resolutions regarding his pay and the company’s reincorporation in Texas had both received strong support, passing by wide margins. He included a graph illustrating that both measures had significantly more votes than required for approval.

Musk was also instrumental in the push to change Tesla’s state of incorporation from Delaware to Texas, conducting a public vote on his X account. He expressed his gratitude to Tesla shareholders and supporters on X and responded positively when one follower suggested that with the new options in place, Musk should now make Tesla the most valuable company on Earth.

Following the announcement, Tesla’s shares surged nearly 6.5% in premarket trading early Thursday, eventually settling at around $187, marking a 5.45% increase from the previous day’s closing price.

Texas Governor Greg Abbott congratulated Musk on the successful vote, welcoming Tesla to a state that boasts neither a personal nor a corporate income tax.

Despite the favorable shareholder vote, it does not immediately overturn the January ruling by Delaware Court of Chancery Judge Kathaleen McCormick that voided Musk’s pay package. Tesla has acknowledged in its security filings that a favorable vote may not resolve the pay issue. However, the company could use the result of the vote to signal to the judge that Musk’s pay package has broad support among shareholders.

Notably, a Tesla shareholder named Donald Ball has already filed a legal challenge against the vote, accusing Musk of using coercive tactics to achieve his desired outcome.

In January, McCormick voided Musk’s record pay package, which was challenged by a Tesla shareholder who argued that it was unfair to shareholders and that Tesla’s board had failed in its fiduciary duty by approving it. Musk criticized the ruling and the state of Delaware, advising against incorporating companies there. He then announced plans to hold a shareholder vote to transfer the company’s state of incorporation to Texas.

If the pay package passes all legal challenges, it could increase Musk’s equity in Tesla from 13% to 22%, bringing him closer to his goal of controlling 25% of the company’s voting power. Musk has emphasized the importance of this level of control, stating that he is uncomfortable with growing Tesla to be a leader in AI and robotics without it. He argued that having less than 15% voting power would make a takeover by questionable interests too easy. If his demand is not met, he indicated that he would prefer to develop products outside of Tesla. Since then, Musk’s artificial intelligence startup, xAI, has raised $6 billion in funding at a pre-money valuation of $18 billion.