Tesla shareholders have approved a $45bn (£35.3bn) pay deal for chief executive Elon Musk, following a fiercely contested referendum on his leadership.
The result, announced Thursday, comes as the billionaire tycoon fights to retain the largest compensation package ever awarded to an executive of a U.S.-listed company.
“I just want to start by saying, damn, I love you!” Musk said cheerfully as he appeared on stage after the vote.
The vote came after a Delaware judge voided Musk’s payment – then worth about $56 billion – in January, arguing that Tesla’s board could not be considered independent of Musk’s influence. and reached that figure in dollars through an illegitimate process.
The result is a victory for Musk and the Tesla board after they campaigned ardently for shareholders to approve the deal. It could serve as a rebuttal to the judge’s ruling that overturned the award, making it easier for Tesla’s board to argue that shareholders were adequately informed about the pay package and board members’ ties to Musk before casting their votes. .
Tesla’s board of directors warned that Musk could walk away from the company if the package was not approved, while Musk said late Wednesday that he had broad support from investors.
Prominent shareholders such as Norway’s sovereign wealth fund and the California State Teachers’ Retirement System announced they would vote against the payout in the run-up to the vote, while proxy advisory firms Glass Lewis and Institutional Shareholder Services also signed up. They opposed the award.
However, the vote does not automatically mean that Musk will receive the money and more disputes are likely to arise. There are still numerous legal arguments over whether the board can be considered independent and whether the package can be considered fair after the judge rules otherwise.
New lawsuits are also possible in the wake of the vote, which could put the case back before a judge and raise the prospect of a protracted legal battle. Shareholders also approved a measure to move Tesla’s legal domicile from Delaware to Texas, which could further complicate any challenge.
Tesla originally devised Musk’s pay package in 2017, setting terms 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 an investor filed a lawsuit alleging that the board had been misleading and that the package was unfair.
Judge Kathaleen McCormick, who oversees Delaware’s chancery court, ruled that Tesla’s board of directors carried out a “deeply flawed” process to determine Musk’s pay. McCormick found the board rife with personal conflict and filled with close Musk allies, such as his former divorce lawyer.
Tesla’s board of directors, which will likely appeal McCormick’s ruling, attempted to remedy its decision with a shareholder vote. Despite McCormick’s criticism of the pay package, the board presented the same deal that the judge rejected, although it is now worth less money due to a drop in Tesla’s stock price.