Elon Musk $56B Compensation Package Re-approved By Tesla Shareholders

Tesla shareholders on Thursday voted both to reinstate CEO Elon Musk's $56 billion pay package that was voided by a Delaware judge and change the company's state of incorporation from Delaware to Texas. Given that the value fluctuates with changes in Tesla's stock price, the company cited $44.9 billion as the current compensation package's value, in its proxy statement.

On the news of the compensation package approve, the company's stock rose 2.92% during Thursday's trading session and gained a further 0.71% in after-hours trading.

"I just want to start by saying, hot damn, I love you guys!" Musk said in opening remarks following announcement by the company's general counsel of the compensation package's approval at Tesla's annual shareholder meeting in Austin, Texas, on Thursday. The board of directors had recommended that shareholders back the proposal.

Musk suggested earlier in the day that shareholders were set to approve the proposals, posting a graph on X that showed the number of votes in favor for both proposals surging above a "guaranteed win" threshold in recent days. "Both Tesla shareholder resolutions are currently passing by wide margins! Thanks for your support!!" he wrote.

Texas Governor Greg Abbott congratulated Musk in a post on X, "Congrats Elon on getting the pay you were promised and on your new incorporation in Texas," he wrote. "Welcome to a state that has neither a personal nor a corporate income tax."

In 2018, Tesla shareholders first approved the $56 billion pay package, a compensation plan that features no salary or bonus and offers rewards in the form of stock options that are awarded based on Tesla's market value rising to as much as $650 billion over the 10 years following 2018.

However, in late January, a left-wing Delaware judge voided the pay plan in response to an activist investor lawsuit. The judge held in part that Tesla's board of directors failed to adequately inform shareholders that the company was on pace to achieve many of the pay plan's performance-based goals. The decision was widely panned by legal experts who argued that it's a slap in the faces of shareholders who overwhelmingly voted to approve the pay package.

Responding to the Delaware court ruling in January, Musk called for shareholders to change Tesla's state of incorporation from Delaware to Texas, where its headquarters is located.

Thursday's vote and show of support for the compensation plan may factor into a potential appeal of the Delaware judge's ruling, and future litigations on the subject.

In what many Tesla fans slammed as a selfish and political move, proxy advisory firms including Glass Lewis and Institutional Shareholder Services opposed the approval of the pay package, as did the California Public Employees' Retirement System (CalPERS) and the New York City Comptroller Brad Lander.

Florida's pension board and prominent investor Ron Baron, founder of Baron Capital, were among the pay plan's public supporters.

Christopher Tsai, president and chief investment officer of Tsai Capital, told Reuters, "People are invested in Tesla because they believe in Elon and they believe in the company, and nothing has changed since the previous vote. Pay the guy and let's move on, that's what the shareholders have concluded."