Ross Kerber
(Reuters) – Tesla’s (NASDAQ:) largest outside investor Vanguard said it voted in favor of CEO Elon Musk’s $56 billion pay package, citing the company’s performance as instrumental in Thursday’s record deal.
In a note seen by Reuters, Vanguard said it voted against Musk’s compensation package when it was first approved by shareholders in 2018 because of its potential size, which may not have been justified by performance.
But “given the clear alignment of executive pay with shareholder returns since 2018 and the benefits the board argued related to the motivational value for the CEO in maintaining the original deal,” Vanguard-advised funds voted to ratify at Tesla’s annual meeting, according to according to Tesla. the note.
On Friday, the note will be available on Vanguard’s website to the fund manager’s more than 50 million investors.
As of March 31, Vanguard held 232 million Tesla shares, or about 7% of the company, second only to Musk’s 13% stake. Although some Vanguard externally managed funds vote separately, a Vanguard spokesman said the note description covers most of its funds.
Musk’s salary was invalidated by a Delaware judge in January, leading to Thursday’s vote. Leading trusted advisers and various major investors opposed the compensation, in part because of concerns that the amount was too high.
Tesla turned to its large base of retail shareholders to help approve Musk’s salary and other issues, including the re-election of two directors and moving the company’s registration to Texas.
But Vanguard, which has about $9 trillion in combined assets, and other large index fund managers will likely always be a key voter. Representatives of Vanguard’s competitors BlackRock (NYSE:) and State Street (NYSE:) declined to comment on its voting results Thursday.
Tesla on Thursday did not disclose the exact results of the vote, which are expected to be made public in the coming days.
In its note, Vanguard said that while Musk’s pay was a “significant outlier” among CEOs, Tesla’s shareholder return was in the 98th percentile among all Russell 3000 companies from 2018 to 2023. like Tesla,” Vanguard said.
Tesla’s performance has weakened in recent periods, including a 26.5% decline in its share price this year amid increased competition from other electric vehicle makers. Vanguard’s note did not address current performance. Shares rose 2.9% on Thursday.
Vanguard also said its funds supported the proposal to move Tesla’s registration to Texas because “we have not observed significant differences in shareholder rights between Delaware and Texas.”
Thursday’s approval does not resolve a lawsuit over Musk’s salary in Delaware court that some legal experts say could drag on for months.