(Reuters) -Tesla shareholders were set to approve Elon Musk’s $56 billion pay package in what is being seen as a thumbs-up to his leadership – and an enticement for keeping his focus on the electric-vehicle maker.
Musk posted a chart on his social media platform X late on Wednesday that showed the resolution – and another vote to move the company’s legal home to Texas – were set to pass by wide margins, though shareholders are allowed to change their votes up to the start of the annual meeting.
A person familiar with the preliminary voting tally confirmed that Musk posted an accurate count of the figures. The result will be announced at the meeting at Tesla’s headquarters in Texas at 4:30 p.m. EDT (2030 GMT) on Thursday.
“Thanks for your support!” Musk said.
The Tesla CEO could still face a long legal fight to convince a Delaware judge who invalidated the package in January, describing it as “unfathomable.” He may also face fresh lawsuits over Thursday’s vote on the package, which dates from 2018 and would be the largest in U.S. corporate history.
Shareholder approval would serve as both an endorsement of Musk’s tenure and an acknowledgment that investors do not want to risk the company’s future.
In January, Musk threatened to build AI and robotics products outside of Tesla if he fails to gain enough voting control, which essentially requires the 2018 pay package to be approved. He has shifted the company’s focus to robotaxis, shelving cheaper mass-market electric cars, to the concern of some investors who fear the autonomous technology will be hard to perfect.
Tesla’s share price has dropped about 60% from its 2021 peak as EV sales have slowed and Musk’s attention has wavered between Tesla and other companies he runs. Tesla shares were up 3.8% on Thursday afternoon.
“This vindicates Musk and allays some investor concerns around his waning interest in Tesla,” said Sandeep Rao, senior researcher at Leverage Shares, which owns Tesla’s stock.
Board chair Robyn Denholm said in a regulatory filing earlier this month that reinstating the pay package was necessary for “retaining Elon’s attention and motivating him.”
The board said Musk deserves the package because he hit all the ambitious targets on market value, revenue and profitability.
Major proxy firms Glass Lewis and Institutional Shareholder Services had urged shareholders to reject the pay package, and large investors including Norway’s sovereign wealth fund and major U.S. pension funds had said they would vote against it.
The pay package is excessive and may enable Musk to strengthen his shares “at the expense of diluting the value of those belonging to other shareholders,” Marcie Frost, CEO of the California Public Employees’ Retirement System said.
Tesla has been drumming up support for Musk’s pay package, especially from retail investors, who make up an unusually high percentage of its ownership base but who often do not vote. The source familiar with the figures said a combination of big institutional investors and retail investor votes was responsible for the support.
Company executives have posted messages on platform X, saying Musk is critical to Tesla’s success. Tesla has run social media ads, and Musk has promised a personal tour of Tesla’s factory in Texas to some shareholders who cast votes.
Tesla shareholders also cast ballots on other proposals including the re-election of two board members: Musk’s brother Kimbal Musk and James Murdoch, son of media mogul Rupert Murdoch.
REFERENDUM
While Musk is undoubtedly Tesla’s driving force, and is credited with much of its success, the company’s sales and profit have slowed. Some investors viewed the vote on Musk’s pay as a test of confidence in his leadership.
The apparent approval suggests shareholders “think he’s the only person with the best strategy to implement going forward,” said Jason Schloetzer, a business professor at Georgetown University.
“They are brushing aside essentially key-man risks, where Tesla has become even more dependent on Musk going forward,” he said, citing high-profile executive departures in the past few months.
Musk also has broadened his commitments, adding two more companies to his roster since the pay package was approved in 2018. He now runs or owns six firms, including rocket-builder SpaceX, social media giant X – formerly Twitter – and the artificial intelligence firm xAI, which Musk created in 2023.
LEGAL BATTLES STILL AWAIT
The Delaware judge who ruled against the package criticized Tesla’s board for being “beholden” to him, saying the plan was proposed by a conflicted board with close personal and financial ties to its top executive.
The board held the shareholder vote as a way to bolster its appeal of the ruling, in which the judge cited the board’s failure to fully inform shareholders before approving the pay package in 2018. But Tesla also acknowledged in securities filings that a favorable ratification might not resolve the pay dispute.
(Reporting by Hyunjoo Jin and Abhirup Roy in San Francisco, Greg Roumeliotis in New York and Abinaya Vijayaraghavan in Bengaluru; Editing by David Gaffen, Miral Fahmy, Mark Potter and Matthew Lewis)