On Thursday, Tesla shareholders will vote on whether to approve a $54 billion pay package for chief executive Elon Musk. Photograph: GettyTesla shareholders will vote on Thursday on whether to restore the mammoth pay package for chief executive Elon Musk that was struck down by a Delaware judge this year.
The outcome of the vote is far from certain. The large proxy advisers, Institutional Shareholder Services and Glass Lewis have recommended voting against the pay, even as many large shareholders have voiced support. The result will send an important message on how investors feel about rewarding successful visionary CEOs – even those who come with baggage.
A new independent director, Kathleen Wilson-Thompson, has approved the same terms as in 2018: 304 million shares, which equates to roughly a tenth of outstanding Tesla shares, if multiple stock price and operating performance targets are hit. Wilson-Thompson hired her own legal, financial and academic advisers, spending more than 200 hours on her deliberations, according to the proxy.
Tesla says shareholders who easily approved the pay package six years ago still support the stock grant – and Thursday’s vote may prove it right. If the shares are restored to Musk, they could argue, then plaintiffs attorneys cannot argue that they achieved any benefit for the remaining shareholders and must be denied their fee request.
The Musk pay decision is just one of a series of recent rulings that has dealt setbacks to corporate boards, a trend that has unsettled its corporate law establishment. Rick Horvath, a California-based partner at Dechert, said: “Both public and private companies have expressed concerns over perceived uncertainty from the Delaware courts. There is a growing perception that decisions are results-based, and a minor misstep could result in significant legal exposure. The discussion around alternative domiciles is at its highest point in a generation.”