A two-month dispute between Elon Musk's allies and adversaries surrounds the reinstatement of the tech billionaire's record $56 billion compensation package.(Photo : by Saul Martinez/Getty Images)
A two-month dispute between Elon Musk's allies and adversaries surrounds the reinstatement of the tech billionaire's record $56 billion compensation package. This dispute stems from a Delaware state judge's ruling that Musk's remuneration was wrongfully awarded.
The battle is being fought through a shareholder vote: almost all Tesla stock owners, including Wall Street businesses and hundreds of private investors, are using their votes to support or oppose the compensation package. The majority of the votes are being cast online ahead of the automaker's annual meeting in Austin, Texas, on June 13.
The matter at hand is the shareholders' decision to adopt a compensation plan that was first authorized in 2018 but was later declared unlawful by a Delaware judge due to the state's corporate regulations.
Not only is Musk's potential gain in wealth 250 times more than the median of his peers, as determined by the court that invalidated the vote in January but there has also been a lot of back-and-forth on the pay vote in the public and private spheres.
Investor Campaigns for and Against Musk's Compensation Package
In an attempt to persuade investors to approve the package, Tesla has developed a website and purchased commercials, strategies that experts claim have never been used in a discussion over corporate executive compensation. Additionally, some Musk supporters are creating internet videos and interacting directly with prospective swing voters, just like in a race for public office.
However, those opposed to Musk's remuneration package are also organizing. This month, a number of investors wrote a combined letter pleading with other stockholders to reject the deal as being too costly.
The vote is a gauge of investors' enduring confidence in Musk, a public figure who has grown more divisive due to his radical opinions on various topics, including immigration and transgender problems. Despite being among the richest people on the planet, he still has a devoted following.
Musk has all but vowed to leave Tesla if he doesn't receive more shares. In a January post on X, he said that if he didn't own 25% of the company's voting rights, he "would prefer to build products outside of Tesla." As of January, he owned around 13% of the business.
Musk already has two things on his mind. He is also the owner of X, the CEO of SpaceX, a rocket firm, and a co-founder of Neuralink, a startup in brain research.
Even by Musk's standards, there is a significant sum of money at risk. Based on the Bloomberg Billionaires Index, he is worth $191 billion. Therefore, the deal represents more than 25% of his total wealth. Musk never received the money: the Delaware judgment states that Musk had stock options worth 304 million Tesla shares at the time the package was canceled, but he had not yet executed them to purchase the shares.
2018 saw the approval of the remuneration package by Tesla shareholders, which was based on the company's success, including its market value. Even then, there was opposition, with 73% of votes in favor as opposed to the usual 95% approval rating for CEO compensation in corporations.
The vote on whether to revive the $56 billion package is seen by some of Musk's detractors as a blatant attempt to circumvent Judge Kathaleen McCormick of Delaware Chancery Court's decision. She decided in favor of a small group of Tesla shareholders who claimed that the board that authorized the compensation was too close to Musk to be wholly impartial and that the shareholders were not fully informed about the situation.
Following the Delaware verdict, plaintiff shareholders' attorneys requested that the judge grant them an unprecedented $6 billion in legal fees should they prevail in the lawsuit. Tesla's board stated in a proxy statement that a fee award might not be justified if shareholders reapprove the pay package, but the judge hasn't made a decision on that request.
Musk and the board have announced their intention to appeal McCormick's decision, expecting that a rerun will effectively nullify McCormick's reservations over the compensation package. Additionally, the board is asking shareholders to accept changing Tesla's state of incorporation to Texas in a separate request.
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