Tesla shareholders vote to reinstate Elon Musk’s $56 billion pay package despite earlier court order to rescind it
By lauraharris // 2024-06-19
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Tesla shareholders have reinstated CEO Elon Musk’s controversial $56 billion 2018 compensation package, five months after a Delaware judge ordered its rescission. In 2018, the board initially approved Elon Musk's compensation plan, which is reputed to be the largest of any CEO in a publicly traded company in the United States. Unlike traditional compensation plans, the package does not include a salary or bonus. Instead, it offers stock options contingent on Tesla's market value reaching up to $650 billion over 10 years starting in 2018. (Related: Tesla to expand battery plant in Nevada using equipment and tech from CCP-linked company.) Under the terms of the package, Musk will receive stock options only if Tesla reaches specified market capitalization targets and achieves operational milestones, thereby ensuring that his compensation is directly tied to the company's long-term success and profitability. And now, with its latest proxy statement, Tesla has cited the package's value at $44.9 billion. However, six years after the Tesla board of directors initially approved the package, Judge Kathaleen McCormick, chancellor of the Delaware Court of Chancery, nullified the pay plan following an investor lawsuit. The court found that Tesla's board of directors had not adequately disclosed potential conflicts of interest due to some directors' close personal ties with Musk. Additionally, the board failed to inform shareholders that Tesla was likely to meet many of the performance goals outlined in the compensation plan. But despite this, Tesla shareholders still showed support and confidence in Musk's leadership and Tesla's future growth during their annual meeting on June 14. In response to the support, Musk began his opening remarks with: "I just want to start by saying, hot damn, I love you guys!"

Approval of Musk's pay package faces backlash from major proxy firms and investors

The proposal has garnered fervent support from various stakeholders and, at the same time, strong opposition from proxy advisory firms. Proxy advisory firms Glass Lewis and Institutional Shareholder Services, along with the California Public Employees' Retirement System (CalPERS) and New York City Comptroller Brad Lander, all expressed their opposition to the approval of the pay package. Glass Lewis publicly opposed the plan in late May, criticizing its "excessive size" and the potential negative impact of Musk exercising his stock options, which they believe could lead to a concentration of ownership. Glass Lewis also expressed concerns about Musk's numerous time-consuming ventures, including his recent acquisition of Twitter, now called X. Meanwhile, CalPERS CEO Marcie Frost called the compensation "exorbitant" and misaligned with CalPERS's views on executive pay. Frost argued that the package is "highly dilutive to shareholders" and lacks connection to Tesla's long-term profitability. She emphasized that while Musk deserves substantial compensation, it should reflect the company's performance and include reasonable salary caps, which she believes the current plan fails to provide. Norway's $1.7 trillion sovereign wealth fund, the world's largest, also announced before the meeting its intention to vote against the pay package, despite holding just a 0.98 percent stake in Tesla. Lander also voiced his disapproval via a post on X, criticizing Musk's influence on Tesla's direction. Lander oversees the city's public pension funds, which hold substantial investments in Tesla. "Elon's tweet is more evidence of the failure of corporate governance at Tesla – this is not how or when shareholder votes are supposed to be made public. As long-term investors in Tesla, we expect genuine board oversight and a CEO who is deeply committed to the company's growth rather than other business ventures," Lander wrote. Visit RoboCars.news for more news on electric vehicles. Watch the video below to learn why car companies are struggling with electric vehicles. This video is from the High Hopes channel on Brighteon.com.

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