Tesla Shareholders Approve $56bn Pay Package for Elon Musk Amid Controversy

Tesla shareholders have given the green light to a record-breaking pay package for CEO Elon Musk and approved the relocation of the company’s legal headquarters to Texas. The decision comes after a judge in Delaware blocked the deal earlier this year, citing concerns about its fairness to shareholders.

This approval marks a significant victory for Musk, who campaigned vigorously for the payout, potentially worth up to $56bn (£43.9bn) depending on Tesla’s share price. “Hot damn, I love you guys,” Musk exclaimed to a crowd of enthusiastic shareholders gathered in Texas for the annual meeting.

Despite being 300 times more than what the highest-earning CEO in the US made last year, the vote is not binding. Legal experts remain uncertain if the Delaware court will accept the re-vote and allow the reinstatement of the pay package. “The vote changes nothing,” said Mathieu Shapiro, managing partner at Obermayer Rebmann Maxwell & Hippel. “It only offers Tesla opportunities to try to use the vote to obtain a better decision going forward.”

The $56bn pay package has faced significant criticism, raising concerns about Tesla’s board being overly submissive to Musk. In a January ruling, Delaware judge Kathaleen McCormick labeled the package as “unfair” and criticized the process of its determination by a board dominated by Musk. The judge highlighted the close personal relationships between Musk and key board members, including Antonio Gracias, who regularly vacationed with Musk, and Todd Maron, Musk’s former divorce attorney.

Musk announced the move of Tesla’s legal headquarters to Texas after the Delaware court voided his pay package, siding with a small investor who sued over the deal. The controversy has brought Musk’s leadership into the spotlight, especially as Tesla’s share price has declined from its peak and the company’s position in the electric car industry faces pressure.

However, Musk successfully rallied individual investors, a significant portion of Tesla’s shareholder base, to support the deal. “It’s a pretty ringing endorsement,” said car industry analyst Karl Brauer. Musk received overwhelming shareholder support “to justify the package,” he added. The company did not immediately disclose the vote margin, but Musk hinted at the results on his social media platform, X (formerly Twitter). Tesla’s stock closed up nearly 3% following the announcement.

The compensation plan grants Musk rights to roughly 300 million shares, equivalent to a 10% stake in the company, as a reward for meeting specific goals linked to sales, profits, and share price, set out in 2018. Despite the original lawsuit alleging that these targets were merely Tesla’s internal growth projections, Musk’s supporters argue that the company’s performance under his leadership justifies the pay package.

Georg Ell, former director of Western Europe at Tesla, told the BBC’s Today program that long-term investors would be pleased with the substantial returns on their investments since 2018. Tesla’s board defended the package, stating that Musk’s leadership was critical to achieving the company’s targets and ensuring his continued dedication.

The vote result provides Musk with “a very strong validation,” said Ell, acknowledging Musk’s relentless work ethic and influential role in setting Tesla’s agenda. Tesla executives expressed support for the package on social media, emphasizing Musk’s importance to the company’s success. Musk also promised a personal tour of Tesla’s Texas factory to some shareholders who voted.

At the same meeting, shareholders re-elected two board members: James Murdoch, son of media mogul Rupert Murdoch, and Musk’s brother, Kimbal Musk.