Tesla shares rise as shareholders approve major pay day deal for CEO Musk

Tesla shareholders approved a huge pay deal to ensure CEO Musk remains at the helm.

Tesla shares rise as shareholders approve major pay day deal for CEO Musk

Tesla shares closed in the green in the US Wednesday, after shareholders approved a huge pay deal for CEO Elon Musk at a special meeting. The deal seeks to ensure Musk remains at the helm of the innovative car maker as it struggles to crank up production of its in-demand vehicles.

Tesla shares ended the US Wednesday trading session 1.93% higher at $316.53. However, after-hours activity currently has the stock in the red.

Huge pay deal

Tesla’s shareholders Wednesday approved a new ten-year pay deal for Musk, potentially worth a maximum of over $55 billion. However, the deal is reliant on Musk hitting certain targets at different points.

His current annual salary is a modest $37,000 per year, which he must accept according to California laws.

For the electric car-maker’s CEO to achieve the maximum remuneration, Tesla must achieve a market cap of $650 billion. It is currently worth $55 billion. The first payment trigger in the tranche-style agreement, will be when the company’s valuation hits $100 billion.

Musk stands to net $2.6 billion of stock options if he can grow the company to more than ten times its current value over a ten-year period. That could grow astronomically if everything works out as well as is currently anticipated.

“This ensures that Elon will continue to lead Tesla’s management over the long-term, while also providing the flexibility to bring in another CEO who would report to Elon at some point,” Tesla said in a statement.

Not everyone approved the pay deal

Musk’s proposed pay deal was put to a shareholder vote and some 73% of voters – minus Musk and his brother – approved the plan.

Among those who didn’t, was Norway’s Sovereign Wealth Fund, managed by Norges Bank Investment Management. Shareholders Glass Lewis & Co and Institutional Shareholder Services also opposed the pay deal.

“It is questionable whether an additional $2.6 billion grant is necessary or appropriate to further align his interests when he already owns a 22% stake in the company,” ISS said.

Top Equities Brokers

0 Brokers added for comparison:
Clear all