Tesla shareholders have approved a record-breaking pay package for CEO Elon Musk and the relocation of the company’s legal headquarters to Texas.
Earlier this year, a judge in Delaware had blocked the deal due to concerns about its fairness to shareholders.
The vote marks a significant win for the billionaire, who had vigorously advocated for the compensation package, potentially valued at up to $56 billion (£43.9 billion), contingent on Tesla’s share price.
“Hot damn, I love you guys,” he told a crowd of enthusiastic shareholders who had gathered in Texas for the firm’s annual meeting.
The deal exceeds 300 times what the highest-paid CEO in the US earned last year and is over 3,000 times the average CEO’s compensation.
However, the vote is non-binding, and legal experts have noted that it remains uncertain whether the court that initially blocked the deal will accept the re-vote and permit the company to reinstate the pay package.
“The vote changes nothing,” said Mathieu Shapiro, a managing partner at law firm Obermayer Rebmann Maxwell & Hippel.
“It only offers Tesla opportunities to try to use the vote to obtain a better decision going forward.
“It will be interesting to see if another court is willing to credit a vote taken after the trial court’s decision.”
The eye-popping sum had sparked criticism and raised concerns that the board of Tesla was too submissive and close to Mr Musk.
In the January court ruling, Delaware judge Kathaleen McCormick ruled the sum was “unfair” and the process for determining the package by a board dominated by Mr. Musk was “deeply flawed.”
Chancellor McCormick had pointed out that Antonio Gracias, who had been a board director at Tesla, had “the sort of personal relationship that had him vacationing with Musk’s family on a regular basis.”
She also highlighted Todd Maron, Tesla’s former general counsel, “who was Musk’s former divorce attorney and whose admiration for Musk moved him to tears during his deposition.”.
Elon Musk announced plans to move Tesla’s legal headquarters to Texas after a Delaware court, where Tesla is currently incorporated, voided his pay package following a lawsuit from a small investor. This conflict has raised concerns about Musk’s leadership, especially as Tesla’s share price has declined from its peak and its dominance in the electric vehicle market faces challenges.
Despite these issues, Musk rallied his fan base, particularly appealing to individual investors who represent a significant portion of Tesla’s shareholders.
The pay proposal received 72% of the votes cast, closely mirroring the 73% approval it initially received in 2018.
“It’s a pretty ringing endorsement,” said car industry analyst Karl Brauer.
Mr. Musk got more than enough shareholder support “to justify the package,” he added.
Mr. Musk had previewed the results in a post on his social media company, X, formerly known as Twitter.
Following Mr. Musk’s announcement, shares in the company saw a nearly 3% increase in closing.
The compensation plan grants Mr. Musk approximately 300 million shares, which equates to a 10% ownership stake in Tesla. This reward is contingent upon Tesla achieving specific objectives outlined in 2018, which are tied to sales, profitability, and the company’s stock price.
Tesla had acknowledged that Mr. Musk’s targets were ambitious. However, the lawsuit that led to the Delaware court’s decision to block the pay package alleged that these targets mirrored internal growth forecasts shared with banks.
“My understanding is that there’s been about 1,100% appreciation in Tesla stock. And that’s pretty, pretty impressive. Most chief executives have never done anything like that,” said Mr Brauer.
On whether Mr Musk deserved such a large pay, Georg Ell, former director of Western Europe at Tesla, told the BBC’s Today programme: “If I were an investor who put a substantial amount of money into this in 2018 and had held it throughout the period, I’d be very happy because I would have seen anywhere between… 13 and 16 times my money back.
“That’s a very, very good return,” he said.
Mr Ell disclosed that he has a small shareholding in Tesla, worth around £6,000.
Tesla’s board said Mr Musk deserved the package because the carmaker had achieved its targets under his leadership and that it was necessary to ensure he remains dedicated to the company.
Mr Ell said that the result of the vote gives Mr Musk “very strong validation.”
“At Tesla, of course, he doesn’t do it all alone but he definitely sets the agenda, he sets the pace and he is a relentless person to work for; there’s no doubt about that,” he said.
Tesla executives took to social media to voice their endorsement of the package, emphasising Mr. Musk’s pivotal role in the company’s achievements.
Simultaneously, Mr. Musk pledged to provide a personal tour of Tesla’s Texas factory to certain shareholders who participated in the voting process.
During Thursday’s meeting, shareholders also sanctioned the re-election of two board members: James Murdoch, the son of media magnate Rupert Murdoch, and Kimbal Musk, Mr. Musk’s own brother.