Tesla Shareholders Approve Musk’s $45 Billion Pay Package

In a significant development, Tesla shareholders have approved a $45 billion compensation package for CEO Elon Musk following a contentious referendum. This outcome marks a pivotal moment in Musk’s fight to retain the largest-ever executive pay deal granted to a CEO of a U.S.-listed company.

In a celebratory appearance, Musk expressed his gratitude to the shareholders. The Tesla board had warned that Musk might turn away from the company if the package was not approved, highlighting the high stakes involved in the decision.

The approval comes after months of legal and shareholder disputes. Earlier this year, a Delaware judge nullified Musk’s previous $56 billion pay package, citing the Tesla board’s lack of independence from Musk and an illegitimate process in reaching the compensation figure. Despite this, the Tesla board and Musk have vigorously campaigned to gain shareholder approval for the new package.

However, the approval does not guarantee that Musk will receive the entire compensation. Legal experts suggest that the pay package is not a done deal, as there are still numerous legal arguments to resolve. The independence of the board and the fairness of the package remain contentious issues, and new lawsuits could arise, potentially leading to further legal battles. Shareholders also approved a measure to move Tesla’s legal home from Delaware to Texas, which could add complexity to any future legal challenges.

Prominent shareholders, including Norway’s sovereign wealth fund and the California State Teachers’ Retirement System, announced their opposition to the package before the vote. Additionally, proxy advisory firms Glass Lewis and Institutional Shareholder Services recommended voting against the award. Despite this opposition, the shareholder approval provides a potential rebuttal to the judge’s ruling, making it easier for Tesla’s board to argue that shareholders were adequately informed about the payment package and the board members’ ties to Musk before casting their votes.

Tesla originally devised Musk’s compensation package in 2017, setting specific performance targets for the CEO to receive 12 tranches of stock options based on the company’s revenue and market capitalization goals. The package was approved by shareholders in 2018. However, a lawsuit was filed by an investor, claiming that the board had been misleading and the package was unfair. Judge Kathaleen McCormick, who oversees Delaware’s Court of Chancery, ruled that the board’s process was deeply flawed and influenced by personal conflicts, including the presence of Musk’s close allies.