Shareholders also approved a proposal to move the company's legal home to Texas from Delaware, Tesla said at its annual shareholder meeting in Austin, Texas. They also approved other proposals including the re-election of two board members: Musk's brother Kimbal Musk and James Murdoch, son of media mogul Rupert Murdoch.
Shareholders did increase the level of investor control by passing proposals in favor of shortening board terms to one year and lowering voting requirements for proposals to a simple majority.
"We're not just opening a new chapter for Tesla, we're starting a new book," Musk said on stage at the meeting.
Musk had tipped off late on Wednesday that the proposals were garnering huge support and thanked shareholders. A chart on his social media platform X showed the resolutions were set to pass by wide margins.
The approval also underscores the support that Musk enjoys from Tesla's retail investor base, many of whom are vocal fans of the mercurial billionaire. The proposal passed despite opposition from some large institutional investors and proxy firms.
The Tesla CEO could still face a long legal fight to convince a Delaware judge who invalidated the package in January, describing it as "unfathomable." He may also face fresh lawsuits on the package, which would be the largest in U.S. corporate history.
Shareholder approval for the compensation serves as both an endorsement of Musk's tenure and an acknowledgment that investors do not want to risk the company's future.
In January, Musk threatened to build AI and robotics products outside of Tesla if he failed to gain enough voting control, which essentially required the 2018 pay package to be approved.
He shifted the company's focus to robotaxis, shelving cheaper mass-market electric cars, to the concern of some investors who feared the autonomous technology will be hard to perfect.
Tesla's share price has dropped about 60% from its 2021 peak as EV sales have slowed and Musk's attention has wavered between Tesla and other companies he runs. The stock closed up 2.9% on Thursday.
"This vindicates Musk and allays some investor concerns around his waning interest in Tesla," said Sandeep Rao, senior researcher at Leverage Shares, which owns Tesla's stock.
The board had said that Musk deserves the package because he hit all the ambitious targets on market value, revenue and profitability. Large investors including the California Public Employees' Retirement System had called the pay package "excessive."
"Elon Musk and Chair Denholm have made this about CEO loyalty and presented the votes as a decision about whether the company can keep Musk. That is a lot of pressure," Ivan Frishberg, chief sustainability officer at Amalgamated Bank, told Reuters. The bank voted against the pay proposal, citing concerns about lack of independence and corporate governance at Tesla.
Tesla had 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.
While Musk is undoubtedly Tesla's driving force, and is credited with much of its success, the company's sales and profit have slowed. There are concerns that he is spreading himself too thin.
Musk has added two more companies to his roster since the pay package was approved in 2018. He now runs or owns six firms, including rocket-builder SpaceX, social media giant X - formerly Twitter - and the artificial-intelligence firm xAI, which Musk created in 2023.
The approval suggests shareholders "think he's the only person with the best strategy to implement going forward," said Jason Schloetzer, a business professor at Georgetown University with expertise in corporate governance.
"They are brushing aside essentially key man risks, where Tesla has become even more dependent on Musk going forward," he said, citing high-profile executive departure in the past few months.
The Delaware judge who ruled against the package criticized Tesla's board for being "beholden" to him, saying the plan was proposed 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.
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