Tesla’s chairman wants to leave the company to keep Musk’s big compensation package

Tesla’s annual shareholder meeting will be held on June 13. Chairman Robyn Denholm is preparing for what could be a difficult meeting. A key agenda item will be Tesla CEO Elon Musk’s pay. He receives no salary or cash bonus for his work. His only reward is (many) Tesla stock options.

Too much, say other 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 very little push when he negotiated the happy option package. A Delaware judge ruled in favor of the minority shareholders and liquidated the package at a maximum value of $55.8 billion. At current market value, the package is still worth $47 billion.

Tesla’s board of directors wants to keep Elon Musk on board at any cost. So the argument is that he should be able to keep his full pay package. Tesla’s solution to avoid a court ruling is to move its legal seat from Delaware to Texas, where the board of directors, independent or otherwise, is more flexible. The approval of the general meeting is required to carry out this action. Chairman Denholm therefore submitted a provisional agenda for the general meeting to the stock market authority SEC, with a broadly drafted motivation for why Musk should retain his portfolio.

Goals achieved

The council defends the package that was agreed in 2018, because it was based entirely on Musk’s ambitious goals with Tesla. For example, a market value of 650 billion dollars was set and this was successfully achieved. Strictly speaking, it involved twelve goals, all of which he was able to complete. For achieving each goal, he received approximately 1 percent of the stock in options. Musk currently owns 13 percent of the stock outright and about 7 percent in options. Musk ultimately wants to get 25 percent, because it would be very difficult for him to be stopped if he wanted a major strategic change.

It remains to be seen how the general assembly will respond. Until recently, Musk enjoyed a god-like status among Tesla investors. The question arises as to whether this is still the case now that the stock is down 37 percent and Tesla has to cut 10 percent of its workforce because demand for the cars is declining. In addition, there is growing criticism of Musk, who, according to some, is too busy with other things, such as the social media platform X.