Tesla investors back $56bn Musk pay deal

Hind Al Soulia - Riyadh - WASHINGTON — Tesla shareholders have backed a record-breaking pay package for boss Elon Musk and approved a plan to move the firm's legal headquarters to Texas.

The deal was blocked earlier this year by a judge in Delaware over concerns it was unfair to shareholders.

The vote is a victory for the multi-billionaire, who had campaigned fiercely for the payout, which is worth up to $56bn (£43.9bn). The exact amount depends on the Tesla share price.

"Hot damn, I love you guys," he told a crowd of enthusiastic shareholders who had gathered in Texas for the firm's annual meeting.

The deal is worth more than 3,000 times what the top-earning boss in the US made last year.

However, the vote is not binding and legal experts have said it is not clear if the court that blocked the deal will accept the re-vote and allow the company to restore the pay package.

"The vote changes nothing," said Mathieu Shapiro, a managing partner at law firm Obermayer Rebmann Maxwell & Hippel.

"It only offers Tesla opportunities to try to use the vote to obtain a better decision going forward.

“It will be interesting to see if another court is willing to credit a vote taken after the trial court’s decision.”

The eye-popping sum had sparked criticism and raised concerns that the board of Tesla was too submissive and close to Musk.

In the January court ruling, Delaware judge Kathaleen McCormick ruled the sum was "unfair" and the process for determining the package, by a board dominated by Musk, was "deeply flawed".

Chancellor McCormick had pointed out that Antonio Gracias, who had been a board director at Tesla, had "the sort of personal relationship that had him vacationing with Musk’s family on a regular basis".

She also highlighted Todd Maron, Tesla's former general counsel, "who was Musk’s former divorce attorney and whose admiration for Musk moved him to tears during his deposition".

Musk announced that he wanted to move the firm's legal headquarters to Texas after the court in Delaware, where it is currently incorporated, voided his pay package, siding with a small investor who had sued over the deal.

The fight over the plan had aired concerns about Musk's leadership, at a time when Tesla's share price has fallen from its height and its position in the electric car industry is under pressure.

But Musk rallied his fan base in support of the deal, appealing particularly to individual investors, who make up an unusually large portion of the firm's shareholder base.

"It's a pretty ringing endorsement," said car industry analyst Karl Brauer.

Musk got more than enough shareholder support "to justify the package," he added.

The company did not immediately disclose the margin of the vote.

Musk had previewed the results in a post on his social media company, X, formerly known as Twitter.

Shares in the company closed up nearly 3% after Musk's announcement.

The compensation plan gives Musk rights to roughly 300 million shares - the equivalent to a 10% stake in the firm - as a reward for Tesla meeting a number of goals set out in 2018 which are linked to sales, profits and the share price.

Tesla had said that Musk's goals were challenging. However, the original lawsuit that led to the Delaware court blocking the pay deal alleged that the targets were the same as internal growth projections that were being shared with banks.

"My understanding is that there's been about 1,100% appreciation in Tesla stock. And that's pretty, pretty impressive. Most chief executives have never done anything like that," said Brauer.

On whether Musk deserved such a large pay aware, Georg Ell, former director of Western Europe at Tesla, told the BBC's Today programme: "If I was an investor who put a substantial amount of money into this in 2018 and had held it throughout the period, I’d be very happy because I would have seen anywhere between... 13 and 16 times my money back.

"That’s a very, very good return," he said.

Ell disclosed that he has a small shareholding in Tesla, worth around £6,000.

Tesla's board said Musk deserved the package because the carmaker had achieved its targets under his leadership and that it was necessary to ensure he remains dedicated to the company.

Ell said that the result of the vote gives Musk "a very strong validation"

"At Tesla of course he doesn’t do it all alone but he definitely sets the agenda, he sets the pace and he is a relentless person to work for, there’s no doubt about that," he said.

Tesla executives expressed support for the package in social media posts, saying that Musk was crucial to the company's success.

Meanwhile, Musk promised a personal tour of Tesla's factory in Texas to some shareholders who cast votes.

Shareholders also approved the re-election of two board members at the meeting on Thursday: James Murdoch, the son of media tycoon Rupert Murdoch, and Musk's brother Kimbal Musk. — BBC