Elon Musk, the CEO of Tesla, is facing a crucial shareholder vote this week, which will determine if he will be granted back stock options worth nearly $47 billion and if Tesla will relocate its incorporation away from Delaware. The original pay package was rejected by a Delaware judge earlier this year due to the flawed process used by the board to create it. The board is now urging shareholders to vote in favor of reinstating the package, arguing that it is necessary to keep Musk engaged in running Tesla, which is facing challenges such as falling sales and profits due to increased competition in the EV market.
The annual shareholders meeting on Thursday will determine the outcome of the vote on the controversial pay package and relocation proposal. Despite overwhelming support for the package back in 2018, the board is actively seeking support for this month’s vote with extensive communications to shareholders and even offering a tour of Tesla’s factory in Texas as an incentive. The board argues that maintaining the pay package is crucial to motivate Musk to continue creating value for stockholders, as he is the driving force behind Tesla’s success.
However, Musk’s recent controversial actions, such as purchasing Twitter and making questionable decisions, have raised concerns among shareholders about his focus and leadership at Tesla. The drop in Tesla’s stock price by more than half since its peak in 2021, along with weaker demand and increased competition, have added to the uncertainty surrounding the company’s future. Despite these challenges, many shareholders believe that retaining Musk at Tesla is essential for its growth and success, given his visionary leadership and innovations in the EV industry.
While some high-profile shareholders, including Ron Baron, have expressed support for Musk and his compensation, others, like Institutional Shareholder Services and Glass Lewis, are advising against it. These firms believe that the original award value was excessive and that Musk has already benefited significantly from his preexisting equity stake in Tesla. The outcome of the shareholder vote and the decision on relocating Tesla’s incorporation to Texas may ultimately determine how involved Musk will remain with Tesla, his flagship company that has made him a household name.
In addition to the controversy surrounding Musk’s compensation package, concerns have been raised about Tesla’s financial performance and the challenges it faces in the EV market. Musk’s involvement in other ventures, such as SpaceX, xAI, The Boring Company, and Neuralink, has raised questions about his focus on Tesla’s growth and success. Despite these challenges, many shareholders believe that Musk’s leadership is indispensable for Tesla’s future, and the upcoming vote will be a crucial moment in determining the company’s direction and Musk’s role in it.
The court ruling in Delaware earlier this year rejecting the original pay package and the board’s subsequent appeal have added to the uncertainty surrounding Tesla and Musk’s future. Whether or not the shareholders approve the reinstatement of the package and the relocation of Tesla’s incorporation will have significant implications for both Musk and the company. The outcome of the vote will show how much support Musk has among shareholders and his continued involvement in steering Tesla through its current challenges and future growth opportunities.
