This is the largest incentive package in US corporate history and will make Musk the richest man in the world with a net worth of USD 200 billion. Musk thanked investors in a post on X.
The board has also approved to move Tesla's corporate registration to Texas, the location of Tesla's largest factory.
Let's answer a few important questions about this.
How did the package reach USD 56 billion in value?
As per an internal agreement, Elon Musk received options for up to 12% of Tesla's outstanding shares in 2018, and to collect those, he was required to meet certain benchmarks for Tesla's revenue or profit and propel the EV company's stock market value to USD 650 billion.
The way the company was performing in 2018, these targets were thought to be untouchable. However, Tesla's business took off soon after, taking its market capitalisation to USD 1.2 trillion in 2021. It has now fallen to USD 545 billion but it stayed above USD 650 billion long enough for Musk to own the options.
What happened in Delaware?
This proposal, which was approved by shareholders in 2018, has come to the vote again because a judge in Delaware, US, voided the pay package, saying that the board was "beholden to Musk" and that the billionaire had dictated most terms of the package to his close friends on the board. Some shareholders also believed the package was wildly excessive.
In favour of and against Musk
Some shareholders stand firmly behind Musk, saying he deserves every penny of the incentives. Robyn Denholm, chair of the Tesla board, said that since March 2018, investors have earned a return of more than 1,000% because of Musk's leadership and that the company is honor bound to give him what he was promised.
"Without his relentless drive and uncompromising standards, there would be no Tesla," Ron Baron, chair of Baron Capital, an investment fund manager, said in a letter urging fellow shareholders to reapprove Musk's pay package. "Tesla is Elon."
However, there are some opposed to it still. Norges Bank Investment Management, which manages Norway's oil wealth and is the largest sovereign wealth fund, voted against the deal because it disagrees with the size of the award.
Many of Tesla's largest shareholders had also said they will vote against the pay package, including the California Public Employees' Retirement System, or CalPERS, the largest pension fund in the United States.
While crediting Musk with building the company, some of the stakeholders are concerned with the company's recent financial performance. Tesla's sales and profit have dropped, and it has lost market share in a market where competition has heated. Some shareholders complain that buying X has distracted him from running Tesla at a critical time.
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