Elon Musk says re-ratification of his $56bn pay package at Tesla is on course

The hotly contested compensation proposal was approved in 2018 but was struck down in January by a judge in Delaware, who said investors were not fully informed of key details

Tesla chief executive Elon Musk. The company's annual meeting will be held on June 13 at its headquarters in Austin, Texas. Reuters

Elon Musk has said two key proposals to re-ratify his pay package and move Tesla’s legal home to Texas, from Delaware, are currently passing by “wide margins”.

The preliminary results are great news for Mr Musk and for Tesla, which has been rallying support for both measures for weeks among large institutional investors and the company’s army of retail shareholders.

The electric car maker set a June 12 deadline of 10.59pm US central time for investors to cast their votes, a day before the annual shareholder meeting.

Tesla’s annual meeting is on June 13 at the company’s headquarters in Austin.

Proposal 3 would make Texas the company’s legal home, while Proposal 4 asks investors to re-ratify the same $56 billion compensation package for chief executive Mr Musk that was voided by a Delaware judge earlier this year.

The hotly contested pay package passed in 2018 but was struck down in January by a judge in Delaware, who said investors were not fully informed of key details.

Under the plan, Mr Musk is eligible for as much as $55.8 billion in stock options if Tesla hits certain milestones, which the company has reached.

“This doesn’t fully settle the matter. The compensation package can still be deemed illegal,” analyst Alexander Potter of Piper Sandler wrote in a note to clients.

“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.”

He expects 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”.

Those in support include Scottish asset manager Baillie Gifford and Company, Cathie Wood’s Ark Investment Management and Ron Baron, who runs Baron Funds.

Mr Baron, a longtime Tesla investor, said in an open letter backing Mr Musk’s package that the will of the shareholders who voted in 2018 should be favoured.

Without Mr Musk, there would “be no Tesla”, and this vote might determine whether he stays at the company, he said.

Those against include Norway’s sovereign wealth fund, run by Norges Bank, and the California Public Employees’ Retirement System.

Tesla chair Robyn Denholm has been engaging with large institutional investors and Tesla has posted several advertisements on social med platform X, which Mr Musk owns.

In the final days of the campaign, several Tesla engineers and current and former executives posted on X in support of Mr Musk’s leadership.