Elon Musk, CEO of Tesla, has asserted that shareholders are likely to approve his proposed pay package of $56 billion (£41 billion), and a move to establish the electric vehicle company in Texas, ahead of the yearly gathering on Thursday. Musk indicated on social media site X late on Wednesday that both resolutions from Tesla shareholders are leading by considerable numbers, expressing gratitude to the investors for their backing.
Charts provided by Musk reflect preliminary results, and the final outcome might be altered at the annual meeting. Nevertheless, approval of these resolutions would constitute a significant victory for the CEO, who has been contesting for the largest remuneration package in the history of American business.
Since a Delaware judge invalidated Musk’s $56 billion award in January 2021, citing a lack of transparency and independence in the board’s operations, the board of Tesla has been persuading investors to approve it again. This court decision led Musk to advocate for Tesla’s re-establishment from Delaware to Texas.
Should Tesla succeed in acquiring investor support for Musk’s package, comprised mainly of stock options, Musk’s share in the firm would escalate from 13% to over 20%, provided these options are acted upon. Tesla’s shares experienced a 3.9% uptick on Wednesday, prior to the vote.
The shareholder vote has generated significant attention, with any potential failure potentially damaging Musk’s reputation during a time of fierce competition with Chinese electric car manufacturers and escalating costs due to heavy investment in AI and robotics.
The campaign promoting both proposals has been spearheaded by Robyn Denholm, Tesla’s chair, who compares the task to scaling Mount Everest. Support has been garnered from key Tesla investors such as Baillie Gifford’s primary Scottish Mortgage Investment Trust, Ron Baron, and Cathie Wood’s Ark Investment Management.
The pay package proposed for Musk has sparked controversy among investors, with Norway’s $1.7 trillion (£1.25 trillion) oil fund opposing due to its size, structure, and inability to address the “key person risk”. The CEO of Calpers, the biggest public pension fund in the US with a $1.67 billion (£1.23 billion) stake, has stated intentions to vote against the deal. The two most prominent proxy advisors, ISS and Glass Lewis, have suggested that shareholders rebuff the sizeable package.
In the closing weeks, Tesla has amplified its campaign, with an array of support coming from both present and past executives, as well as engineers publicly endorsing Mr. Musk on social platforms. To stir enthusiasm amongst its retail investors for casting their vote in his favour, Tesla has also promised a guided tour of its factory with Musk.
Nearly 30 per cent of Tesla shares are held by retail investors which is a significantly higher percentage compared to other companies. Given the steep challenges in successfully gaining approval for both propositions, especially the relocation to Texas, the support of these retail investors is essential.
In terms of Musk’s compensation vote, the requirement is a straightforward majority, not counting the shares owned by Musk and his brother, Kimbal.
The stipulation for moving the incorporation to Texas is more stringent, requiring the majority of total shares in circulation. Any shares not voted are automatically considered as voting against the proposition. – Copyright The Financial Times Limited 2024.