Tesla shareholders will vote on Elon Musk's controversial $56B pay package this week: Here's what's at stake

The Delaware court's decision has voided Elon Musk's original 2018 pay package, which was valued at approximately $55 billion at the time of the court's decision5. The court found that Tesla's board of directors breached their fiduciary duties by approving the compensation package, which was considered excessive and unfair to shareholders5. As a result, the pay package has been invalidated, and Tesla's board must now negotiate a new pay package that has the approval of shareholders and Musk.

Tesla shareholders have several concerns regarding Elon Musk's $56 billion pay package. The main concerns are the excessive size of the award and its potentially negative impact on smaller shareholders. Proxy advisory firm Glass Lewis has recommended that shareholders vote against the pay package, stating that the size of the award challenges the very basis that the 2018 grant as structured and sized was even necessary6. Additionally, the firm notes that Musk is already well compensated through his 12.9% ownership stake in Tesla, which is valued at approximately $74 billion.

Another concern is the potential dilution of stock if Musk is granted the massive stock grant, which could result in shares held by other shareholders being worth less. Under the 2018 pay deal for Musk, Tesla would issue about 304 million new shares, creating a dilution effect of about 9%. This, coupled with the concentration of ownership around Musk, has raised concerns among shareholders.

Furthermore, some shareholders are concerned about Musk's divided attention, as he is in charge or spends significant amounts of time at SpaceX, X.com (formerly Twitter), and the Boring Co., among other ventures. There are worries that without the pay package, Musk may not focus as much on Tesla and its growth.