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HomeWorldTesla shareholders poised to approve Musk’s $56 bln pay package

Tesla shareholders poised to approve Musk’s $56 bln pay package

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Tesla shareholders were set to approve Elon Musk’s $56 billion pay package, signaling strong support for his leadership and commitment to the electric-vehicle maker.

Musk shared a chart on his social media platform X on Wednesday, showing that the resolution, along with a vote to relocate the company’s legal home to Texas, was likely to pass by wide margins.

Shareholders can adjust their votes until the annual meeting starts at Tesla’s Texas headquarters at 4:30 p.m. EDT (2030 GMT) on Thursday.

A source confirmed that Musk’s posted voting tally was accurate. “Thanks for your support!” Musk said in response to the positive preliminary results.

Despite potential shareholder approval, Musk may face a prolonged legal battle. A Delaware judge invalidated the package in January, describing it as “unfathomable.” There is also the risk of new lawsuits regarding the 2018 pay package, the largest in U.S. corporate history.

Shareholder approval would endorse Musk’s tenure and show that investors prioritize the company’s future stability. Earlier this year, Musk threatened to develop AI and robotics products outside Tesla if he didn’t secure enough voting control, which hinges on the approval of the 2018 pay package. Concerns have been raised over Musk’s shift in focus from mass-market electric cars to robotaxis.

Market Performance and Investor Sentiment

Tesla’s share price has dropped about 60% from its 2021 peak due to slowing EV sales and Musk’s divided attention among his various ventures. However, Tesla shares rose 3.8% on Thursday afternoon.

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“This vindicates Musk and allays some investor concerns around his waning interest in Tesla,” said Sandeep Rao, a senior researcher at Leverage Shares.

Board chair Robyn Denholm stated in a recent regulatory filing that reinstating the pay package is crucial for retaining Musk’s attention and motivating him. The board maintains that Musk deserves the package for meeting ambitious targets related to market value, revenue, and profitability.

Dissenting Opinions and Proxy Advice

Major proxy firms Glass Lewis and Institutional Shareholder Services advised shareholders to reject the pay package. Major investors, including Norway’s sovereign wealth fund and several U.S. pension funds, also expressed opposition.

Marcie Frost, CEO of the California Public Employees’ Retirement System, criticized the package for potentially diluting the value of other shareholders’ holdings.

Shareholder Engagement and Additional Votes

Tesla has actively sought support for Musk’s pay package, especially from retail investors who own a significant portion of the company but often do not vote. Company executives and Musk have been promoting the importance of his leadership on social media and through direct appeals to shareholders.

Shareholders also voted on other proposals, including the re-election of board members Kimbal Musk and James Murdoch. The outcome of the pay package vote serves as a referendum on Musk’s leadership amid slowing sales and profits at Tesla.

Future Challenges

Despite the anticipated approval, Musk faces ongoing legal challenges. The Delaware judge who invalidated the package criticized Tesla’s board for its close ties to Musk and inadequate shareholder disclosure before the 2018 approval.

Tesla hopes the shareholder vote will strengthen its appeal of the ruling, though a favorable ratification may not completely resolve the dispute.

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