Elon Musk, the CEO of Tesla, received shareholder approval on Thursday for the highest corporate compensation package in history as investors supported his plan to transform the electric vehicle manufacturer into a robotics and artificial intelligence powerhouse.
Musk leaped to the stage of the company’s annual meeting at its Austin, Texas, factory, joined by dancing robots, after the proposal received more than 75% of the vote.
Over the next ten years, Musk, who is now the richest person in the world, may receive up to $1 trillion in stock, but, the compulsory payments would reduce the value to $878 billion.
Even if Musk’s far-right political language has hurt the Tesla brand this year, the vote is critical for the company’s future and valuation, which depends on his goal of producing self-driving cars, building a robotaxi network throughout the United States, and selling humanoid robots.
If he didn’t receive the compensation package, the board threatened to fire him.
Many investors saw it as a way to keep Musk on board. The objectives outlined in the package would ensure shareholders also benefited, despite some investors’ claims that it was needless and extremely costly.
“What we are about to embark upon is not merely a new chapter of the future of Tesla, but a whole new book,” Musk declared to an enthusiastic audience of investors.
On stage, he then made several promises, starting in April with the launch of its next-generation Roadster electric sports car and starting production of the Cybercab, a two-seater robotaxi without steering.
Additionally, he stated that Tesla should think about collaborating with Intel since it would require “a gigantic chip fab” to produce AI chips.
Additionally, shareholders approved a replacement compensation plan for Musk’s prior package, which is pending in court, and reelected three directors on Tesla’s board. They also voted in support of yearly elections for all board members.
“Other shareholder meetings are like snoozefests, but ours are bangers,” Musk stated. “Look at this, really. This is ill.
Despite a large number of abstentions, shareholders supported Tesla’s investment in Musk’s artificial intelligence startup, xAI.
According to Jessica McDougall, partner at the strategic and governance advice company Longacre Square, that might be a reflection of large investors’ reluctance to approve the deal without more stringent board oversight.
She stated that numerous investors would be “looking for the board to provide assurances and convictions that there are guardrails in place to be sure there’s not too much mixing of businesses.”
Following the automaker’s relocation from Delaware to Texas, the billionaire was permitted to vote on his about 15% interest, so a victory for Musk was generally anticipated.
According to Jessica Strine, CEO of shareholder consulting firm Jasper Street Partners, the majority was modest enough, excluding Musk’s impact, to justify a board review of CEO compensation at a typical company. She stated at Tesla that “realistically there is not going to be such a review.”
Proxy firms Glass Lewis and Institutional Shareholder Services, together with Norway’s national wealth fund, were among the big investors who had rejected the idea.
Investor worries that Musk might shift his attention to managing his other businesses, including the rocket manufacturer SpaceX and xAI, have been allayed by the vote.
The record-breaking compensation plan benefits shareholders in the long run, according to the board and numerous investors who endorsed it, as Musk must ensure Tesla reaches several benchmarks to be compensated.
“If completed, these tranches of awarded shares follow strong improvements in revenue growth for Tesla,” stated Zacks Investment Management senior client portfolio manager Brian Mulberry.
Will the expansion allay these worries about dilution, or is this only fulfilling Elon’s desire for sufficient power to affect AI’s future? That is yet to be determined.
Musk wants the company to deliver 20 million cars, have one million robotaxis operating, sell one million robots, and make up to $400 billion in core profit over the next ten years.
However, for him to be compensated, the value of Tesla’s stock must increase simultaneously, first from the present $1.5 trillion to $2 trillion and then to $8.5 trillion.
Musk receives 1% of the stock upon reaching each stage, which is an operational objective and a valuation milestone.
Therefore, even if Musk doesn’t meet the majority of his lofty goals, the plan might still give him tens of billions of dollars.
Musk would be eligible for 12% of the stock, or around $1 trillion, if he hits them all.
Because the package is set up to exclude the stock’s value on the day the board approved the proposal in early September, the net worth of those shares would be $878 billion.
Musk has the option of accepting fewer shares to reflect their initial value or paying that sum in cash.
Because it would alter in response to changes in the package, its value is constantly a moving goal based on the stock price.
