Getty Images | Diego Donamaria
Tesla Board Chairperson Robyn Denholm urged shareholders to re-approve CEO Elon Musk’s $46 billion pay package this week, saying the vote is “not about the money” while suggesting that Musk could leave Tesla or devote less time to the company if he isn’t properly compensated.
“This is obviously not about the money. We all know Elon is one of the wealthiest people on the planet, and he would remain so even if Tesla were to renege on the commitment we made in 2018,” Denholm wrote in a June 5 letter to shareholders.
Musk’s pay plan was nullified by a Delaware Court of Chancery ruling in January 2024 after a lawsuit filed by a shareholder. The ruling said that Denholm had a “lackadaisical approach to her oversight obligations” and “derived the vast majority of her wealth from her compensation as a Tesla director.” It also said most board members “were beholden to Musk or had compromising conflicts,” and that the proxy information given to shareholders before the 2018 vote was “materially deficient.”
Musk’s pay plan “is the largest potential compensation opportunity ever observed in public markets by multiple orders of magnitude—250 times larger than the contemporaneous median peer compensation plan and over 33 times larger than the plan’s closest comparison, which was Musk’s prior compensation plan,” the court ruling noted.
Tesla’s board subsequently asked shareholders to approve a transfer of Tesla’s state of incorporation from Delaware to Texas and to reinstate the pay plan, which was previously estimated to be worth $56 billion but was more recently valued at $46 billion. Votes can be submitted before Tesla’s annual meeting on June 13. A survey found that more than 80 percent of early votes were in favor of Musk’s pay package, despite some shareholders’ vocal opposition.
Lawsuit slams Musk’s “strong-arm, coercive tactics”
The pay plan and Texas move are also being challenged by a new shareholder lawsuit filed in the same Delaware court that nullified the 2018 pay package. Donald Ball, who owns 28,245 shares of Tesla stock, yesterday filed a lawsuit against Tesla, Musk, Denholm, and other board members.
The Ball lawsuit points to Musk’s January 2024 statement that he “would prefer to build products outside of Tesla” if he isn’t given 25 percent voting control. It also points to reports that “Musk has directed Nvidia to ship thousands of AI chips reserved for Tesla to X and xAI, delaying Tesla’s ability to build up its data center and AI infrastructure by several months.”
“Musk has engaged in strong-arm, coercive tactics to obtain stockholder approval for both the Redomestication Vote and the Ratification Vote,” the lawsuit said.
The lawsuit also alleges that the Tesla board has not “disclosed a complete or fair picture” to shareholders on the impact of re-approving Musk’s pay plan. The lawsuit said “there could be radical tax implications for Tesla that will potentially wipe out Tesla’s pre-tax profits for the last two years.”
