Tesla is once again proposing what could become the largest pay package in corporate American history for its CEO, Elon Musk, valued at an estimated $56 billion. This comes after a previous package set in 2018 is facing a revival, even after being struck down by a Delaware judge earlier this year who labeled the pay amount as “an unfathomable sum.” The electric vehicle (EV) manufacturer is currently urging its shareholders to cast their votes in favor of this unprecedented compensation plan.
The timing of this move is notable, occurring shortly after Musk announced a reduction of Tesla’s global workforce by more than 10%, a decision he described as extremely reluctant yet necessary. Amid these significant layoffs, the spotlight has intensified on Musk’s own compensation, which notably includes no salary or direct bonuses. Instead, the 2018 compensation framework rewards him based on increases in Tesla’s market valuation, targeting a milestone of $650 billion over a decade. As of now, Tesla’s market capitalization stands at approximately $500.36 billion.
The controversy originally arose when Judge Kathaleen McCormick of Delaware deemed the package unfair to Tesla’s shareholders. Her decision highlighted concerns that Tesla’s board members might have been overly influenced by Musk’s “superstar appeal” and failed to adequately inform shareholders about the terms of the deal. This led to Musk’s outspoken criticism of the decision and his threat to relocate Tesla’s headquarters from Delaware to Texas.
In a recent regulatory filing, Tesla reiterated its request for shareholder approval of both the relocation and the 2018 compensation package. Tesla’s board chair, Robyn Denholm, emphasized in a letter that Musk has not received any payment for his work at Tesla over the past six years, a situation the board and many shareholders reportedly find “fundamentally unfair.”
Tesla’s board is challenging the court’s previous ruling, with plans to appeal and suggestions for a re-vote on the original pay package. This initiative surfaces at a challenging time for Tesla, which has seen a significant drop in EV deliveries—the lowest since 2022—and is facing weak demand as it approaches the release of its quarterly earnings.
Moreover, Musk’s public image has been under scrutiny over the past year due to various controversies, including a major vehicle recall over safety issues, involvement in an antisemitic conspiracy controversy, and repeated challenges with his social media platform, X. Despite these hurdles, Musk’s financial status remains robust, with Bloomberg and Forbes estimating his net worth to be between $198 billion and $220 billion as of November 2023, maintaining his position as the wealthiest individual globally.
