Tesla board recommends $56bn Musk compensation deal

Proposed pay for the CEO was deemed unlawful in February

Tesla board recommends $56bn Musk compensation deal
Tesla board says Musk has not been paid for Tesla work in six years

The Tesla board of directors have asked shareholders to re-approve CEO Elon Musk's proposed compensation package that could see Musk make $56bn in incentives based on the company's market capitalisation.

The automaker has recently slashed its workforce by over 10pc, and in an SEC filing today, the board of directors reiterated that "it is extremely important to look at every aspect of our business for cost reductions".

The proposed pay deal has a maximum value of $55.8bn split between 12 tranches. It would see Musk earn this maximum amount based on Tesla's market value increasing by approximately $600bn, with successive stepped tranches of compensation based on value added below this amount.

Since the beginning of 2024, however, Tesla shares have fallen by 37pc, with its market cap decreasing from just below $800bn in early January to under $500bn today.

EV inFocus - Google News
Read full articles from EV inFocus and explore endless topics, magazines and more on your phone or tablet with Google News.

In an SEC filing, Tesla refers to the pay package as a "100pc performance-based stock option award" and repeatedly emphasises that the deal was proposed to and approved by shareholders in 2018.

Musk has also said he wants a greater stake in Tesla before pushing ahead with any AI or robotics projects, citing fears of being ousted by rivals.

"The Board stands behind this pay package. We believed in it in 2018, as we asked Elon to pursue remarkable goals to grow the company. You, as stockholders, also believed in it in 2018 when you overwhelmingly approved it," Tesla chair Robyn Denholm says. "Time and results have only shown the wisdom of our judgment."

In February a court in Delaware, where Tesla is incorporated, ruled that the proposed compensation was unlawful on the grounds that Tesla directors were "beholden" to Musk, allowing the CEO undue influence on the initial approval of the compensation plan by shareholders.

In today's filing, however, Tesla says that ratification of the plan will "restore Tesla's stockholder democracy".

"We do not agree with what the Delaware court decided, and we do not think that what the Delaware Court said is how corporate law should or does work," says Denholm in a letter to stockholders.
EV inFocus - Google News
Read full articles from EV inFocus and explore endless topics, magazines and more on your phone or tablet with Google News.

As part of the fallout from the Delaware court ruling, the filing also reveals that Tesla is seeking to re-incorporate in Texas pending stockholder approval, calling the state "Tesla's home".

Tesla shareholders will vote on both the reincorporation and Musk's pay deal at the firm's annual meeting in June.

Great! You’ve successfully signed up.

Welcome back! You've successfully signed in.

You've successfully subscribed to EV inFocus.

Success! Check your email for magic link to sign-in.

Success! Your billing info has been updated.

Your billing was not updated.

Insider Focus LTD (Company #14789403)