Tesla Investors Back $56 Billion Musk Pay Deal

Tesla shareholders have approved a groundbreaking pay package for CEO Elon Musk and endorsed a plan to relocate the company's legal headquarters to Texas. Earlier this year, a judge in Delaware had blocked the deal citing concerns over its fairness to shareholders. The vote marks a significant victory for Musk, who vigorously campaigned for the payout, potentially worth up to $56 billion (£43.9 billion) contingent upon Tesla's share price.

"I love you guys," Musk exclaimed to a crowd of enthusiastic shareholders gathered in Texas for the company's annual meeting.

This deal surpasses the earnings of the highest-paid CEO in the US last year by more than 300 times and exceeds the average CEO's compensation by over 3,000 times.

However, the vote is not legally binding, and legal experts question whether the court that previously blocked the deal will accept this new vote and allow the pay package to be reinstated.

"The vote changes nothing," said Mathieu Shapiro, managing partner at law firm Obermayer Rebmann Maxwell & Hippel. "It merely provides Tesla with opportunities to leverage the vote for a more favorable decision in the future."

Shapiro added, "It will be intriguing to see if another court will acknowledge a vote taken subsequent to the trial court's ruling."

The eye-popping sum sparked criticism, raising concerns about Tesla's board being too deferential to Musk. In January, Delaware judge Kathaleen McCormick deemed the amount "unfair" and criticized the flawed process by which the board, dominated by Musk, determined the package.

Chancellor McCormick noted conflicts such as Antonio Gracias, a former Tesla board member, having personal ties with Musk's family, including vacationing together regularly. She also highlighted Todd Maron, Tesla's former general counsel and Musk's ex-divorce attorney, whose emotional testimony underscored his admiration for Musk during legal proceedings.

Following the Delaware court's voiding of the pay package, Musk announced plans to relocate Tesla's legal headquarters to Texas, where it is currently incorporated.

The dispute over the pay plan prompted concerns about Musk's leadership, especially as Tesla faces challenges amidst fluctuating share prices and competitive pressures in the electric car industry.

Despite these challenges, Musk rallied support among his fan base, particularly individual investors who constitute a significant portion of Tesla's shareholder base. The pay proposal secured 72% of the votes cast, similar to its approval rate in 2018.

"It's a resounding endorsement," commented automotive industry analyst Karl Brauer. He noted that Musk received ample shareholder support "to justify the package."

Musk had foreshadowed the results in a social media post on X, formerly Twitter. Following his announcement, Tesla's stock rose nearly 3%.

Under the compensation plan, Musk could gain rights to approximately 300 million shares, equivalent to a 10% stake in Tesla, contingent upon the company achieving goals established in 2018 related to sales, profitability, and share price performance.

Tesla stated that Musk's targets were ambitious, but critics, including those involved in the original lawsuit, claimed these targets mirrored internal growth projections shared with banks.

"Some sources indicate Tesla stock has appreciated by about 1,100%," noted Brauer. "That's quite remarkable. Few CEOs achieve that level of success."

Georg Ell, former Western Europe director at Tesla, defended the pay package on BBC's Today programme, citing significant returns for long-term investors since 2018.

"The vote provides strong validation for Musk at Tesla," Ell remarked. "While he doesn't operate in isolation, he sets the company's agenda and pace with relentless determination."

Tesla executives echoed support for the package on social media, underscoring Musk's pivotal role in the company's achievements.

Meanwhile, Musk pledged personal tours of Tesla's Texas factory to shareholders who participated in the vote.

Additionally, shareholders re-elected two board members during the meeting: James Murdoch, son of media mogul Rupert Murdoch, and Kimbal Musk, Elon Musk's brother.