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Tesla's shareholders on Thursday gave strong approval to a huge compensation package for CEO Elon Musk that could total up to 1 trillion dollars. This pay arrangement was designed to keep Musk with the company as Tesla works towards major advancements in artificial intelligence and robotics. According to a Tesla representative at the annual meeting, over 75 percent of shareholders backed the proposal. "I want to sincerely thank everyone who voted in favor," a jubilant Musk stated to the crowd. "I really appreciate it." The announcement of the results sparked cheers of "Elon" at the event, which took place at the Austin factory.
Musk has become a polarizing figure partly due to his support of right-wing leaders, including former President Donald Trump. However, the vote on Thursday showed that investors still connect strongly with the successful entrepreneur. The plan is intended to keep Musk at Tesla for at least seven and a half more years, increasing his ownership from about 12 percent at the time of the proposal in September to possibly over 25 percent. Musk has referred to Tesla's potential for growth as nearly limitless, stating in July that it could "be the most valuable company in the world by far" if it fulfills its goals in self-driving technology and AI. However, he has indicated that he might step back or even leave Tesla if his stake is not increased enough to ensure he has the necessary influence on its direction.
In advocating for the proposal, Tesla Chair Robin Denholm stressed the importance of retaining Musk for the future of the company, warning that its stock price could plummet if he departed. The board has dismissed worries that Musk's support for controversial political figures has negatively impacted sales. Tesla investors have commonly been supportive of Musk in previous votes concerning his compensation, including a 2018 package valued at around 55.8 billion dollars, which has faced repeated legal challenges in Delaware due to shareholder lawsuits. After the most recent court ruling in Delaware, Denholm and the Tesla board initiated a new plan, first approving an "interim" pay package worth about 29 billion dollars for Musk in August before revealing the larger proposal in September.
Once again on Thursday, Tesla shareholders approved Musk's exorbitant compensation and also supported the company on other important votes, including the reelection of board members. Despite this, an activist group called Tesla Takedown criticized the vote result, pointing to a decline in the company’s car sales in recent months. "Elon Musk just received a trillion dollars for failure," declared the group, which protested against the plan in downtown Austin the day before. "Sales are decreasing, safety issues are rising, and his political stance is driving customers away. This isn't leadership -- it’s the most expensive trophy for just participating." In contrast, analyst Dan Ives from Wedbush stated that the overwhelming vote in favor of Musk solidifies his place as "the AI Revolution begins, bolstering our confidence in Tesla's future."
According to Forbes's list that is updated in real-time, Musk, who has a personal wealth exceeding $500 billion, currently holds the title of the wealthiest individual globally. To obtain the complete compensation package, he needs to achieve 12 objectives tied to the company's market capitalization. Once Tesla attains a market valuation of $2 trillion, a surge from its existing $1.5 trillion, the initial segment of the compensation becomes accessible. This plan additionally encompasses various operational profit targets and product-oriented objectives, for instance, delivering 20 million Tesla automobiles. The compensation proposition garnered disapproval from both Glass Lewis and Institutional Shareholder Services (ISS). Last month, an ISS assessment expressed doubts about the justification for the possible financial advantage, emphasizing that Musk's monetary stakes are substantially connected to the course of Tesla.
ISS stated that, in its present design, splitting the entire compensation into segments of "unheard of" worth "may lessen the necessity for fulfilling every objective". In addition, ISS highlighted the absence of specific conditions mandating that Musk, known for his numerous commitments, maintains his focus on Tesla.
