Tesla investors approve Elon Musk's $55 billion pay plan

• Tesla announced investors approved Elon Musk's pay package.

• The package, initially approved in 2018, was voided by a Delaware judge in January.

• Tesla is hoping the shareholder ratification will make the judge's ruling moot, but it's not guaranteed.

It's official — Tesla investors voted to approve Elon Musk's pay package.

The carmaker announced the results of the shareholder vote during the company's annual meeting on Thursday.

Musk did a victory dance as he took the stage amid cheers from on-site investors.

"I just want to start off by saying: "Hot damn! I love you guys," Musk said.

Tesla shares held after-hours gains of more than 1% after the vote.

Investors had initially approved the compensation plan in 2018, but a Delaware judge voided it in January after a shareholder filed a lawsuit alleging the agreement was "beyond the bounds of reasonable judgment."

In January, Delaware Chancellor Kathaleen McCormick said she had decided to strike down the pay package because she believed Musk had undue influence over the agreement and its approval due to his close ties to several board members, one of which is his brother.

Tesla has yet to appeal the decision, but the company hopes to use the shareholder approval to argue that the ruling is moot now — the question now is whether the Delaware court will agree. The company said in a filing with the Securities and Exchange Commission on Monday that it will seek to reverse the ruling and will use an affirmative vote to do so.

When the compensation package was voided, it was estimated to be worth around $55 billion — making it the largest pay package to ever be awarded to a CEO.

Musk does not receive a salary from Tesla. His pay was determined by his ability to hit a series of financial goalposts. It consists of a 10-year grant comprising 12 sets of stock options. These options become available to Musk when Tesla achieves the specific goals. Each time a milestone is met, Musk receives stock equivalent to 1% of Tesla's outstanding shares at the time of the grant. By 2023, Tesla said it had successfully reached all 12 milestones.

Tesla has argued that the pay package is both fair and necessary to maintain Musk's focus on the car company. And the company went all out in its efforts to promote Musk's pay package, paying for advertisements and even offering shareholders who voted a chance to win a tour of the Texas gigafactory alongside Musk.

Some Tesla fans took to social media to promote the proposal, joining with some of the company's notable shareholders, such as Ron Baron of Baron Funds and Cathie Wood of Ark Investment Management, who were quick to rally around Musk.

"Elon is the ultimate 'key man' of key man risk. Without his relentless drive and uncompromising standards, there would be no Tesla," Baron wrote in an open letter last week.

One big reason investors are rallying around Musk: they are afraid of losing him — or at least his attention. The CEO has threatened to take his plans for AI and robotics elsewhere, saying that unless he had about 25% of voting control, he would "prefer to build products outside of Tesla."

"He is putting a knife at the throat of the company: 'You don't pay me what I want, then I am going to compete,'" Anat Alon-Beck, a corporate law expert at Case Western Reserve University, told BI.

During the annual meeting, Tesla announced that a proposal to move Tesla's state of incorporation to Texas had been approved. Earlier this year, Musk moved SpaceX's state of incorporation from Delaware to Texas as well.

Additionally, shareholders approved a proposal to reelect Tesla board members Kimbal Musk and James Murdoch.

This is a developing story. Check back for updates.

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