Tesla shareholders voted to approve CEO Elon Musk’s contested pay package, currently estimated to be worth more than $45 billion. 

The results were announced on a preliminary basis during Tesla's annual shareholder meeting, resulting in boisterous cheers from the investors in attendance. The decision comes after weeks of Musk and the company trying to gin up support through letters to shareholders, social media advertisements and incentives like Tesla factory tours. 

Board members say the vote should shore up Tesla’s future by keeping Musk focused on the company. Musk has come under fire from some shareholders for being too distracted with his other ventures, which include SpaceX, the Boring Company, Neuralink, and the social media platform X. 

The pay package “was, and fundamentally still is, about retaining Elon’s attention and motivating him to focus on achieving astonishing growth for our company,” board chair Robyn Denholm wrote in a June letter to shareholders.

Why did Tesla hold a second pay package vote?

The pay package initially passed a 2018 vote with 73% of voted shares in support, but a Delaware judge voided the compensation package earlier this year.

Chancellor Kathaleen McCormick of the Delaware Court of Chancery sided with a shareholder who challenged the package, describing it as an “unfathomable sum” that was unfair to shareholders. The shareholder who had filed the lawsuit took issue with Tesla’s board, accusing its members – which include Musk’s brother – of having too close of ties to the CEO. 

The vote does not automatically restore Musk’s pay, but it does act as evidence that shareholders continue to approve the compensation package.

Who voted in favor?

More than 40% of Tesla’s common stock is held by nonprofessional shareholders as of Thursday, according to data from S&P Global Market Intelligence. That may have helped Musk’s pay package win approval, since many of those shareholders are loyal Musk fans who want to see the CEO take the company from an EV manufacturer to a leader in AI and robotics. 

Musk has made clear he would be “uncomfortable” developing artificial intelligence at Tesla without boosting his current 13% stake in the company to 25%.

"Shareholders at the end of the day knew that voting no would risk Musk potentially eventually leaving as CEO," Wedbush Securities analyst Daniel Ives wrote in a Thursday note. "The risk far overweighed the reward in voting no on this proposal despite some obvious frustration with Musk."

Tesla set to incorporate in Texas

The majority of all outstanding Tesla shares also voted in favor of moving Tesla’s incorporation from Delaware to Texas. The company already operates a factory and hosts its corporate headquarters in the state.

Musk has previously criticized Delaware and its courts, and earlier this year moved SpaceX’s state of incorporation from Delaware to Texas. 

“If your company is still incorporated in Delaware, I recommend moving to another state as soon as possible,” Musk said in a February post on X. 

Is Elon Musk overpaid?Why a Delaware judge struck down Tesla CEO's $55 billion payday.

Just how big is this pay package?

The pay package's value varies depending on Tesla's stock price, and was valued as high as $56 billion before stocks took a dip. The rewards are tied to Musk's ability to increase Tesla’s market value.

The median annual compensation for other Tesla employees last year was $45,811. 

Marcie Frost, CEO of the California Public Employees' Retirement System, called the compensation package “exorbitant” in a Wednesday press release. 

"The compensation is excessive when compared to executives at peer companies, highly dilutive to shareholders, and isn’t tied to the long-term profitability of Tesla,” Frost said in the statement. 

Tesla shares are down more than 50% from their peak in late 2021. The company has slashed car prices in recent months to address weakening demand and rising competition. 

Tesla share price

Tesla shares jumped Thursday at the opening bell after social media posts from Musk indicated that shareholders were largely in support of the massive pay package. 

“Both Tesla shareholder resolutions are currently passing by wide margins!” Musk said in a Wednesday night post on X, the social media company he purchased in 2022. “Thanks for your support!!”

The tweet was shared in a regulatory filing, along with other posts Musk interacted with that showed shareholder support – possibly because Musk’s decision to share the tally before the polls had closed could be considered a solicitation of shareholder votes.

Shares closed the day up 2.9% at $182.47.