Getty Photos | Diego Donamaria
Tesla Board Chairperson Robyn Denholm urged shareholders to re-approve CEO Elon Musk’s $46 billion pay bundle this week, saying the vote is “not concerning the cash” whereas suggesting that Musk may depart Tesla or dedicate much less time to the corporate if he is not correctly compensated.
“That is clearly not concerning the cash. Everyone knows Elon is among the wealthiest individuals on the planet, and he would stay so even when Tesla had been to renege on the dedication we made in 2018,” Denholm wrote in a June 5 letter to shareholders.
Musk’s pay plan was nullified by a Delaware Courtroom of Chancery ruling in January 2024 after a lawsuit filed by a shareholder. The ruling stated that Denholm had a “lackadaisical strategy to her oversight obligations” and “derived the overwhelming majority of her wealth from her compensation as a Tesla director.” It additionally stated most board members “had been beholden to Musk or had compromising conflicts,” and that the proxy info given to shareholders earlier than the 2018 vote was “materially poor.”
Musk’s pay plan “is the most important potential compensation alternative ever noticed in public markets by a number of orders of magnitude—250 occasions bigger than the contemporaneous median peer compensation plan and over 33 occasions bigger than the plan’s closest comparability, which was Musk’s prior compensation plan,” the court docket ruling famous.
Tesla’s board subsequently requested shareholders to approve a switch of Tesla’s state of incorporation from Delaware to Texas and to reinstate the pay plan, which was beforehand estimated to be price $56 billion however was extra lately valued at $46 billion. Votes could be submitted earlier than Tesla’s annual assembly on June 13. A survey discovered that greater than 80 p.c of early votes had been in favor of Musk’s pay bundle, regardless of some shareholders’ vocal opposition.
Lawsuit slams Musk’s “strong-arm, coercive techniques”
The pay plan and Texas transfer are additionally being challenged by a brand new shareholder lawsuit filed in the identical Delaware court docket that nullified the 2018 pay bundle. Donald Ball, who owns 28,245 shares of Tesla inventory, yesterday filed a lawsuit towards Tesla, Musk, Denholm, and different board members.
The Ball lawsuit factors to Musk’s January 2024 assertion that he “would favor to construct merchandise outdoors of Tesla” if he is not given 25 p.c voting management. It additionally factors to stories that “Musk has directed Nvidia to ship 1000’s of AI chips reserved for Tesla to X and xAI, delaying Tesla’s means to construct up its information middle and AI infrastructure by a number of months.”
“Musk has engaged in strong-arm, coercive techniques to acquire stockholder approval for each the Redomestication Vote and the Ratification Vote,” the lawsuit stated.
The lawsuit additionally alleges that the Tesla board has not “disclosed a whole or honest image” to shareholders on the affect of re-approving Musk’s pay plan. The lawsuit stated “there could possibly be radical tax implications for Tesla that may probably wipe out Tesla’s pre-tax income for the final two years.”
