The upcoming Tesla shareholder vote revolves around CEO Elon Musk’s controversial $50 billion pay package, which was thrown out by a Delaware judge five months ago. The board is now urging shareholders to vote to reinstate the package and relocate Tesla’s state of incorporation from Delaware to Texas, where its headquarters are located. The board claims that Musk needs the package to stay engaged in running Tesla amid the company’s recent struggles, including a significant drop in stock price, missed sales forecasts, and profit margins being squeezed by a global price war for EVs.
Delaware Chancery Court Chancellor Kathaleen McCormick ruled in January that the process used to create Musk’s pay package was “deeply flawed” and criticized the board for being too close to Musk to represent the interests of shareholders. Musk and Tesla are appealing the ruling and seeking approval from shareholders to move the company’s state of incorporation. The board has been actively advocating for a yes vote on the pay package, citing the importance of keeping Musk fully engaged in running Tesla to create value for shareholders.
Despite widespread support for Musk’s pay package in 2018, Musk’s controversial actions, such as buying Twitter and being accused of improperly selling shares, have raised concerns among shareholders. The recent controversy surrounding Musk and Tesla’s struggles have prompted calls for a closer review of the pay package. While some high-profile shareholders, such as Ron Baron of Baron Capital, have voiced support for Musk, firms like Institutional Shareholder Services and Glass Lewis are urging shareholders to vote no on the pay package.
The outcome of the shareholder vote could determine the level of support for Musk’s pay package and his continued involvement with Tesla. Musk has emphasized the importance of the pay package in motivating him to create value for shareholders and stay focused on Tesla amid his involvement in other ventures. While some shareholders believe that Musk is crucial for Tesla’s future success, others are concerned about the outsized nature of the pay package and the need for more transparency and accountability.
The ongoing controversy surrounding Musk’s pay package and Tesla’s struggles in the EV market have created a challenging environment for the upcoming shareholder vote. The board’s efforts to secure support for the pay package and the potential relocation of Tesla’s incorporation highlight the significance of the vote for the company’s future direction. Ultimately, the decision could have far-reaching implications for Tesla, Musk, and the company’s shareholders as they navigate through a complex and uncertain period.
