Tesla (NASDAQ:TSLA) shareholders have given their approval to a staggering pay package for CEO Elon Musk, valued at up to US$56 billion (A$84 billion), contingent on Tesla's share price.
The package is the largest in US corporate history and a strong endorsement of Musk’s leadership despite firm opposition from some larger institutional investors and proxy firms.
Governance concerns
The package’s approval is proof of the support Musk enjoys from his retail investor base – known for their vocal admiration of the CEO – even as concerns grow about his increasing commitments and recent high-profile executive departures from the company.
Some large investors, such as the California Public Employees' Retirement System, criticised the pay package as "excessive."
Similarly, Amalgamated Bank voted against it, citing concerns over independence and corporate governance at the iconic electric vehicle brand.
Observers also opined about the inherent ‘key man’ risks of throwing such enthusiastic support behind the Tesla figurehead.
The bank's chief sustainability officer Ivan Frishberg remarked that: "Elon Musk and [company chair Robyn] Denholm have made this about CEO loyalty and presented the votes as a decision about whether the company can keep Musk.
“That is a lot of pressure."
In addition to the pay package, shareholders approved the relocation of Tesla's legal home from Delaware to Texas.
The annual meeting also saw the re-election of Kimbal Musk, Elon Musk’s brother, and James Murdoch, son of media mogul Rupert Murdoch, to the board.
Pathological optimism
Onstage, Musk expressed what he referred to as "pathological optimism," saying, "if I wasn't optimistic, this wouldn't exist, this factory wouldn't exist. But I do deliver in the end. That's the important thing."
He had earlier enthused via social media that the proposals were garnering substantial support and thanked shareholders.
Despite the resounding investor approval, Musk still faces legal challenges. A Delaware judge had previously invalidated the pay package in January, deeming it "unfathomable."
This ruling suggests a prolonged legal battle may lie ahead, along with potential new lawsuits concerning the compensation package.
Tesla's stock, which has dropped in the vicinity of 60% from its 2021 peak, saw a 2.9% rise on Thursday.
Commentators see the package as a vindication of the controversial billionaire and speculate that it may alleviate some investor concerns about his waning interest in Tesla.
The board maintains that Musk deserves the package due to his achievement of ambitious targets related to market value, revenue and profitability.
But Musk may be spread too thinly across his various business interests.
He now manages six companies including SpaceX and social media platform X, and has shifted Tesla’s focus towards robotaxis, despite concerns among some onlookers about the viability of autonomous technology and the unresolved ethical issues surrounding AI.