This illustration image shows Elon Musk’s campaign launched on X ahead of Tesla shareholders meeting in front of his picture on a screen. AFP

Tesla shareholders are voting to approve a $56 billion pay package for Elon Musk and to move the electric vehicle maker's legal home to Texas, Musk said on social media platform X on Wednesday, adding that passage was by wide margins.

A yes vote gives the electric carmaker more ammunition in a Delaware court, where a judge voided the 2018 pay package plan, which at the time was the largest in US corporate history, saying the board was "beholden" to CEO Musk.

It also marks a massive win for Musk and the board, who have put their credibility on the line to gain shareholder approval, despite opposition from major investors Glass Lewis and Institutional Shareholder Services (ISS).

"Thanks for your support!!" Musk said in his post on X.

The result will be announced at a meeting at Tesla's headquarters in Texas at 4:30 pm (2130 GMT) on Thursday.

A person familiar with the preliminary voting tally said a combination of big institutional investors and retail investor got the 'yes' result over the line.

Shareholders, however, are allowed to change their vote up to the start of the annual meeting.

Image only for representation .

Tesla shareholders also cast ballots on other proposals including the move of its legal headquarters from Delaware to Texas, as well as the re-election of two board members: Musk's brother Kimbal Musk and James Murdoch.

Referendum

Some investors viewed the vote on Musk's pay as a test of confidence in his leadership. While he is undoubtedly Tesla's driving force, and is credited with much of its success, the company has recently seen slowing sales and profits.

Tesla's stock has lost nearly 60% of its value from its peak in 2021, when Musk started selling billions of dollars' worth of his stake partly to help finance his purchase of Twitter, sparking concerns that he would be spread too thin. He now runs six firms, including rocket-builder SpaceX, social media giant X - formerly Twitter - and the artificial intelligence firm xA1, which Musk created in 2023.

Musk's outspokenness and knack for creating controversy have also weighed on Tesla's reputation and sales.

Tesla stocks ended up 3.9% on Wednesday, a day before the shareholder meeting.

Shareholders, led by major institutional investors, call such compensation far too generous for a leader who is splitting his time between six companies and is now presiding over falling sales and a strategic upheaval at Tesla.

The pay package would enable Musk to strengthen ownership "at the expense of diluting the value of those belonging to other shareholders," Marcie Frost, CEO of the California Public Employees' Retirement System said earlier Wednesday.

Tesla has been drumming up support for Musk's pay package, especially from retail investors, who make up an unusually high percentage of its ownership base but who often do not vote.

Company executives have posted messages on X, saying Musk is critical to Tesla's success. Tesla has run social media ads, and Musk has promised a personal tour of Tesla's factory in Texas to some shareholders who cast votes.

The board said the world's richest person deserves the package, because he hit all the ambitious targets on market value, revenue and profitability.

The pay package is also needed to keep Musk devoted to Tesla, the board said, even though the Delaware judge said the 2018 pay plan failed to make sure that Musk committed a substantial amount of time to Tesla.

Musk has threatened to build AI and robotics products outside Tesla, if he fails to gain enough voting control, which requires the 2018 pay package to be approved.

Donald Ball, a Tesla shareholder earlier this month filed a lawsuit challenging the upcoming shareholder vote, saying a ratification of the pay package should be void because Musk has "engaged in strong-arm, coercive tactics to obtain stockholder approval."

Court battle

The same package was previously rejected by a Delaware judge who invalidated it as an "unfathomable sum" granted by a conflicted board with close personal and financial ties to its top executive.

The board held the shareholder vote as a way to bolster its appeal of the ruling, in which the judge cited the board's failure to fully inform shareholders before approving the pay package in 2018.

"Even if the shareholders do approve the old package, it is not clear that the Delaware court will allow that vote to be effective," said Adam Badawi, a law professor who specializes in corporate governance at the University of California Berkeley.

Musk has to wait months or years to get his pay package restored as appeals wind their way up to Delaware's Supreme Court.

Reuters