The “ballots” are still open, but, according to Elon Musk, Tesla shareholders have approved by a large majority the restoration of his maxi-compensation of 56 billion dollars. The compensation package, outlined in 2018, was annulled by the Delaware court, according to which the amount of the bonus was disproportionate, contrary to the interest of investors and approved by a board of directors dominated by Musk. Hence the decision of the founder of Tesla to submit the decision to a second vote of the shareholders’ meeting, scheduled for the Italian night of June 13th. However, Musk decided to anticipate the outcome, posting on his social network, the former Twitter, a graph that seems to demonstrate that the “yes” have already exceeded the majority threshold. For the official status, we will have to wait for the assembly vote because members can change their preference right up to the last minute and some may not have expressed their opinion yet.
Musk’s super compensation, the Norwegian fund’s no and the election campaign
If it is officially confirmed, the green light for the 56 billion pay package will represent a success for Musk who has faced opposition from some large investors such as the Norwegian sovereign fund Norges and the largest US pension fund Calpers. To overcome it, the volcanic entrepreneur of South African origin appealed to the “base”, i.e. the multitude of small savers who are members of Tesla because they believe in the potential of the electric company but above all they often have blind faith in Musk. As a rule, these investors do not show up at the meeting, but the CEO did everything to increase their turnout, for example by offering voters a guided tour of Tesla’s factories.
Tesla, for Musk a remuneration package unparalleled in the history of Wall Street
In short, Musk’s efforts seem destined to be crowned with success. Which will result in a compensation package unparalleled in the history of Wall Street. Musk will not receive the compensation in cash, but in the form of options which, once exercised, will allow him to increase his stake in Tesla by 25% (currently stuck at 13%). Consequently, the value of the prize of 56 billion is only indicative: the final amount could be higher or lower, depending on Tesla’s stock prices. At the moment, the house capitalizes around 550 billion dollars on Wall Street, a sum 30% lower than a year ago and halved compared to the highs of 1,120 billion reached in November 2021.
Musk’s threat to step down from Tesla leadership
The vote may also have been influenced by Musk’s threat to abandon the leadership of Tesla or to slow down its development if the maxi-stock package was not approved. In fact, the CEO declared that he did not feel “comfortable” integrating artificial intelligence into Tesla cars without having control of the company. He therefore asked for compensation that could bring him to at least 25%, in order to allow him to control the adoption and development of AI. A concept reiterated, from another perspective, during the presentation of the 2023 accounts, during which Musk suggested the adoption in Tesla of a share structure with two classes of securities, one of which gives him greater voting rights on equal terms of economic rights.
Musk’s compensation package and the Delaware court decision
Moreover, approval at the meeting does not guarantee that the package will be restored. Musk argues that ratification ensures full awareness of shareholders, but the final decision will be up to the Delaware courts. If the court also gives the green light, Musk will be able to exercise the options immediately or defer them over time until 2028. The package approved in 2018, when Tesla was worth around 50 billion on the stock exchange, established that the prize would go to the CEO of Tesla upon reaching of a series of objectives regarding the company’s turnover, its profits and its valuation on the stock market. The latter seemed the most ambitious goal, almost unattainable, because the unlocking of the maxi-compensation required Tesla to break through the 650 billion wall on Wall Street, multiplying its capitalization by 13.
