Tesla Vote: Elon Musk's Pay Package. What We Know And What's At Stake.
Elon Musk's $46B Pay: Fair Deal or Excess?
Tesla shareholders are currently voting on whether to approve CEO Elon Musk's 2018 compensation package valued at approximately $46 billion, following a Delaware court ruling that voided the plan as excessive. The vote also includes a decision on relocating Tesla's incorporation from Delaware to Texas. The results are pending, with a significant influence from both retail and institutional investors, amidst legal challenges and potential shifts in the company's strategic focus.
The compensation package requires a simple majority excluding votes from Musk and his brother, while the move to Texas needs a majority of all shares. The outcomes could significantly impact Tesla's governance and legal standing, especially with Musk expressing a desire to increase his voting control in the company. Tesla's stock performance has been volatile, reflecting uncertainties surrounding these decisions and broader industry challenges.
Why did a Delaware judge void Elon Musk's 2018 compensation package earlier this year, and what were the main criticisms?
Earlier this year, a Delaware judge voided Elon Musk's 2018 compensation package due to concerns about its fairness and the process through which it was approved. The judge specifically criticized the package for being excessive and unfair to Tesla investors. One of the main criticisms highlighted by the judge was Musk's "extensive ties" with members of the Tesla board, suggesting that these relationships could have influenced the board's approval of the compensation package6. This ruling reflects concerns about the governance and oversight within Tesla, particularly regarding the independence of board members in decision-making processes involving executive compensation.
What are the details of Elon Musk's 2018 compensation package that Tesla shareholders are currently voting on for reapproval?
Elon Musk's 2018 compensation package, which Tesla shareholders are currently voting on for reapproval, was originally valued at $56 billion but is now worth around $46 billion due to changes in stock value. This package granted Musk options to buy 303 million split-adjusted shares of Tesla at $23.34 each. The package was structured around 12 tranches of options, each linked to specific performance milestones that Tesla needed to achieve5. These milestones were tied to increases in Tesla's market capitalization and operational targets like revenue and EBITDA growth5. Musk would not receive any direct salary or cash bonuses under this plan; his compensation was entirely dependent on the company's achievement of these goals. The Delaware Chancery Court, however, threw out this package earlier in the year, ruling it was unfairly approved due to Musk's close ties with the board members, prompting the current reapproval vote by shareholders24.