Tesla shareholders approved CEO Elon Musk's US$56 billion (S$75 billion) pay package, the electric vehicle-maker said on Thursday (June 13), a big thumbs-up to his leadership and an enticement for keeping his focus on his biggest source of wealth.
The approval of the largest CEO package in US corporate history underscores the sport Musk has from the company's shareholders and passed despite opposition from some large institutional investors and proxy advisory firms.
Here are what some people are saying about it:
"I think voting on the package after it was overruled by the court is a fairly unprecedented move. I don't think this automatically invalidates what the judge did the first time around January. This will try to be used on either appeal or further proceedings with the judge. But again, that's fairly new territory and nobody knows how that's going to go.
"Now moving to Texas is a really interesting thing. The vast majority of large American companies are in Delaware and they're in Delaware because Delaware is generally viewed as a favourable jurisdiction for companies. So, it's kind of funny that they've taken this approach of 'Delaware stopped us from doing what we want. We're going to move to Texas.' Texas law on corporate governance is not anywhere near as developed as Delaware's. Nobody's is, and most states as a kind of first instinct look to Delaware law to figure out how to handle corporate governance issues."
"The vote would imply that the large institutional investors voted for the Texas reincorporation and ratification of pay, which indicates that investors don't really care about either or don't see a real downside to either one. It's well-known that institutional investors don't generally object to pay packages and now we've seen that the sky's the limit. With the except of CalPERS and whoever else.
"You need to look at the (exact) votes that the directors got. If people really think there needs to be a check and the board isn't doing its job, that's where they'll vote."
"The vote by Tesla shareholders to reinstate Elon Musk's compensation package should give Tesla the legal ammunition it needs to have the court officially reinstate it. The whole premise of the judge's ruling was that she felt the Tesla board was under Elon Musk's control and was not representing the best interests of the shareholders.
This implies that the judge believed Tesla shareholders wouldn't agree to the package but now that shareholders have voted for it a second time with all of the facts out in the open, the entire crux of the judge's argument becomes invalid. This is clear evidence that the shareholders are in support of the pay package."
He doubted the move out of Delaware would damage the state. "If the people who leave (Delaware) are controlling stockholders who abused the governnance system, my guess is a Delaware court judge would be happy to see them go. If Texas wants to hang out a shingle that says, 'Bring your worst corporate governance practices to Texas, we compete with Nevada,' I mean, okay, that's a brand."
"Elon Musk remains a controversial figure at Tesla, but the approval of his mammoth pay package isn't a big surprise.
"Although some shareholders are accusing him of "brazen disloyalty" and pointedly criticised his pay-or-leave ultimatum before the vote, Musk has established that enough stockholders value his presence and aren't yet willing to risk a future at Tesla without him."
"The news lifts a major overhang on the shares, although we wouldn't be surprised by a "sell the news" reaction on Friday following big gains over the past two trading sessions as the likely outcome became clearer.
"By the vote, shareholders once again endorsed the terms of the contract, sending a strong signal that "a deal is a deal" and Musk deserves to be rewarded for meeting the lofty thresholds of an entirely incentive-based contract. The legal battle over the compensation plan is far from over, but we think the vote greatly strengthens Tesla's case.
"We think the news takes a potentially disastrous scenario off the table, in which Musk could have potentially left Tesla and opted to dedicate more time to his other (non-public) companies, which could have triggered a "brain drain" of top talent and had massive implications for the future of the company (and TSLA's stock price)."
"There will be challenges to the vote contending it was coerced or that Tesla was not entirely forthcoming on details about the pay package, but there a respectable argument the vote should validate the pay.
"In simple terms, it's their money, and they should have some agency in determining, with the benefit of six years of hindsight, whether the grant should be approved, in light of Musk's past contributions to the value of their stock and the importance (or not) of retaining his services ... I do believe that those whose money is at stake are best positioned to decide to put thumbs up or down."
"This is, firstly, a message that Tesla's retail shareholders do approve of what's going on. It will be interesting to see what the exact percentages of the votes are. So we've still got to dig underneath the numbers."
The below quotes were prior to the vote but after Musk on Wednesday posted on his social media platform X that the resolution had strong support:
"Elon Musk and Chair (Robyn) Denholm have made this about CEO loyalty and presented the votes as a decision about whether the company can keep Musk. That is a lot of pressure but it doesn't change the fact that good governance is good for the bottom line of a company, and the Tesla board is consistently and clearly deficient on that front."
Frost said some people appeared to vote for the pay package to remain consistent with their 2018 vote. "I think people would be concerned about hindsight bias. You get an outcome, you don't like the outcome so you vote against it."
"People are invested in Tesla because they believe in Elon and they believe in the company, and nothing has changed since the previous vote. Pay the guy and let's move on, that's what the shareholders have concluded."
"The prospect of Tesla investors approving a gargantuan pay deal for Elon Musk is in itself perplexing given the US$56 billion amount, but for it to drive up the share price might also leave some people scratching their heads.
The logical explanation is that it means Musk is no longer a flight risk, should the deal be approved. Pay him well and he'll stay to oversee Tesla's ongoing efforts to be crowned king of the electric vehicle sector."
"Elon's tweet is more evidence of the failure of corporate governance at Tesla — this is not how or when shareholder votes are supposed to be made public."
"As long-term investors in Tesla, we expect genuine board oversight and a CEO who is deeply committed to the company's growth rather than other business ventures.
We would like the board to ensure that its approval is required for any attempts to leverage Tesla's intellectual property or resources for his other ventures so shareholders can trust that their interests are aligned with the company's goals."
"Additionally, instead of continuing to try to defend it in court, the board should hire a compensation consultant, and renegotiate Musk's incentive plan so that it is appropriate and not dilutive to shareholders."
The approval suggests shareholders "think he's the only person with the best strategy to implement going forward. They are brushing aside essentially key man risks, where Tesla has become even more dependent on Musk going forward."
"Based on all of our discussions over the past month large shareholders at the end of the day knew that voting no would risk Musk potentially eventually leaving as CEO and the risk far overweighed the reward in voting no on this proposal despite some obvious frustration with Musk."
"This doesn't fully settle the matter; the compensation package can still be deemed illegal. But a Delaware judge previously struck down the package citing limited shareholder disclosure, and given enhanced disclosures preceding this vote, it's unclear why anyone would take issue with this newly-ratified deal.
We expect the stock to respond favourably to this news, though the upside is perhaps unlikely to be as violent as the downside would have been, had shareholders rejected the deal."
"This vindicates Musk and allays some investor concerns around his waning interest in Tesla, but major institutional shareholders who are opposing the pay package might seek value elsewhere due to their concerns around the size of package, especially given Tesla's recent disappointing performance and rising competition."
ALSO READ: Musk says Tesla shareholders voting yes for his $75b pay package
Source: Reuters
