Tesla wants to revive Elon Musk’s $56 billion compensation plan

“The board supports this compensation plan. We believed in 2018, asking Elon to pursue extraordinary goals to develop the company,” said the board of directors in documents published on Wednesday. “You, as shareholders, also believed in 2018 when you overwhelmingly approved. Time and results have only shown the wisdom of our decision,” he noted.

Board chairwoman Robyn Denholm highlighted the fact that the group’s “entrepreneurial spirit” has been “taking big risks to get a chance at a big prize.” This is a new direction about this plan that planned to give Elon Musk Tesla shares for ten years, based on the achievement of several goals.

At the time of confirmation, these payments were estimated at $56 billion in total. A surprising amount far from pleasing all shareholders. At the end of January, a court judge in the state of Delaware (Eastern United States) issued a decision in favor of one of them, who demanded the cancellation of the plan.

“Spark”

The judge considered that, prior to the AGM when the plan was approved, shareholders had received “false” and “inaccurate” information about the board of directors and the remuneration committee.

He questioned the independence of these two entities against Elon Musk. But, in documents released Wednesday, the board of directors specifically wrote that the company “would not be where it is today without the contributions, leadership and vision of Mr. Musk.” “We think this requires a compensation plan that recognizes (its) unique role,” he stressed.

Furthermore, he believed that “proper incentives” were needed for the billionaire to “stay at Tesla” and “continue to bring a level of challenge. Commitment to the company (…) is necessary to achieve the company’s long-term goals.

“The combination of this document and the general meeting, and the current state of Tesla, promises to cause more sparks in the coming months,” commented Dan Ives, an analyst at Wedbush. Because this decision to revive this compensation plan comes when Tesla is weakened by the growth of its competitors in the American market but also in the Chinese market.

In China, the group is facing strong competition from domestic manufacturers and, above all, from BYD, which vacated the title of the largest global supplier of electric vehicles in the fourth quarter of 2023.

Hit the brakes

Tesla’s first quarter sales were disappointing for experts. Wednesday’s announcement also comes against the backdrop of a 37% drop in the stock price on the New York Stock Exchange since the beginning of the year, while The S&P 500 index rose by almost 6% during the same period. It ended up 1.06% on Wednesday.

The directors also intend to present to shareholders the transfer of Tesla’s registration from Delaware to Texas, according to what Elon Musk has already announced. Tesla’s head office is already in Texas since the end of 2021, where the electric car specialist has established a large factory.

Elon Musk recently changed the registration of SpaceX. “SpaceX has moved from Delaware to Texas,” Elon Musk announced on February 16 on X, the social network he owns, adding: “If your business is still registered in Delaware, I recommend moving it as soon as possible.

Delaware has been considered for more than a century as one of the pillars of American capitalism, where nearly two-thirds of the country’s 500 largest companies have established their homes there. This small state is particularly known for its profit tax.

In addition, Tesla returned on Wednesday to lay off 10% of its global workforce, or at least 14,000 workers, announced internally earlier this week. The company justified this move with the need for “cost reduction and productivity improvement”.