Tesla shareholders approve A $45bn (£35.3bn) pay deal for CEO Elon Musk follows a hotly contested referendum on his leadership.
The decision, announced on Thursday, comes as the billionaire tycoon fights to retain the largest compensation package ever awarded to an executive at a US-listed company.
“Oh, I want to start by saying I love you!” A jubilant Musk said as he appeared on stage following the vote.
After a Delaware judge overturned Musk’s payment – then worth around $56bn (£43.9) – in January, Tesla’s board reached that dollar figure through an illegal operation on the grounds that it could not be considered independent of Musk’s influence.
The result was a victory for Musk and Tesla’s board after campaigning hard to get shareholders to approve the deal. That would serve as a rebuttal to the judge’s ruling that overturned the award — making it easier for Tesla’s board to argue that shareholders were properly informed about the pay package and board members’ ties to Musk before voting.
Tesla’s board warned that Musk could walk away from the company if the package isn’t approved, while Musk said Wednesday evening that he had broad investor support.
Major shareholders such as Norway’s sovereign wealth fund and the California State Teachers’ Retirement System announced they would vote against the payout ahead of the vote, while proxy advisory firms Glass Lewis and Institutional Shareholder Services also opposed the award.
The vote doesn’t automatically mean Musk will receive the money, however, and further controversy is likely. There are still many legal arguments about whether the board can be considered independent, and whether the package can be considered fair after a judge rules otherwise.
New lawsuits could arise over the referendum, bringing the case back before a judge and raising the prospect of a protracted legal battle. Shareholders also approved a move to move Tesla’s legal home from Delaware to Texas, further complicating any challenges.
Tesla first laid out Musk’s pay package in 2017, setting conditions for the CEO to earn 12 different stock options depending on whether the company hits certain revenue and market targets. Shareholders broadly approved the package in 2018, but an investor filed a lawsuit claiming the board was misleading and the package unfair.
Judge Kathleen McCormick, who oversees Delaware’s court, ruled that Tesla’s team conducted a “deeply flawed” process to determine Musk’s fee. McCormick found the team fraught with personal conflicts and stacked with Musk’s closest allies, such as his former divorce lawyer.
Tesla’s board, which could appeal McCormick’s ruling, sought to correct his decision through a shareholder vote. Despite McCormick’s criticism of the pay package, the board presented the same deal that the judge rejected — now worth less cash because of Tesla’s falling stock price.
