Tesla asks shareholders to reinstate Musk's voided $56B pay package

Given the electric car maker's annus horribilis so far in 2024, does the chief even deserve it?

A Delaware court may have voided Elon Musk's $56 billion Tesla pay package in February, but now the board is asking shareholders to reinstate it.

Tesla filed its 2024 proxy statement with the US Securities and Exchange Commission today that includes several shareholder proposals, most notably votes on restoring Musk's massive pay plan and to move Tesla's legal home from Delaware to Texas.

Musk's pay package, which would have awarded him all that cash in stock options for meeting certain growth milestones, was voided in February after a Delaware court decided it was unfairly approved by the board due to Musk's close ties with members and substantial influence over his electric car company. 

Tesla board chair Robyn Denholm said the Delaware court cancelled the package against shareholder will, noting that 73 percent voted to approve the 2018 agreement.

"Because the Delaware Court second-guessed your decision, Elon has not been paid for any of his work for Tesla for the past six years that has helped to generate significant growth and stockholder value," Denholm said in a letter to shareholders included in the statement.

"We do not agree with what the Delaware Court decided … so we are coming to you now so you can help fix this issue."

Does Musk deserve that pay package?

The fact that Musk hasn't been paid for several years may be part of why he's recently fallen from the top of Forbes's rich list to a paltry third place. As of writing he's worth just $185 billion.

In other words, while he hasn't been paid for his work at Tesla of late, Musk isn't hurting for wealth. Considering Musk's pay package was also based on Tesla's performance, however, it's worth taking a look at that since the company's value peaked in 2021 – and it hasn't been good.

Tesla has been the worst performing company in the S&P 500 so far in 2024, and as of writing is down nearly 37 percent year-to-date. Tesla vehicle deliveries fell substantially below analyst expectations in the first quarter of 2024, further driving the stock down earlier this month. Tesla's full Q1 2024 earnings call is scheduled for April 23, and it's expected to be more bad news.

Tesla also announced this week that it was laying off 10 percent of its employees, equating to more than 14,000 people, shortly after it announced it was ditching plans for a lower-cost vehicle dubbed the Model 2.

Part of the reason Tesla is doing relatively poorly has been tied directly to Musk's mercurial personality and penchant for courting controversy.

Given that Musk's pay package is tied closely to Tesla's performance, shareholders might want to consider whether giving him his $56 billion – if he can earn it at this point after Tesla's fall from grace – is the best move for the company. 

Denholm thinks it is.

"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," Denholm said, calling the pay package "a matter of fundamental fairness and respect to our CEO."

Tesla's board – Denholm among them – settled a case with shareholders last year that accused the company of awarding oversized pay packages to board members.

Denholm, Elon's brother Kimbal Musk, and others agreed to return more than $735 million to Tesla coffers as part of the settlement. ®

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