Electric vehicle giant Tesla is pursuing the support of its substantial base of retail investors for CEO Elon Musk’s $56 billion pay package.
Tesla board seeks retail investors’ favorable vote
Tesla’s board decided to hire a strategic adviser to gain favorable votes from retail investors, Bloomberg reports, citing a person familiar with the matter.
The newly hired strategic adviser is now collaborating with an external law firm to propel this initiative. Moreover, the adviser has also launched a dedicated Vote Tesla website to urge retail investors with 42% estimated shares in the company to participate.
The website supports online vote casting via various mediums, such as QR codes, phones, and mail. It also indicates Tesla board Chair Robyn Denholm’s video, highlighting the significance of CEO Musk’s $56B compensation package for the electric automaker’s growth.
“We don’t believe one judge’s opinion should void the will of millions of votes cast by all of the owners.”
Tesla board Chair Robyn Denholm
Court’s ruling
Tesla’s recent initiatives occurred ahead of the annual meeting on June 13. Tesla investors will vote on whether the company will uphold the compensation package deal, which a Delaware judge vetoed early this year.
In hindsight, Tesla shareholders approved the pay package in 2018. However, it lost validity after shareholder Richard Tornetta defeated the company in a lawsuit in early 2024. The court judged that the compensation deal for the CEO Musk was “deeply flawed.”
Delaware Chancery Court Chancellor Kathaleen McCormick ruled that Tesla CEO Elon Musk controlled the electric automaker instead of the board. She also determined that the board’s compensation committee “worked alongside him, almost as an advisory body” instead of negotiating with the CEO.
Vote implications
As noted in the report, the vote is only advisory. Nonetheless, it would play a crucial role in the future of Tesla CEO Elon Musk’s leadership in the automaker.
A majority approval would substantially back the Tesla board’s dispute against the Delaware court’s previous decision. On the other hand, losing from this initiative would undoubtedly be a major setback.
CEO Musk previously warned that he may launch new products beyond Tesla if he fails to obtain at least a 25% equity stake, a key portion of the voided pay package.
If Tesla succeeds in reinstating the compensation agreement, CEO Musk would be able to nearly double his current holding to about 21%.
All that said, the impending vote casting stands as a chance for shareholders to repromote Elon Musk’s leadership amid declining sales due to slower-than-expected uptake and intensifying competition. The voting will transpire at the company’s upcoming annual meeting on June 13, 2024.
