Thematic Spotlight: Tesla Shareholders Approve Musk’s US$56 Billion Bonus

Despite previous blockages, Tesla shareholders have voted with 72% in favour to re-ratify a US$56 billion pay package for Elon Musk.1 The historic vote also includes approval to re-incorporate the electric car company in Texas, where the company claims it may receive more favourable regulatory and tax conditions.2

As it stands, the vote is only advisory and remains mostly symbolic, but if finalised would be the biggest pay package in corporate America’s history. Just a few months ago, a near identical pay-package for Musk was voided in a Delaware court over director conflicts of interest and lack of clarity by the company to disclose his terms of compensation.3 Tesla is aware of this complication and intends to use the second vote of approval as evidence of continued shareholder endorsement to appeal the court’s decision.

The execution of a pay package which currently represents roughly 10% of the company’s market capitalisation could cause significant destruction of shareholder value through dilution.4 So, why would shareholders want to bestow Musk with US$56 billion in Tesla shares? Some investors argue that re-orienting Musk’s focus toward Tesla and retaining a figurehead of innovation is reason enough for the pay check. Musk, who currently heads six separate companies including SpaceX, xAi, X (formally Twitter), and Neuralink, had recently been accused of ignoring Tesla in favour of his other ventures.5 To keep him on board and attentive to Tesla’s needs, the proposed pay package will be comprised of stock options which only mature after five years.6

Judge McCormick, who voided the first pay package back in January, will hear arguments surrounding disputed lawyer fees from the initial lawsuit on July 8th.7 After which, Musk will have 30 days to appeal the entire case to the Delaware Supreme court.

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