Tesla hits the road to persuade shareholders to pay Elon Musk $46 billion

Tesla board chair Robyn Denholm and others plan to spend the next several weeks rallying support from shareholders.
Tesla board chair Robyn Denholm and others plan to spend the next several weeks rallying support from shareholders.


Investors will vote on a 2018 pay package again after a judge threw it out.

Tesla shareholders have a decision to make in the next month about Elon Musk.

On June 13, they are set to vote on whether to reinstate stock options currently valued at $46 billion to Musk, the carmaker’s CEO and one of the world’s richest people, after a judge struck down the award in January.

Having a revote on such a giant pay package is uncharted territory, and there is a lot at stake for Tesla: The company is launching ambitious plans that its board believes Musk is integral to achieving. Approval should erase investor concerns that Musk could leave the company if he doesn’t get paid, which some investors say are weighing on Tesla’s stock price. And, Tesla hopes, a fresh vote would sidestep a drawn-out appeals process in court.

Tesla board chair Robyn Denholm and others at the company plan to spend the next several weeks crisscrossing the globe to rally support from shareholders.

Their challenge is taking shareholders back to 2018, when they originally signed off on Musk’s pay package, and detaching from the vote concerns that have cropped up since then.

In 2018, Tesla had a market value of around $50 billion and was losing money. The company is now valued at nearly $570 billion. Denholm and Tesla are telling shareholders Musk deserves to be rewarded for hitting lofty goals set back then. They say he earned that pay and should get it.

The present complicates their efforts. Tesla’s shares are down about 30% this year, as sales and margins have fallen. Musk’s varied business interests, including his ownership of social-media platform X, his changes to plans for Tesla and his drug use have stoked controversy. (Musk has brushed off concerns he’s distracted and said he hasn’t failed drug tests.)

Adding to Tesla’s challenge, individual investors whose votes are harder to wrangle amassed an outsize portion of its shares in the past several years. In 2018, shareholders voted 73% of their shares in favor of the pay package. Tesla is bracing for a tighter vote this time around.

How to get to Mars

The board awarded Musk the unusual pay package in 2018. If Tesla shares skyrocketed by more than 10 times and the company hit several operational targets, Musk would be able to buy a huge stake at cheap prices. If he fell short, he would get nothing.

Musk would have to hold the stock for at least five years. He planned to use the money to go to Mars.

“The added comp is just so that I can put as much as possible towards minimizing existential risk by putting the money towards Mars," Musk wrote to an executive at the time, according to the judge’s opinion. “This is kinda crazy, but it is true."

Vanguard, the biggest outside shareholder, rejected the pay package, while BlackRock, the second biggest, approved it.

Within five years, the company had hit all the targets, and its share price had increased more than 1,000%. Tesla was valued at $1 trillion, and the package was valued at $55.8 billion. Mars looked a bit closer.

But earlier this year, a Delaware judge ruled the board’s process in negotiating the pay package was “deeply flawed," citing the directors’ close ties to Musk. She invalidated the shareholder vote and ordered the pay rescinded.

In response, Musk fumed on X: “Never incorporate your company in the state of Delaware."

The board has said a fresh shareholder vote should cure the judge’s concerns, but the shareholder who sued over the pay is challenging the idea. Appeals are also likely to remain live.

The board also put up for a vote moving the company’s incorporation from Delaware to Texas, where it has its corporate headquarters.

Campaigning for votes

Convincing shareholders falls to Denholm, an Australian businesswoman who was on the board committee that negotiated the pay package and succeeded Musk as chair later in 2018. She has been reaching out to shareholders and the proxy advisers whose opinions, published ahead of the vote, hold important sway.

She met with some investors in New York this week and plans to return in early June, people familiar with the matter said.

Some big holders are taking a fresh review, not just repeating their 2018 votes, investors and Tesla say.

T. Rowe Price, which owns about 0.8% of the shares, blessed the pay package in 2018 and pushed for the board to take it to a vote again. Other shareholders say Musk, who owns roughly 13% of Tesla’s shares, has been handsomely rewarded by the stock price’s rise. Some plan to use the meetings to air current gripes.

Denholm and Tesla are making several arguments beyond the company’s performance. They are telling shareholders their rights have been usurped by a judge and they should ratify the original vote, whether they approved of the package or not.

They also say approval will remove doubts about Musk’s interest in running Tesla.

Musk said in testimony he wouldn’t have quit if the original vote had gone against him.

But he did take the vote personally. In 2018, he told Tesla representatives to tell big shareholders who voted against the package he was “very offended by their action," according to the judge’s opinion. He wanted to tell one holder to divest themselves of all of his companies because “they are not welcome."

The need for individual investors

Individual investors, who often sit out shareholder votes entirely, now own about 30% of Tesla’s shares.

For the pay package to be approved, a majority of shares voted must support it, excluding Musk’s stake and a much smaller stake owned by his brother. That leaves Tesla racing to get individuals to show up. It is rolling out new ads—including paid posts on Musk-owned X—urging investors to vote.

The campaign to incorporate in Texas likely faces even harder odds. That vote needs a majority of all shares outstanding, so anyone who doesn’t vote is essentially a no.

Write to David Benoit at David.Benoit@wsj.com, Emily Glazer at Emily.Glazer@wsj.com and Corrie Driebusch at corrie.driebusch@wsj.com

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