Tesla chair says Elon Musk needs $46 billion pay plan to stay motivated
What specific reasons did Robyn Denholm provide for urging shareholders to re-approve Elon Musk's pay package?
Robyn Denholm, Tesla Board Chairperson, urged shareholders to re-approve CEO Elon Musk's $46 billion pay package, arguing that it is crucial for the company's growth and stockholder value5. In a letter to shareholders, Denholm emphasized that Musk has delivered on the growth targets set in the 2018 package, with Tesla meeting all the stock value and operational goals1. She also highlighted the potential consequences if the pay package is not reinstated, suggesting that Musk could leave Tesla or devote less time to the company. Denholm framed the vote as being about "whether the promise made to Elon should be honored."
What changes are being proposed by Tesla's board in addition to reinstating Musk's pay plan, such as the state of incorporation?
Tesla's board is proposing two major changes for shareholders to vote on. The first is the reinstatement of CEO Elon Musk's $46 billion pay package, which was previously nullified by a Delaware court ruling in January 2024. The second change is a proposal to move Tesla's state of incorporation from Delaware to Texas. The board believes that these changes are crucial for the future success of the company and has urged shareholders to support both proposals in an upcoming vote on June 13.
What were the main concerns cited by the Delaware Court of Chancery regarding the board members' relationship with Elon Musk?
The Delaware Court of Chancery had several concerns regarding the board members' relationship with Elon Musk. In the shareholder derivative action Tornetta v. Musk, et al., the court found that most board members were either beholden to Musk or had compromising conflicts. The court noted that the board's decision to grant Elon Musk a massive compensation package was not entirely fair, as the process of approving the grant and the grant's price were problematic.
Firstly, the court found that the proxy statement given to shareholders ahead of the meeting, which described the process and the grant, was inaccurate and misleadingly omitted key details about the process. This prevented the stockholder vote from being fully informed.
Secondly, the court observed that the board's Compensation Committee, which was responsible for negotiating Musk's compensation plan, worked alongside Musk almost as an advisory body, rather than negotiating against him with the mindset of a third party. The close personal and business relationships of Tesla's Compensation Committee members with Musk raised concerns about the objectivity of the process.
Lastly, the court found that the grant process lacked a traditional benchmarking analysis, and the incredible size of the compensation plan seemed to have been calibrated to help Musk achieve his personal goals, which had no relation to Tesla's goals with the compensation plan.
In summary, the main concerns cited by the Delaware Court of Chancery were the inaccuracies and omissions in the proxy statement, the close relationships between the board members and Musk, and the lack of a rigorous analysis in determining the compensation plan.