Tesla: $55B Pay Deal to Keep Musk 'Engaged'
Facts
- On Tuesday, the head of Tesla's board of directors, Robyn Denholm, testified in a trial challenging a $55B compensation plan for CEO Elon Musk. Denholm said she was focused on the results Musk could deliver, not how much time he would commit to Tesla.
- It comes after board member Ira Ehrenpreis took the stand on Monday, where he stated that the largest executive-pay package in US corporate history was determined by the board to keep Musk "engaged" in the company.
- Ehrenpreis, who chaired the compensation committee, also explained that the board didn't require Musk dedicate himself to Tesla full-time because their focus was on achieving targets, rather than compelling him to spend time at the company.
- Todd Maron, Tesla's former general counsel, also asserted during his testimony on the first day of the trial that Musk didn't dictate the terms of the plan, adding that there were times that the board wanted things he was against.
- The week-long trial scrutinizing the pay package kicked off in Delaware's Court of Chancery in Wilmington, following a lawsuit filed in 2018 by Richard Tornetta who, on behalf of Tesla shareholders, claimed the board and Musk had breached fiduciary duties.
- Under the compensation plan, Musk gets billions when Tesla hits specific market capitalization and operational milestones. To date, he has received more than $52B, and the carmaker has achieved 23 out of 24 of the specified milestones.
Sources: ABC, Bloomberg, Reuters, Associated Press, CNN, and LA Times.
Narratives
- Narrative A, as provided by BNN Bloomberg. This compensation plan is clearly excessive. Musk has benefited from his influence over the board's committee — which has falsely claimed that it has no conflicts of interest — and been rewarded for his part-time management role at Tesla, largely on the grounds of milestones that had already been achieved when shareholders voted.
- Narrative B, as provided by Teslarati. This compensation plan has granted Elon Musk his fair share of Tesla's success, especially considering he took a high risk to receive a high reward. Though Tesla skeptics ridiculed his decision at the time, Musk's management has led the carmaker to increase its value from $59B to $600B, achieving almost all his stipulated performance targets.