Tesla shareholders have approved a $45bn pay deal for CEO Elon Musk, following a fiercely contested referendum on his leadership.
The result, announced on Thursday, comes as the billionaire tycoon fights to retain the largest-ever compensation package granted to an executive at a US-listed company.
“I just want to start off by saying, hot damn, I love you guys!” a gleeful Musk said as he appeared on stage following the vote.
The vote took place after a Delaware judge nullified Musk’s payment – then worth around $56bn – in January, on the grounds that Tesla’s board could not be considered independent from Musk’s influence and reached that dollar figure through an illegitimate process.
The result is a victory for Musk and the Tesla board after they ardently campaigned for shareholders to approve the deal. It could serve as a rebuttal to the judge’s ruling that struck down the award – making it easier for Tesla’s board to argue that shareholders were properly informed about the payment package, and the board members’ ties to Musk, before casting their votes.
Tesla’s board warned Musk could turn away from the company if the package wasn’t approved, while Musk claimed on Wednesday evening that he had wide support of investors.
Prominent shareholders such as Norway’s sovereign wealth fund and the California State Teachers’ Retirement System announced they would vote against the payment in the lead-up to the vote, while proxy advisory firms Glass Lewis and Institutional Shareholder Services also opposed the award.
The vote does not automatically mean that Musk will receive the money, however, and there are likely to be further disputes. There are still numerous legal arguments around whether the board can be considered independent, and whether the package can be considered fair after the judge ruled otherwise.
It is also possible new lawsuits may arise over the vote, potentially bringing the case back in front of a judge and raising the prospect of a protracted legal battle. Shareholders also approved a measure to move Tesla’s legal home from Delaware to Texas, potentially further complicating any challenges.
Tesla originally devised Musk’s payment package in 2017, setting conditions for the CEO to receive 12 different tranches of stock options depending on whether the company hit certain revenue and market targets. Shareholders approved that package by a wide margin in 2018, but one investor filed a suit claiming that the board had been misleading and the package was unfair.
Judge Kathaleen McCormick, who oversees Delaware’s court of chancery, ruled that Tesla’s board conducted a “deeply flawed” process to determine Musk’s payment. McCormick found that the board was rife with personal conflicts and stacked with Musk’s close allies, such as his former divorce attorney.
Tesla’s board, which is likely to appeal McCormick’s ruling, sought to remedy her decision with a shareholder vote. Despite McCormick’s criticism of the pay package, the board put forth the same deal that the judge rejected – albeit now worth less money due to a fall in Tesla’s share price.