Judge Rejects Tesla’s “Unfathomable” $56 Billion Pay Package for Elon Musk
On April 17, the Guardian reported that Tesla asked its shareholders to reapprove CEO Elon Musk’s $56 billion pay deal set in 2018. A Delaware judge, Kathleen McCormick, had previously rejected this package in January, labeling it excessive and poorly justified. They called it an “unfathomable sum” and unfair to shareholders.
According to the Guardian, the compensation plan for Elon Musk does not include a traditional salary or cash bonuses. Instead, it offers incentives tied to Tesla’s market performance, with rewards set to kick in if the company’s value reaches up to $650 billion within the next decade. According to Google Finance, Tesla’s market value is around $460 billion.
In a letter to shareholders, Robyn Denholm, Tesla’s board chairperson, expressed the company’s discontent. “We do not agree with what the Delaware court decided, and we do not think that what the Delaware court said is how corporate law should or does work,” Denholm wrote.
This statement was part of a regulatory filing that also proposed another vote on Musk’s compensation, emphasizing Tesla’s challenge to the court’s previous decision.
Tesla also wrote in the filing that the company suggests subjecting the original 2018 package to a new shareholder vote if it’s legally advisable.
In addition, Tesla has urged its shareholders to support the move of the company’s state of incorporation from Delaware to Texas, as noted in another regulatory filing. This move could reflect a strategic shift in Tesla’s legal and corporate structure.
In 2023, Musk received no compensation from Tesla, maintaining his practice of forgoing a salary in favor of stock options. This approach to his pay structure highlights his investment in the company’s long-term performance rather than immediate cash earnings.
Tesla has had a fair share of issues this year. The company underperformed against market expectations and experienced its first decline in deliveries in 4 years. Also, last week, Elon Musk announced the layoff of approximately 10% of Tesla’s global workforce, roughly 14,000 employees, in response to the downturn in sales.
Ahead of the market opening, Tesla’s shares saw a modest increase of 1%, reflecting investor reactions to these developments. The ongoing saga around Musk’s pay and Tesla’s corporate decisions continues to draw significant attention from shareholders and the public alike.
