Tesla Shareholders Endorse Musk’s $45 Billion Pay Package

In a highly contested referendum, Tesla shareholders have approved a $45 billion compensation package for CEO Elon Musk. The result, announced on Thursday, marks a significant moment as Musk defends the largest-ever pay deal for a US-listed company’s executive.

This outcome follows a Delaware judge’s decision in January to nullify Musk’s previous compensation package, which was valued at approximately $56 billion. The judge ruled that Tesla’s board was too influenced by Musk to be considered independent and that the payment was reached through an improper process.

The recent vote is a triumph for Musk and the Tesla board, who campaigned vigorously for shareholder approval. This endorsement may challenge the judge’s ruling by demonstrating that shareholders were adequately informed about the compensation package and the board’s connections to Musk before voting.

Tesla’s board had cautioned that Musk might leave the company if the package wasn’t approved, while Musk asserted strong investor support prior to the vote. Despite opposition from major shareholders like Norway’s sovereign wealth fund and the California State Teachers’ Retirement System, as well as advisory firms Glass Lewis and Institutional Shareholder Services, the package was approved.

However, this vote does not guarantee Musk will receive the full amount, as legal disputes remain. Questions about the board’s independence and the fairness of the package persist, following the judge’s prior ruling. In addition, shareholders approved relocating Tesla’s legal home from Delaware to Texas, potentially complicating future legal challenges.

Originally devised in 2017, Musk’s compensation plan included 12 tranches of stock options contingent on Tesla meeting specific revenue and market milestones. While shareholders widely approved this package in 2018, it faced legal challenges. Judge Kathaleen McCormick of Delaware’s Court of Chancery criticized the board’s process, citing personal conflicts and a close association with Musk.

Tesla’s board, likely to appeal McCormick’s decision, sought to address her concerns through a shareholder vote, presenting the same deal that the judge had rejected. Although worth less now due to a decline in Tesla’s share price, the compensation package has once again gained shareholder approval.

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