Elon Musk’s future at Tesla hangs on shareholder’s pay package vote
What specific reasons did the Delaware judge give for voiding Elon Musk's initial $50 billion pay package?
The Delaware judge voided Elon Musk's initial $50 billion pay package for several reasons. Firstly, the judge found that the process leading to the board's approval of Musk's compensation was "deeply flawed." Musk had extensive ties with the persons tasked with negotiating on Tesla's behalf, including management members who were beholden to him. This led to a lack of meaningful negotiation over any of the terms of the plan.
Additionally, the judge determined that Musk "controlled Tesla," and as a result, the compensation plan was not fair to shareholders. The pay package was the largest potential compensation opportunity ever observed in public markets by multiple orders of magnitude, making it an "unfathomable sum." The judge also noted that the share-based compensation was negotiated by directors who appeared beholden to Musk, and the board never asked if the plan was necessary for Tesla to retain Musk and achieve its goals.
Lastly, the judge found that Tesla's 10-year pay agreement with Musk reached in 2018 would be worth around $51 billion at the current closing price for Tesla stock, accounting for the cost to Musk to exercise the options. This would be about a quarter of his $210.6 billion fortune, as calculated by Forbes magazine, which currently ranks him as the world's richest person.
How does Elon Musk's potential compensation package relate to his voting power within Tesla's board?
Elon Musk's potential compensation package is tied to his voting power within Tesla's board. The package, which is worth around $50 billion, would increase Musk's voting power to close to 25% if approved by shareholders. This would give Musk more control over Tesla's board through stock options. However, if the compensation package is denied, Musk has threatened to leave the company and build futuristic technology, including robotics and artificial intelligence, elsewhere.
How might Tesla's corporate relocation from Delaware to Texas affect the company or its governance?
Tesla's potential corporate relocation from Delaware to Texas could have several implications for the company and its governance.
Firstly, the move might be seen as a response to the recent Delaware court ruling that voided Elon Musk's $55 billion pay package. Musk has expressed his frustration with Delaware and is now seeking shareholder approval to move the company's incorporation to Texas, where its physical headquarters are located. This move could potentially give Musk more control over the company and its board through stock options.
Secondly, the relocation might impact Tesla's shareholders and their rights. Texas has different corporate laws and governance structures compared to Delaware, which could affect how shareholders participate in company decisions and protect their interests. Some shareholders might be in favor of the move, while others might be concerned about the potential changes in their rights and the company's governance.
Lastly, the move to Texas could also have implications for Tesla's legal and financial operations. Texas is in the process of setting up its own business court network, which could challenge Delaware's dominance in handling corporate disputes2. The move could also have tax implications for the company, as Texas has no state corporate income tax, while Delaware has a low corporate tax rate.
In summary, Tesla's potential corporate relocation from Delaware to Texas could have significant effects on the company's governance, shareholder rights, and legal and financial operations.