Rama Krishna Sangem
Elon Musk is making one of his biggest asks of Tesla Inc. investors yet. It was one thing for shareholders to approve his moonshot pay package in 2018, when it contained seemingly audacious goals and the market for electric vehicles was still Tesla’s to lose, says a Bloomberg story.
In requesting that they ratify the same package again, Musk and Tesla’s board are gambling that the billionaire’s cult following and his role in the carmaker’s stock surging about 700 per cent over the past six years — which its leadership says merits a big payday — will outweigh the fact that much has changed since 2018. Most notably, that the pay in question was voided by a Delaware court earlier this year.
Tesla’s 2024 proxy statement, filed Wednesday, asks shareholders to approve the same 2018 compensation package for its chief executive officer that was rejected by Delaware Chancery Court Judge Kathaleen St. J. McCormick, who argued the board wasn’t looking out for the best interests of investors.
What’s immediately at stake for Musk are Tesla stock options that make up nearly a quarter of his net worth, according to the Bloomberg Billionaires Index. But so too, according to the proxy, is his future as CEO.
“If the 2018 CEO performance award is not ratified, then Tesla may need to negotiate a replacement compensation plan with Mr. Musk,” the filing said. “There is a risk that failure to ratify would further delay any compensation for the CEO, which could affect his incentive to continue devoting time and energy to Tesla, which is essential to the company.”
The unprecedented compensation package awarded him 12 tranches of options dependent on the company hitting increasingly steep targets related to market value, revenue and adjusted earnings. Each tranche of options corresponded to 1 per cent of Tesla’s outstanding shares.
There was significant doubt about whether the targets were achievable at the time — the filing cites a New York Times article that called the top market capitalization goal of $650 billion “a figure that many experts would contend is laughably impossible” — but they were all met by the end of 2022. That gave Musk the maximum number of options outlined in the pay package, which are currently worth $40.2 billion.
73 per cent Approved
Shareholders were willing to bet their money alongside Musk’s in 2018. About 73 per cent of disinterested shareholders voted to pass the package, even though large proxy advisers said it was too costly and openly questioned why Musk needed more equity to stay committed to the company.
Musk is worth $173.8 billion, according to the Bloomberg Billionaires Index. which considers the options part of his fortune until there’s clarity around his pay package. After starting the year in the ranking’s top position, he’s now the fourth-richest person in the world, having lost $55 billion largely due to Tesla’s stock decline.
If the compensation package is rejected, Musk’s net worth would drop by $40.2 billion and he would be the eighth-richest person on the planet, behind Google co-founder Larry Page
