Tesla Sets Up a New Showdown Over Elon Musk’s Pay

Tesla’s board is asking shareholders to vote again on Elon Musk’s huge compensation deal.Credit…Gonzalo Fuentes/Reuters

Tesla tries again on Musk’s record pay package

Nearly three months ago, a Delaware court voided Elon Musk’s multibillion-dollar pay package that Tesla’s board — and most shareholders — had given him in 2018, contending that the process to decide it was “deeply flawed” and that the company didn’t properly disclose it to investors.

On Wednesday, Tesla said that it would ask shareholders to vote again on that same pay package, now valued at about $47 billion, at its annual meeting on June 13. The company’s board is effectively asking shareholders, now armed with all of the information that was revealed about the negotiations in court, to make the court’s ruling moot.

The vote is likely to set off a bitter battle among investors and governance experts over whether shareholders should provide Musk with the richest pay package in U.S. corporate history. It comes as Tesla faces new challenges, especially slumping sales that have erased billions off its market value in recent months.

The background: In 2018, Tesla came up with a package that would give Musk the right to buy up to 304 million shares at a preset price of $23.34 — if he met a series of increasingly difficult-to-achieve financial milestones. If he didn’t meet them, he would get nothing. At the time, the company was worth $59 billion.

It was the most radical, “skin-in-the game” compensation plan ever devised. This is how Andrew described the compensation arrangement at the time:

About 73 percent of non-Musk shareholders approved the plan in a 2018 vote.

Musk managed to surpass those high hurdles. But in January, a Delaware judge struck down the plan, agreeing with shareholders who had sued to block the payouts because, they said, it was created with the help of overly compliant Tesla directors.

What Tesla is doing now: The company will ask its shareholders to vote yes or no on the pay package again. Here’s the rationale, as laid out in a special board committee’s report included with its proxy filing:

In other words, if the Delaware judge’s objection to the plan was that shareholders weren’t aware of all of the circumstances behind its creation in 2018, they would be if they voted this time. While Tesla is still appealing that decision, a new shareholder vote on the plan would clear up the matter.