car industry
Tesla Chairman Robyn Denholm is calling on shareholders to approve Tesla’s move from Delaware to Texas. This way, CEO Elon Musk can keep his generous remuneration package.
Tesla’s annual shareholder meeting will take place on June 13. Chairman Robyn Denholm is preparing for what could be a tough meeting. An important agenda item will be the remuneration of Tesla’s CEO Elon Musk. He does not receive a salary or cash bonus for his work. His only reward is (lots of) Tesla stock options.
Too much, say some small shareholders who went to court in Delaware, the state where Tesla is registered. They believe that the board of directors, which must decide on the CEO’s option package, is not independent enough. The council is said to have given Musk too little pushback when he negotiated the exuberant option package. The judge in Delaware ruled in favor of the small shareholders and canceled the package with a maximum value of $55.8 billion. At the current market value, that package is still worth $47 billion.
Tesla’s board of directors wants to keep Elon Musk on board at all costs. The reasoning is therefore that he should be able to keep his full remuneration package. Tesla’s solution to circumvent the court’s decision is to move its legal seat from Delaware to Texas, where a board of directors, independent or otherwise, is more flexible. The approval of the general meeting is required to implement this move. Chairman Denholm therefore submitted the provisional agenda for the general meeting to the stock exchange authority SEC, containing a broadly formulated motivation as to why Musk should retain his package.
Objectives achieved
The council defends the package that was agreed in 2018, because it was completely dependent on Musk’s very ambitious goals with Tesla. For example, a market value of 650 billion dollars was set and this was effectively achieved. In concrete terms, it concerned twelve objectives, all of which he was able to tick off. For achieving each target, he received approximately 1 percent of the shares in options. Musk currently owns 13 percent of the shares directly and about 7 percent in options. Musk ultimately wants to acquire 25 percent, because it would then be very difficult for him to be blocked if he wanted major strategic changes.
It remains to be seen how the general meeting will respond. Until recently, Musk enjoyed godlike status among Tesla investors. The question arises whether this is still the case now that the share has fallen 37 percent and Tesla has to lay off 10 percent of its staff because demand for the cars is falling. In addition, there is increasing criticism of Musk, who, according to some, is too busy with other matters, such as the social media platform X.
