Is Elon Musk Worth His $56bn Tesla Pay Package?
In a decisive move, Tesla shareholders have re-approved a multi-billion-dollar pay package for CEO Elon Musk that had previously been struck down by a Delaware judge. The decision was made at Tesla’s annual meeting on Thursday, alongside the approval to shift the company’s incorporation from Delaware to Texas.
Tesla announced on Friday that the pay package received 84% support from shares not held by Musk or his brother Kimbal, exceeding the 73% approval it garnered when first passed in 2018. The decision to move incorporation to Texas was backed by 63% of outstanding shares.
The contentious compensation package, which includes 303 million options to purchase Tesla shares at a significantly reduced price, was valued at $48.3 billion as of Thursday’s market close. This comes after a Delaware judge voided the package five months ago, deeming the board’s approval process “deeply flawed” and highlighting the close personal relationships between Musk and some board members.
Despite the court ruling, Tesla’s board argued that Musk’s full engagement is crucial as the company faces multiple challenges, including a significant drop in stock price, sales shortfalls, and a price war in the electric vehicle market. The board warned that without the pay package, Tesla might not retain Musk’s attention amid his numerous ventures, including SpaceX and X (formerly Twitter).
Tesla Chair Robyn Denholm emphasized that the package is about motivating Musk, not about the money, highlighting his limited time and vast array of ideas that could benefit Tesla.
While supporters like Cathie Wood of Ark Invest and Ron Baron of Baron Capital praised Musk as irreplaceable, major shareholders like the California State Teachers Retirement Fund and the Norwegian sovereign wealth fund voted against the package, citing concerns about its size and Musk’s divided focus.
Despite controversy surrounding Musk’s management of X and legal issues at SpaceX, Tesla shares rose 3% following the shareholder vote. However, the Delaware court may still have the final say on the matter.
