6:58 am, June 14, 2024
Elon Musk is set to become the best-paid boss in American corporate history ever after investors approved his record £35bn pay deal yesterday.
The company had been working for two months to try to convince investors that backing the deal – promised to Musk in 2018 – was the right thing to do.
The all-stock deal was once worth as much as £43.8bn but declined in value in line with Tesla’s share price, which has fallen by around 40% in the past year.
The record pay deal was thrown out by a Delaware judge earlier this year after it was ruled that Musk effectively controlled the Tesla board when it agreed the package in 2018.
Tesla said it would appeal but still asked its shareholders to approve the package again at yesterday’s annual meeting.
Shareholders also voted to move the company’s legal home to Texas to avoid the Delaware courts.
Musk told shareholders he ‘loved’ them after the results were announced at the meeting at Tesla’s Austin factory.
‘It’s incredible,’ he said. ‘I think we’re not just opening a new chapter for Tesla, we’re starting a new book.’
Tesla’s share price rose 2.9% after the results were announced to close at $182.47.
However, the backing of shareholders doesn’t mean Musk will immediately gain the pay-out.
The deal is likely to be tied up in the courts for months as Tesla hopes to overturn the court ruling.
Adam Badawi, a law professor at UC Berkeley, said: ‘Even if the shareholders do approve the old package, it is not clear that the Delaware court will allow that vote to be effective.’
The company is hoping the fact shareholders have approved the package for the second time will help the judge change her mind. There can be no question this time that they were not fully aware of its size.
Charles Elson, a retired professor and founder of the corporate governance centre at the University of Delaware, said he does not think the vote will influence the judge – Kathaleen St Jude McCormick – who issued a decision based on the law.
Elosn said Judge McCormick’s ruling essentially made the 2018 compensation package a gift to Musk and that would need unanimous shareholder approval – an impossible threshold.
John Lawrence, a Dallas-based lawyer who defends corporations against shareholder lawsuits, agreed that the vote doesn’t end the legal dispute and automatically give Musk the stock options. But he said it gives Tesla a strong argument to get the ruling overturned.
He expects Musk and Tesla to argue that shareholders were fully informed before the latest votes, so the judge should reverse her decision.
Major shareholders had been split on backing the pay deal for Musk, who many believed would walk away from Tesla if it wasn’t ratified. Musk had threatened to develop crucial AI technology outside of Tesla if the deal wasn’t approved.
The Times reported that Scottish asset manager Baillie Gifford & Co and Ark Investment Management had backed the deal while Norges Bank, Norway’s sovereign wealth fund, and the California Public Employees’ Retirement System had said they would vote against it.
