Tesla investors will vote today on Elon Musk’s $46 billion payday. Here’s what to know

Tesla shareholders are about to decide the future of the world’s largest electric vehicle company.

Investors — both large and small — will come together on Thursday for Tesla’s annual shareholder meeting, where anyone with stock in the company can vote on a series of ballot measures. Many of the shares — and votes attached to them — will likely be cast days, if not weeks, before that day.

The meeting will open up Tesla to a number of operational changes and, most importantly, serve as somewhat of a referendum of Elon Musk, the controversial billionaire who has served as CEO since 2008. In the weeks leading up to the vote, advisory firms and investors alike have issued warnings both for and against Musk, who is asking shareholders to re-approve his multibillion-dollar compensation package.

A vote for Musk would embolden the CEO, who is known for his boastful promises, and grant him more control of the company. A vote against him would be an irritation and an about-face of shareholders’ prior widely-held opinions.

Here’s what’s on the table.

A $46 billion reason to vote

The biggest issue on the table, by far, is whether Musk will get his compensation package reapproved by shareholders.

June’s meeting will be the second time that investors have voted on the compensation deal, which was approved in 2018 and tied Musk’s pay directly to Tesla’s performance. But a shareholder lawsuit filed in Delaware Chancery Court successfully got the deal struck down by Judge Kathaleen McCormick in January (more on why later).

The 2018 CEO compensation plan, the largest in history, was valued at up to $55.8 billion dollars and was the largest executive compensation package in recent history. At the time, 73% of investors supported the plan. It’s now valued at a smaller, but still substantial, $46 billion.

Some, including proxy advisory firms Glass Lewis and Institutional Shareholder Services, have argued that shareholders should vote against the plan, citing its “excessive size.” The heads of California pension system CalPERS, major retail investor Leo KoGuan, and New York City Comptroller Brad Lander have also criticized Musk’s pay.

Norway’s $1.7 trillion sovereign wealth management fund, Norges Bank Investment Management, will also vote against Musk’s compensation.

Critics also argue that Musk’s attention has been split among his portfolio — which now stands at seven companies thanks to the birth of xAI last year — and that the plan could dilute investors’ existing holdings in Tesla. Lander has said the company needs a “full-time CEO” focused on growing the company and not “chasing shiny new objects.”

Musk in April addressed similar concerns during Tesla’s first-quarter earnings call, telling analysts that Tesla “constitutes a majority of my work time, and I work pretty much every day of the week; it’s rare for me to take a Sunday afternoon off.”

Tesla argues that the plan was valid and that Musk has not been paid for “any of his work” for the Austin, Texas-based company since 2018. Since the end of 2018, Tesla has added roughly $500 billion in market value.

The company has gone to great lengths to win over shareholders, purchasing advertisements and launching a dedicated website. Tesla board chair Robyn Denholm has been reaching out to larger institutional investors to secure support. Non-affiliated backers like influencers Alexandra Merz and Sawyer Merrit have been promoting voting, raising awareness about issues, and reaching out to voters for one-on-one discussions.

A common theme among supporters of the pay package is that Tesla shareholders already approved the deal in 2018 and that judges should respect their decision. Scottish Mortgage Investment Trust, which owns 3 million shares and voted in favor of the deal six years ago, recently reaffirmed its support on similar grounds. Tesla has also won the support of major investor and Tesla bull Ron Baron, Cathie Wood’s ARKInvest.

Musk on June 8 said that, so far, “roughly 90%” of retail shareholders who have already voted have done so in favor of both his compensation and a move to Texas. The public is “unequivocally supportive,” he added.

A Musk-sized problem

On the off chance that shareholders reject Musk’s compensation, it’s entirely possible he may leave the company. In the past, he’s expressed discomfort with advancing some of Tesla’s goals without owning a larger percentage of the company, which the deal is poised to do.

“I am uncomfortable growing Tesla to be a leader in AI & robotics without having ~25% voting control,” Musk said on his social media platform X on Jan. 15. “Enough to be influential, but not so much that I can’t be overturned. Unless that is the case, I would prefer to build products outside of Tesla.”

That could be a big problem. Tesla — led by Musk’s ambitions — is going “balls to the wall” on developing self-driving vehicles and working toward mass-deployment of its humanoid robots, Optimus. Even as federal investigations continue to examine Tesla’s driver assistance software, Musk has committed to unveiling a self-driving car on Aug. 8.

Musk’s comments about ownership also worried some investors who were already concerned about succession plans at Tesla. Several potential replacements have left the company in recent years, including former “master of coin” and CFO Zachary Kirkhorn, who many had seen as the obvious successor.

Another potential successor was Andrew Baglino, the senior vice president in charge of energy engineering and powertrain. Baglino resigned last month and pocketed a cool $181.5 million on his way out.

A direct(or) issue

Investors will also be voting on the re-election of two men crucial to Musk’s success to the company’s board of directors: Kimbal Musk, his brother, and James Murdoch, a long-time friend.

