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Tesla Inc. investors re-approved Elon Musk’s compensation and cleared the company moving its legal home to Texas, offering votes of confidence in the chief executive despite a sales slump and falling stock price.

The proposal to ratify an award of stock options worth up to US$55.8 billion passed with around 72 per cent of votes cast in favour, Tesla said in a regulatory filing Friday. That’s roughly one percentage point shy of the support Musk received when the company first proposed the pay package in 2018.

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The pay vote is only advisory and doesn’t guarantee Musk will get his stock options. A Delaware judge voided the payout in January, and Tesla is expected to appeal. If that fails, moving the company’s incorporation to Texas allows the board to revive the pay package in a new state with potentially more favorable courts.

Musk’s pay vote was widely seen as a referendum on the CEO’s leadership and frustration with Tesla’s corporate governance. The CEO oversees six companies and is prone to distractions and abrupt strategy shifts — he ordered up Tesla’s biggest layoffs ever earlier this year, only to rehire some workers weeks later.

Tesla shares rose as much as 1.5 per cent before the start of regular trading. The stock fallen 27 per cent this year, costing the company almost US$208 billion in market capitalization.

Shareholders also reelected James Murdoch and Kimbal Musk to Tesla’s eight-member board. Murdoch, son of media mogul Rupert Murdoch, has been a Tesla director since 2017. Kimbal Musk, younger brother to Elon, has been on the board since 2004.

At the company’s Austin headquarters, shareholders cheered as Musk, wearing a black Cybertruck t-shirt, walked on stage. He leapt into the air as investors chanted his name, telling the crowd: “Hot damn, I love you guys.”

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Musk hinted during a presentation that the company was working on three new models, flashing images of mystery vehicles renderings under white sheets, as he has in years past. He said Tesla’s Supercharger network was growing and that he just approved plans to boost production of Semi trucks. He said Tesla’s weekly output of Cybertrucks hit a record of 1,300 in a week.

“A lot of people said Cybertruck was fake, never going to come out,” Musk said. “Now we’re shipping a lot of Cybertrucks.”

When asked what he was going to do with his billions, Musk noted the pay package is comprised of stock options and that he’d have to hang onto them for five years. “I can’t cut and run, nor would I want to,” he said.

Some investors were worried Musk would leave the company if the award wasn’t reapproved. Musk has threatened to develop products outside of Tesla if he doesn’t attain at least a 25 per cent equity stake. He owns about 13 per cent of the shares now, and exercising the options in his compensation deal would boost his holding to roughly 21 per cent.

Tesla pulled out all the stops in an effort to persuade shareholders to support both Musk’s pay package and the move to Texas, setting up a dedicated website and running ads on X, Musk’s social media platform. In recent days, Tesla investors, engineers and current and former executives also took to X to voice their support for Musk and his leadership.

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Some major investors, including Norway’s sovereign wealth fund and the California Public Employees’ Retirement System, had said they planned to vote against the measure.

When Delaware Chancery Court Judge Kathaleen St. Jude McCormick voided the pay package early this year, she pointed to board director conflicts of interest and the company’s failure to properly disclose terms of the plan. The second shareholder vote may bolster Tesla’s chances with a forthcoming appeal.

McCormick will hear arguments July 8 on disputed lawyer fees in the case. Once McCormick decides on the fees, she’ll issue a final ruling. Musk then has 30 days to appeal it to the Delaware Supreme Court.

Late Thursday, Tesla issued a press release confirming that the company was now incorporated in Texas. The certificate of conversion was visible on the Texas Secretary of State website.

Tesla shareholders re-approving the same compensation plan for Musk as in 2018 is unlikely to carry much weight because Texas courts are legally obligated to honor the Delaware court’s decision, according to Charles Elson, a retired University of Delaware professor and corporate governance expert.

The board may have to make substantial changes to the plan, and shareholders would then have to vote on Musk’s compensation once more, Elson said. Then, if an investor wanted to then challenge it, they would have to sue in Texas, which is just getting its business courts off the ground.

With assistance from Ryan Beene.

Bloomberg.com

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