FREMONT, California – Shareholders of Tesla have voted in favor of a $45 billion pay deal for CEO Elon Musk, concluding a contentious debate over his leadership. This decision, announced recently, marks a significant moment as Musk fights to uphold the largest compensation package ever awarded to an executive of a US-listed company.
During the voting process, a judge in Delaware had previously invalidated Musk’s payment of about $56 billion. The judge’s ruling was based on concerns that Tesla’s board lacked independence from Musk’s influence and had arrived at the payment amount through dubious means. However, the recent shareholder approval represents a win for Musk and Tesla’s board, who vigorously campaigned for support.
Amid warnings from Tesla’s board that a failure to approve the package could prompt Musk to distance himself from the company, the CEO asserted that he had substantial backing from investors. Notably, major shareholders like Norway’s sovereign wealth fund and the California State Teachers’ Retirement System had initially voiced opposition to the payment. Likewise, proxy advisory firms Glass Lewis and Institutional Shareholder Services had also criticized the award.
Although shareholders have granted approval for the deal, it does not guarantee that Musk will receive the funds. Legal uncertainties persist around the independence of Tesla’s board and the fairness of the package post the judge’s ruling. In the coming days, potential lawsuits could emerge, potentially prolonging the legal dispute. Moreover, shareholders have also sanctioned a proposal to relocate Tesla’s legal headquarters from Delaware to Texas, which could introduce further complications.
The origins of Musk’s payment agreement trace back to 2017, under which he would receive stock options based on the company meeting specific revenue and market targets. Despite the board’s initial approval of the package in 2018, a lawsuit was filed alleging deception and unfairness. Judge Kathaleen McCormick’s subsequent ruling highlighted flaws in the board’s decision-making process, noting personal conflicts and close alliances with Musk.
The board, likely to appeal the judge’s ruling, sought to address the issue through a shareholder vote. Despite criticisms of the pay package, the board stood by the original offer that was previously rejected by the judge, albeit with a reduced value following a decline in Tesla’s stock price. As legal battles loom and complexities persist, the aftermath of the shareholder vote continues to shape the future dynamics of Tesla and its leadership structure.