Tesla approves share award worth $29 billion to CEO Elon Musk
NEW YORK: Tesla has approved a fresh share award worth about US$29 billion for CEO Elon Musk in an effort to keep him at the helm as the company pivots from its core electric vehicle (EV) business to emerging ventures such as robotaxis and humanoid robots, the company said on Monday (Aug 4).
The award, which grants Musk 96 million new shares, was described as a “good faith” gesture to honour the spirit of a US$50 billion pay package from 2018 that was struck down by a Delaware court last year.
Musk can only claim the new award if he remains in a key executive position at Tesla for at least two more years and the Delaware courts do not reinstate the 2018 plan. Tesla said the shares, priced at US$23.34 each, will be subject to a five-year holding period.
The company said it will seek shareholder approval of a longer-term compensation plan at its investor meeting on Nov 6.
TESLA BOARD SHOWS SUPPORT
The move underscores the board's continued support for Musk, despite recent controversies surrounding his political activity and involvement in outside ventures including artificial intelligence startup xAI.
“While we recognise Elon’s business ventures, interests and other potential demands on his time and attention are extensive and wide-ranging... we are confident this award will incentivise Elon to remain at Tesla,” said a special committee composed of board chair Robyn Denholm and independent director Kathleen Wilson-Thompson.
The new shares will be forfeited or offset if Musk’s voided 2018 award is reinstated, effectively preventing any “double dip,” the committee said.
The company said it would not recognise compensation expense for the award at this time, as it does not currently expect the performance condition to be met. It will re-evaluate the situation if that changes after the two-year vesting period.
STOCK CLIMBS, INVESTORS REACT
Tesla shares rose nearly 2 per cent in early trading on Monday, easing concerns over Musk’s long-term commitment and the future leadership of the EV pioneer. The stock has lost about 25 per cent this year, as of Friday’s close.
"Under normal circumstances, a compensation package in the billions would raise some eyebrows. (But) clearly investors have benefited from Musk's stewardship of Tesla," said Camelthorn Investments adviser Shawn Campbell. “This stock grant will bind Musk to Tesla for the next two years.”
Musk's new award boosts his stake in the company to more than 15 per cent, up from 12.7 per cent, according to Reuters calculations based on LSEG data.
2018 PACKAGE APPEAL ONGOING
The Delaware court’s January ruling invalidated Musk’s 2018 pay plan, which was the largest in US corporate history. The court cited procedural flaws and found the package to be unfair to shareholders.
Musk has appealed the decision, arguing that the package spurred tremendous value creation and was twice approved by investors.
Tesla shares have surged nearly 2,000 per cent over the past decade, compared to a 200 per cent rise in the benchmark S&P 500 index.
Still, some governance experts questioned the latest move.
"This is simply a repackaged version of what was done years ago and was ruled improper by a judge. It renders the Delaware court decision effectively meaningless," said Charles Elson, founding director of the Weinberg Center for Corporate Governance at the University of Delaware.
"You don't have to incentivise him to stay. If he leaves, he throws away 13 per cent of the company, which is still a huge part of his net worth," Elson added.
