Tesla Shareholders Approve Musk Compensation Package

Facts

• Tesla shareholders voted on Thursday to approve CEO Elon Musk's $44.9B compensation package — previously valued at $56B before a drop in Tesla's stock — and to move the electric vehicle (EV) maker's legal headquarters to Texas.¹
• This development comes despite disapproval from significant investors Glass Lewis and Institutional Shareholder Services.²
• According to an internal agreement, for Musk to receive the stock options of up to 12% of Tesla's outstanding shares in 2018, his role as the chief executive officer was required to achieve predetermined revenue or profit milestones to boost the stock market value to $650B.³
• When the targets were set in 2018, few believed they could be met. Tesla's stock then rose to $1.2T in 2021. The stock price has since dropped to $545B, but it stayed above $650B long enough duration for Musk to achieve this milestone.³
• In March 2018, most shareholders supported Musk's compensation plan. However, in January 2024, a Delaware judge overturned the plan, with Institutional Shareholder Services calling the compensation 'excessive' and Glass Lewis warning of stock dilution.⁴
• Despite the approval, it remains to be seen when the billionaire will actually receive the record package due to the Delaware ruling, which Tesla is seeking to overturn.¹

Sources: ¹Associated Press, ²New York Post, ³The Economic Times and ⁴CBS.

Narratives

• Narrative A, as provided by wsj.com. While Tesla's stock price has certainly dropped since the deal was first proposed, the agreed-upon terms were previously met and the board, as it was in 2018, seems set on fulfilling its promise. This vote isn't just about money —Musk requires full control over the company if his innovative ideas are to remain the backbone of Tesla.
• Narrative B, as provided by New York Times. Tesla has gone from a world-leading EV maker in hot pursuit of giving everybody affordable and effective green energy cars, to one advertising unnecessary cyber trucks and spending time debating pay packages. Tesla's success should be based on manufacturing and sales, not casino-style money transfers to satisfy shareholders.

Predictions