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Elon Musk declares victory in crunch CEO pay vote hours before shareholder meeting even begins



In a crunch vote that had been expected to swing either way, Tesla’s shareholders have granted a request from their board to restore Elon Musk’s 2018 pay package, dubbed the largest in human history, over the objections of critics who said it was excessive and unreasonable.

Dispensing with the usual custom of waiting until polls were closed and ballots tabulated, Musk took to his social media platform X to declare victory for both his personal compensation estimated at around $55 billion as well as a move of the company’s legal domicile from Delaware to Texas. 

“Both Tesla shareholder resolutions are currently passing by wide margins!” he tweeted hours before the start of the annual shareholder meeting, posting graphs showing their approval above the minimum threshold required. “Thanks for your support!” 

The saga around his compensation deal opened up deep divisions in the once closely-knit investor base. It pitted supporters of the company’s visionary yet often distracted CEO against a growing minority that felt Musk had become too much of a liability now that its halcyon days of 50% growth were over.

In the run-up, Tesla mounted an unprecedented campaign to lobby on his behalf, with critics like asset manager Gerber Kawasaki suggesting the company spent more on advertising for their CEO’s pay package than it did for their own cars. 

All-or-nothing confidence vote in Musk

Musk effectively turned the shareholder meeting into an all-or-nothing confidence vote that risked undermining his authority and that of the entire board should the vote not go their way. 

Big institutional shareholders like CalPERS, the nation’s largest manager of public pension assets, and Norway’s $1.7 trillion pledged to oppose Musk, while other long-term investors like Baillie Gifford and T. Rowe Price supported him. 

The two big unknowns going into today’s meeting were how the major index funds like Vanguard, BlackRock and State Street might vote, as well as how many of Musk’s retail shareholders would actually cast their ballot remotely via a dedicated website.

“It’s a pop the champaign moment for Musk and Tesla shareholders,” wrote Wedbush Securities tech analyst Dan Ives in a research note to clients on Thursday. “This removes a $20-$25 overhang on the stock in our opinion that has weighed on shares since the head-scratching Delaware ruling set this Twilight Zone soap opera on earlier this year.” 

With the uncertainty over the vote now removed, shares are set to open more than 6% higher on Thursday at $189 each, their highest level since May 21.

At the time the compensation deal was first conceived six years ago, it was a high-stakes gamble that in lieu of a salary gave Musk the right to buy up to 304 million shares at a steep discount should he achieve more than dozen milestones. 

Although overwhelmingly approved at the time and subsequently met in full, it was struck down in January by a Delaware court on the basis that Musk’s friends and family on the board had failed to reveal to shareholders they gave him wide berth to set his own terms. 

Re-ratifying the package won’t change the ruling, expected to being challenged by Tesla on appeal. But it does lend credence to his legal team’s argument that investors are now sufficiently informed about the scale of their company’s governance issues. 

No obvious alternative as successor after Musk purged rivals

There were good reasons for investors to ratify the deal at this year’s shareholders meeting. Chief among them was the risk that Musk could simply fly the coop. The volatile entrepreneur is known for his take-no-prisoners “demon mode”, during which he tends to make extreme decisions. Resigning was a distinct possibility as losing the vote would have suggested that he no longer enjoyed the support of a majority of his investors.

While some believed this could be a blessing in disguise, the risk is, without Musk, Tesla would lose its hunger to disrupt the industry, much like when Apple kicked out Steve Jobs. 

Exacerbating this risk was the lack of an obvious successor who enjoyed the broad confidence of Tesla’s investors. Zach Kirkhorn, Tesla’s widely respected finance chief, and engineer Drew Baglino, the senior vice president for powertrain and energy, were both pushed out of the company in recent months. 

The only obvious candidate with the requisite standing at hand is non-executive director J.B. Straubel, formerly Tesla’s chief technology officer until 2019.

This is just one reason why the likely appeal of the Delaware decision could still fail—today’s approval could be construed as having been made under duress.

“This doesn’t fully settle the matter,” warned Piper Sandler analyst Alex Potter on Thursday. “The compensation package can still be deemed illegal.”

Major challenges still lie ahead

Even if the polarizing entrepreneur did stay on in the event of a no vote, there was another major downside facing shareholders.

While a new contract would likely be more legally water-tight than the porous one shareholders just revoted, it would have meant months of negotiation to reach a costly outcome. That’s because the stock-based compensation for the previous deal has already long been fully expensed and financially digested. 

Were Musk to demand so much as a tenth of the original 304 million shares under his previous package, the company faced potentially billions in new accounting costs as the value would have to be adjusted to today’s stock price rather than those back in 2018, when Tesla was still struggling to prove it could survive.

The hope is now that the company can put this acrimonious affair behind it and move forward as a team to deliver on its strategic pivot away from selling EVs to AI and robotics.

Major challenges lie ahead. With Musk dashing any hopes of a refreshed Model Y for this year, responsible for two-thirds of all car sales, hopes rest on the Aug. 8 robotaxi unveiling, where Tesla could also present its latest and most affordable entry model. 

If that doesn’t convince, it could be a trying time for investors. Company officials that recently briefed JPMorgan warned the bank’s analysts not to expect the robotaxi to go into production until 2027.

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