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Tesla shareholders back huge payout for CEO Musk, company says

Tesla shareholders voted in favor of a massive compensation package for CEO Elon Musk and endorsed the potential windfall after a Delaware court invalidated the package, a company official said Thursday.

Based on preliminary voting results, investors backed a plan of up to $56 billion for the erratic Musk, company secretary Brandon Ehrhart said at Tesla’s annual meeting in Austin, Texas.

“I want to start by saying, damn, I love you guys,” a euphoric Musk said as he took the microphone after preliminary voting results were announced.

The package was originally approved by investors in 2018, but a Delaware court struck it down in January 2024, prompting Tesla to launch a campaign to revive it.

Legal experts say Thursday’s vote does not automatically mean Musk will receive the payout, but the victory could strengthen Tesla’s appeal to the Delaware ruling.

Tesla shares rose 0.7 percent in after-hours trading.

The stock gained 2.9 percent in Thursday’s session after Musk posted on social media platform X late Wednesday that investors supported the pay plan.

Analysts said passing the compensation package will likely ensure Tesla remains led by Musk, who has hinted he could leave without a large enough stake in Tesla. Musk owned about 20.5 percent of Tesla shares at the end of 2023.

The lawsuit continues

Shareholders overwhelmingly supported Musk’s compensation plan in 2018, but it was rejected by Delaware Judge Kathaleen McCormick, who ruled that the plan was conceived in a “deeply flawed” manner given Musk’s extensive ties to key Tesla executives who blessed the plan.

In April, Tesla revived the package, with chairman Robyn Denholm imploring investors to “fix this problem” after the Delaware ruling, arguing that ratification would “restore Tesla’s shareholder democracy” after the 2018 shareholder vote.

Musk backers, such as billionaire investor Ron Baron, have offered unwavering support.

“Shareholders should ask themselves this question: is Tesla better off with or without Elon,” Baron said in a public letter.

“At Baron Capital, our answer is clear, loud and unequivocal: Tesla is better with Elon. Tesla is Elon.”

But other investors, such as the California State Teachers’ Retirement System, opposed the package.

CalSTRS chief investment officer Chris Ailman told CNBC that he thinks Musk is “brilliant” but that the current package is “ridiculous.”

Dorothy Lund, a corporate governance expert at Columbia Law School in New York, said the effect of the latest shareholder vote is uncertain because the plan is still blocked by a Delaware court.

But Lund said the vote likely strengthens Tesla’s appeal to McCormick’s decision because it shows shareholders supported the plan even after a judge blocked it.

“It’s probably a way to appeal,” Lund said.

Gregory Varallo, who represented shareholders who opposed the plan in the Delaware lawsuit, argued the vote had no bearing on the case.

“We believe that the ratification vote that Elon demanded and enforced is legally deeply flawed, legally ineffective and has no bearing on our case,” Varallo said in an email. “We will respond to any arguments in due course.”

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