Tesla shareholders have approved a huge pay package for Elon Musk and agreed to move the company’s legal headquarters to Texas. This pay package, which could be worth up to $56 billion depending on Tesla’s stock price, had been blocked earlier by a Delaware judge for being unfair to shareholders.
Elon Musk celebrated the approval, telling excited shareholders in Texas, “Hot damn, I love you guys.” The pay package is more than 3,000 times what the highest-paid CEO in the US earned last year. However, legal experts say it’s unclear if the court that initially blocked the deal will now accept the shareholders’ vote and allow the pay package to be reinstated.
The large pay package faced criticism for potentially showing Tesla’s board is too close to Musk. A Delaware judge previously ruled that the process for determining Musk’s pay was flawed because the board was heavily influenced by him. Some board members had personal relationships with Musk, which was a concern.
Musk decided to move Tesla’s legal headquarters to Texas after the Delaware court blocked his pay deal, siding with a small investor who sued over it. This legal battle raised questions about Musk’s leadership, especially as Tesla’s stock price has recently dropped and the company faces increased competition in the electric car market.
Musk rallied support for the pay package, particularly among individual investors who make up a large portion of Tesla’s shareholders. Car industry analyst Karl Brauer said the strong support from shareholders justifies the pay package. The company didn’t immediately disclose the vote margin, but Musk hinted at the results on social media.
The compensation plan grants Musk about 300 million shares, equating to a 10% stake in Tesla, as a reward for meeting various goals set in 2018 related to sales, profits, and the share price. Tesla stated these goals were tough, but the lawsuit that led to the pay deal being blocked claimed the targets were the same as the company’s internal projections.
Analysts and former Tesla executives argue that Musk’s leadership has significantly increased Tesla’s stock value, providing excellent returns for investors. The Tesla board believes Musk deserves the pay package because the company achieved its targets under his leadership, and it ensures he remains committed to Tesla.
In the meeting, shareholders also re-elected two board members: James Murdoch and Kimbal Musk, Elon Musk’s brother.
Published: 14th June 2024
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