Tesla’s shareholders have endorsed an unprecedented compensation package for CEO Elon Musk and have also approved relocating the firm’s legal headquarters to Texas.
This outcome represents a triumph for Musk, who vigorously advocated for the payout valued up to $56 billion (£43.9 billion), contingent on Tesla’s stock performance.
“Hot damn, I love you guys,” he exclaimed to a crowd of enthusiastic shareholders at the company’s annual meeting in Texas.
The enormous sum has drawn criticism and raised questions about the board’s independence from Musk.
However, this vote is not binding, and legal experts note it is uncertain whether a court that previously blocked the deal will accept this re-vote and allow the company to reinstate the pay package.
“The vote changes nothing,” stated 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,” he added.
Musk announced his intention to move Tesla’s legal headquarters after a Delaware judge, where the firm is currently incorporated, nullified his compensation package, siding with a small investor who had challenged the deal.
The dispute over the package highlighted concerns regarding Musk’s leadership at a time when Tesla’s stock price has declined from its peak and its dominance in the electric vehicle sector faces challenges.
Nevertheless, Musk rallied his supporters, particularly individual investors, who constitute a significant portion of the firm’s shareholder base.
“It’s a pretty ringing endorsement,” commented car industry analyst Karl Brauer.
Musk secured more than sufficient shareholder backing “to justify the package,” he added.
The company did not immediately reveal the voting margin.
Musk had hinted at the results via a post on his social media platform, X, previously known as Twitter.
Following his announcement, Tesla shares closed nearly 3% higher.
The compensation plan grants Musk rights to approximately 300 million shares, about a 10% stake in the company, as a reward for Tesla achieving ambitious goals, such as becoming a $650 billion firm.
“My understanding is that there’s been about 1,100% appreciation in Tesla stock.
And that’s pretty, pretty impressive. Most CEOs have never done anything like that,” remarked Brauer.
Earlier this year, Judge Kathaleen McCormick ruled the payout “unfair” and criticized the process for determining the package, led by a board largely influenced by Musk, as “deeply flawed.”
Tesla deemed the decision “fundamentally unfair, and inconsistent with the will of the stockholders.”
The company then resubmitted the deal for another vote and sought shareholder approval to reincorporate outside Delaware.
“It will be interesting to see if another court is willing to credit a vote taken after the trial court’s decision,” Shapiro noted.
The board justified the package by highlighting Tesla’s achievement of its targets under Musk’s leadership and emphasized the need to ensure his continued commitment to the company.
Tesla executives also voiced support for the package on social media, underscoring Musk’s crucial role in the company’s success.
Meanwhile, Musk promised a personal tour of Tesla’s Texas factory to some shareholders who voted.
The package, estimated to be 300 times what the highest-paid US CEO earned last year, received support from 73% of shareholders who voted six years ago.
Shareholders also re-elected two board members during the meeting: James Murdoch, son of media magnate Rupert Murdoch, and Musk’s brother, Kimbal Musk.