Tesla shareholders recently approved a substantial pay package for CEO Elon Musk, one that could potentially yield approximately $1 trillion in company stock over the next ten years. However, this latest support fell short of the backing Musk received for a similar plan in 2018.
In a vote that excluded shares owned by board members and executives, around 66% of the shares counted were in favor of the new pay package, as reported in a filing on Friday. This is a notable decrease compared to the 73% support for the 2018 compensation plan, indicated by analysis from Andrew Droste, who leads corporate governance at investment firm Columbia Threadneedle.
The unofficial results of the voting at Tesla’s annual shareholders’ meeting on Thursday initially suggested that 75% of the voting shares supported the proposal, a figure that included insiders such as Musk, who holds roughly a 15% stake in the company.
The reduction in support comes during a challenging period for both Musk and Tesla. In the first half of the year, the company faced declining sales, a situation exacerbated by Musk’s controversial political comments and his association with the Trump administration, which resulted in cuts to the federal government. Alongside these issues, Tesla’s brand value has also suffered.
Despite this decline, Droste expressed in an email that a 66% approval still signifies significant backing for Musk among Tesla’s investors. He noted that many shareholders understand the deep connection between Musk and Tesla, stating that they were “unwilling to risk his potential departure by allowing this vote to fail.”
The board of directors had recommended that shareholders approve this pay plan, which was unveiled back in September. However, leading proxy advisory firms Glass Lewis and ISS advised investors to vote against it.
Musk’s pay package is set up in 12 tranches of shares that will be granted as Tesla meets specific milestones over the next decade. Notably, the first tranche will be awarded when Tesla’s market capitalization reaches $2 trillion, which is about $500 billion more than its current valuation. The compensation plan combines targets based on market cap improvements with operational achievements.
Moreover, by fulfilling a few of the more easily attainable goals set forth by the board, Musk stands to gain more than $50 billion. There are also provisions within the award terms that include a set of “covered events” which would allow him to acquire shares without having to achieve the necessary operational targets.
Tesla did not immediately respond to inquiries for comment regarding the vote and its implications.
