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

on Mar 22, 2018

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.