Electric vehicle (EV) maker Tesla’s CEO, Elon Musk, may depart from the company if shareholders reject his proposed $56 billion pay package, according to the board’s chairwoman Robyn Denholm. Earlier in 2018, shareholders approved a unique deal stipulating that Musk would forgo a traditional salary, and instead receive compensation tied to Tesla’s growth and earnings targets.
However, in January 2024, a Delaware judge nullified the agreement, citing Musk’s undue influence over Tesla’s board of directors. This decision rendered the substantial pay package non-binding, though it can still be approved by a majority of shareholders.
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Tesla is requesting shareholder approval to relocate the company’s incorporation from Delaware to Texas.
“When we made our commitment to Elon in 2018 — a commitment that was overwhelmingly approved by approximately 73% of disinterested stockholders — it had one simple purpose: to keep Elon focused on Tesla and motivated to achieve the Company’s incomparable ambitions. It’s why we designed the Award to consist of a series of tranches that would vest upon the achievement of market capitalization and operational milestones. For Elon to realize any benefit of the award, he had to hit milestones that directly and substantially benefited the Company and our stockholders. And it did exactly what it was designed to do,” Denholm wrote in a letter to shareholders filed with the Securities and Exchange Commission (SEC).
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Denholm asserted that under Musk’s leadership, the firm generated over $735 billion in value for shareholders, urging them to support the 2018 compensation agreement.
“In 2024, we now have the benefit of our bargain, with six years’ worth of Elon’s hard work, which has driven exceptional growth in the Company’s size and profitability and created over $735 billion in value1 for stockholders. Upholding our end of the bargain, then, by ratifying the decision we all made in 2018, is more important than ever. If Tesla is to retain Elon’s attention and motivate him to continue to devote his time, energy, ambition and vision to deliver comparable results in the future, we must stand by our deal,” Denholm added in the letter.
Several proxy firms have advised against approving Musk’s compensation proposal. However, early voting indicates he may still secure approval, a report by TechCrunch said.
According to a report by trading platform eToro last month, approximately 25 per cent of Tesla shares had already been voted, with over 80 per cent in favour of Musk’s pay package, as reported by news agency Reuters.
