Exclusive-Vanguard vote switch helped pass Tesla CEO Elon Musk's $56 billion pay package
Why was Elon Musk's pay package initially invalidated by a Delaware judge?
Elon Musk's $56 billion pay package was initially invalidated by a Delaware judge because the process for securing its approval was found to be "deeply flawed1." The judge sided with a Tesla shareholder who called the compensation granted by the EV maker's board "an unfathomable sum" that was unfair to other shareholders6. The court found the pay package to be excessive and determined that Musk already had a significant influence over the board.
What reasons did Vanguard provide for changing their vote in favor of Elon Musk's $56 billion pay package?
Vanguard, Tesla's largest outside investor, changed its vote in favor of CEO Elon Musk's $56 billion pay package due to the company's performance since 2018. In a note, Vanguard stated that it had initially voted against the compensation package in 2018 because of its potential size, which might not have been justified by performance at the time. However, the investment management company revised its stance after observing the strong alignment of executive pay with shareholder returns since 2018. Vanguard also considered the benefits the Tesla board asserted related to the motivational value for the CEO in preserving the original deal.
What percentage of Tesla's shares does Vanguard hold, and how does this compare to Elon Musk's stake?
Vanguard holds 232 million Tesla shares, which is about 7% of the company. This makes Vanguard the largest outside investor in Tesla. In comparison, Elon Musk holds a 13% stake in the company.