Tesla shareholders voted Wednesday to approve a massive $2.6 billion compensation package for CEO Elon Musk despite opposition from two of the company’s prominent proxy advisory firms, according to multiple reports.
The unprecedented package grants Musk stock awards in 12 increments tied to the electric-car maker’s performance over the next 10 years. The awards are based on projections that Tesla will rise from a market value of $650 billion from $55 billion during that timeframe. Tesla previously noted that Musk would not be compensated at all if the company fails to meet any of the benchmarks.
The approving vote took place at Tesla’s annual shareholders meeting in California. Proponents of the deal argue that it will incentivize Musk, who also founded SpaceX and the Boring Company, to align with Tesla’s long-term business interests. Musk already owned about 22% of Tesla before the stock awards were approved.
The vote came as Tesla shares entered a bear market, with the stock down roughly 20% from its 52-week high. Shares were under pressure this week after Goldman Sachs reiterated its sell rating over concerns about the car maker’s production levels.
The stock package should provide a major boost to Musk’s already sizeable net worth. The tech entrepreneur was worth an estimated $20 billion as of Wednesday, according to Forbes.
The vote passed despite strong opposition from two proxy advisory firms: Institutional Shareholder Services and Glass Lewis. In the weeks ahead of the shareholder meeting, both firms argued that the compensation package was excessive. Glass Lewis said the plan was too costly and would dilute the shares of other top Tesla investors.
ISS estimated the package could ultimately be worth as much as $3.7 billion, an amount that “locks in unprecedented high pay opportunities for the next decade, and seemingly limits the board’s ability to meaningfully adjust future pay levels in the event of unforeseen events or changes in either performance or strategic focus,” according to a statement obtained by Reuters.
Conversely, some top investors, including T. Rowe Price Group, said before the vote that they were in favor of the plan. Full details on the shareholder vote and compensation plan are expected later this month.