NEW YORK, US -Tesla’s CEO Elon Musk and his massive wealth are at the center of a crucial shareholder vote this week.
The vote comes five months after a Delaware judge invalidated Musk’s record-breaking pay package, initially valued at over $50 billion.
Tesla’s board, however, is urging shareholders to reinstate these stock options and relocate Tesla’s state of incorporation from Delaware to Texas.
In 2018, Tesla’s board awarded Musk a compensation package of 303 million split-adjusted stock options, which was approved by 73% of shareholders.
However, in January, Delaware Chancery Court Chancellor Kathaleen McCormick ruled the package unfair, criticizing the board’s process as “deeply flawed” and overly influenced by Musk.
The options, worth $46.9 billion as of Friday, are down from their original value of $51 billion.
Musk and Tesla’s board are also seeking shareholder approval to move Tesla’s state of incorporation from Delaware to Texas.
This proposal comes in the wake of McCormick’s ruling and aims to align the company’s legal and operational headquarters, potentially reducing judicial oversight from Delaware.
Tesla’s stock has halved in value since its peak in 2021, driven by missed sales forecasts and profit squeezes from a global price war in the EV market, a conflict it helped ignite.
This backdrop intensifies the stakes of the upcoming vote, with Tesla’s future leadership focus in question.
Tesla’s board argues that Musk’s engagement is crucial for the company’s success. Chair Robyn Denholm emphasized that retaining Musk’s focus on Tesla over his other ventures is vital for creating shareholder value.
The board has been actively campaigning for a “yes” vote, even offering a factory tour led by Musk to incentivize shareholders.
While some high-profile shareholders, such as Ron Baron of Baron Capital, support Musk, pointing to his instrumental role in Tesla’s achievements, advisory firms like Institutional Shareholder Services and Glass Lewis recommend voting against the package, deeming it excessive from the outset.
The outcome of this vote will likely influence Musk’s continued involvement with Tesla. Despite his controversies, many shareholders and analysts believe his leadership is essential for Tesla’s innovation and growth.
However, legal battles over the pay package may persist, regardless of the shareholders’ decision.
