Elon Musk may ‘step back’ if shareholders reject $56bn pay package, Tesla chair warns
What are the potential consequences for Tesla if shareholders do not approve Elon Musk's $56bn pay package?
The potential consequences for Tesla if shareholders do not approve Elon Musk's $56 billion pay package are primarily centered around the risk of losing Musk's full-time attention and commitment to the company. Tesla's board chair, Robyn Denholm, has hinted that Musk may step back from the electric carmaker if the pay package is not approved, as there are "other places" he could spend his time1. Musk's other business interests include SpaceX, xAI, and the social media platform X. Some Tesla investors have expressed concern about Musk's ability to focus on Tesla amidst his numerous other ventures.
Denholm emphasized in her letter to investors that the purpose of the 2018 pay package was to "keep Elon focused on Tesla and motivated to achieve the company's incomparable ambitions." She also noted that Musk's fortune would remain intact even if Tesla were to renege on the 2018 commitment. The pay package includes options to buy Tesla stock, which require Musk to wait five years before selling the shares he receives in the deal.
If the vote does not pass, it is possible that Musk could decide to spend less time at Tesla or even step away from the company altogether, which could impact Tesla's future growth and innovation. Additionally, the outcome of the vote may affect investor sentiment and the company's public image, especially considering the mixed recommendations from proxy advisory firms and the varying opinions of institutional investors.
How did Robyn Denholm, the chair of Tesla, describe the importance of Elon Musk's time and ideas to the company in her letter to investors?
In her letter to investors, Tesla Chair Robyn Denholm emphasized the importance of Elon Musk's time and ideas to the company. She acknowledged that Musk has numerous other places where he can make a significant difference in the world, but she wants his ideas, energy, and time to be focused on Tesla for the benefit of its shareholders. Denholm also mentioned that Musk's time is not unlimited, implying that shareholders should support the $56 billion pay package to ensure his continued commitment and focus on the company's growth and success. The purpose of the 2018 compensation deal, according to Denholm, was to keep Musk focused on Tesla and motivated to achieve its ambitious goals.
Why is it crucial for Tesla shareholders to ratify the 2018 pay decision according to Denholm?
According to Denholm, it is crucial for Tesla shareholders to ratify the 2018 pay decision for several reasons. Firstly, the pay package was initially approved by shareholders in 2018, and the recent judgment by the Delaware judge should not overrule the shareholders' decision. Secondly, the pay package has contributed to Tesla's significant growth since its approval, including a ~1,100% shareholder growth and a $2.2 billion loss turned into a $15 billion profit. Lastly, Denholm argues that ratifying the decision will demonstrate reciprocal respect and ensure that Elon Musk continues to focus his time, energy, ambition, and vision on Tesla, which has been a key factor in the company's success.