Many members of the board have a mixture of close personal, familial, or transactional ties to the CEO. They’ve also been criticized for not doing enough to reign in Musk and enforce proper oversight.

Richard J. Tornetta, the shareholder who filed the lawsuit that killed Musk’s compensation package, argued in court that Musk had used his influence on the board to secure the plan and the funds would go to support his dreams of colonizing Mars.

McCormick, the Delaware judge, wrote that the “process leading to the approval of Musk’s compensation plan was deeply flawed,” noting that he “operates as if free of Board oversight” and cited Musk’s “extensive ties” to members of the board. She also described Denholm’s approach to her oversight obligations as “lackadaisical.”

The Wall Street Journal in February published a sweeping look at Musk’s relationships with members of the board, including how several members — including Murdoch and Kimbal Musk — have invested tens of millions of dollars in each others’ companies.

Kimbal Musk and Joe Gebbia, a board member and co-founder of Airbnb, have attended social gatherings where Elon Musk has consumed ketamine recreationally, the Journal reported. Some former directors, including SpaceX board member and venture capitalist Stephen Jurvetson, have consumed drugs with Musk.

“The Board stands behind this pay package. We believed in it in 2018, as we asked Elon to pursue remarkable goals to grow the company,” Denholm said in a letter to shareholders. “We do not agree with what the Delaware Court decided, and we do not think that what the Delaware Court said is how corporate law should or does work.”

What else is on the ballot?

But Musk’s promised pay and who gets to sit on Tesla’s board are just two of 12 total proposals for shareholder consideration next month.

Investors will also cast their ballots in favor of or against the board’s push to reincorporate the company in Texas, a process Musk set in motion shortly after McCormick voted down his compensation deal in January.

“Tesla will move immediately to hold a shareholder vote to transfer state of incorporation to Texas,” he wrote at the time. SpaceX, Musk’s aerospace giant, has already made the move to ditch Delaware and relocate to Texas.

If the move is approved, Tesla will join SpaceX and exit a state with a two-century-old corporate legal system. Texas, last June, approved the “Business Courts,” which won’t officially open until September and lack Delaware’s reliable and balanced corporate law. The state will also soon become home to its own stock exchange that aims to begin trading next year and hold its first listing in 2026.

Tesla has also proposed appointing an independent accounting firm and compensation for executives like automotive senior vice president Tom Zhu. The company has asked shareholders to vote in favor of all five of its proposals, which also includes the appointment of Kimbal Musk and Murdoch, as well as Musk’s compensation.

Also on the ballot are measures submitted by shareholders that propose restricting directors to one-year term limits, requiring a simple majority for votes instead of the current supermajority needed for approval, freezing sourcing materials from deep sea mining, and adopting a collective bargaining contract.

Shareholders also proposed a series of initiatives that would require Tesla to provide more transparency. If approved, those proposals would force Tesla to provide annual reports on anti-harassment and discrimination efforts, information concerning the risks associated with wireless technologies and electromagnetic radiation, and adopt and report the feasibility of integrating sustainability metrics into compensation for executives.

Tesla has asked investors to vote against each of the seven shareholder-submitted proposals. It’s unlikely that any of the measures proposed by investors will pass.

A financial fiasco

The shareholder debacle comes after months of issues for the company that culminated in staggered layoffs that affected thousands of employees.

Tesla delivered just 386,810 EVs over the first three months of 2024, well below Wall Street’s expectations, shocking investors. The company, Musk has said, is “currently between two major growth waves” and streamlining its operations.

In April, Tesla began laying off “more than 10%” of its global workforce, or at least 14,000 people. The company continued laying off workers for about a month across its global operations.

More than 20,000 people may have been laid off in Tesla’s first round of headcount reductions, Bloomberg reported last month. Summer internship offers have been revoked just weeks before their start dates. Almost the entire Supercharger division has been cut, despite Tesla being a major player in the EV charging industry, although several members have been re-hired. Meanwhile, Tesla’s public policy team has been greatly reduced and the marketing division axed.

At least six high-profile executives have either already resigned or plan to later this year, including head of investor relations Martin Viecha and senior director of human resources for North America Allie Arebalo.

And, as Tesla’s sales in China have slowed, Musk has directed Tesla’s “fireman” — automotive senior vice president Tom Zhu — to return to his old job overseeing the country’s market. Zhu has been credited with turning Tesla’s Gigafactory Shanghai into a major performer. Tesla has started building the Shanghai Megafactory, its first dedicated energy storage facility outside the U.S., and is preparing to register its “Full Self-Driving” (FSD) technology with authorities.

Tesla sold 62,167 China-made cars in April, down 18% compared to the same time in 2023, and 72,573 units in May, down 6.6% compared to a year earlier, according to data released by the China Passenger Car Association. Production of the Model Y — one of two cars made in Shanghai — has been slashed in recent months.