Tesla approves share award worth $29 billion to CEO Elon Musk
The company described the grant of the 96 million new shares as a first step, "good faith" payment to honor Musk's more than $50 billion pay package from 2018 that was struck down by a Delaware court last year. A longer-term CEO compensation plan will be put to a vote at its annual investor meeting on November 6.
The Delaware ruling had cited flaws in the board's approval process and unfairness to investors. Musk kicked off an appeal against the order in March, claiming a lower court judge made multiple legal errors in rescinding the record compensation.
The world's most valuable automaker is at a turning point, with Musk, its largest shareholder with a 13% stake, positioning it more as an AI and robotics company amid falling sales in its mainstay auto business and a slump in its share price.
The share award is designed to gradually boost Musk's voting power, something he and shareholders have consistently insisted was key to keeping him focused on Tesla's mission, said a special committee Tesla formed earlier this year to consider Musk's compensation. It consists of chair Robyn Denholm and independent director Kathleen Wilson-Thompson.
"While we recognize 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 incentivize Elon to remain at Tesla," the committee said in Monday's filing.
The new shares vest only if Musk remains in a key executive role through 2027. They also have a five-year holding period, except to cover tax payments or the purchase price of $23.34 per share, which is equal to the exercise price of the 2018 award.
If the Delaware courts fully reinstate the 2018 CEO Performance Award, the new interim grant will either be forfeited or offset and there will be no "double dip," according to the filing with the Securities and Exchange Commission.
"This is simply a repackaged version of what was done years ago and was ruled improper by a judge," said Charles Elson, founding director of the Weinberg Center for Corporate Governance at the University of Delaware.
"It renders the Delaware court decision effectively meaningless," said Elson, who had filed amicus briefs supporting the Delaware Court's decision to void Musk's 2018 award.
AUTO BUSINESS STRUGGLES
Gary Black, a longtime Tesla investor who sold his position recently, said on X the award should be viewed "very favorably" for the company as it aligns Musk's incentives with the shareholders and removes uncertainty about him leaving.
Tesla shares rose more than 2% in premarket trading. They have gained almost 2,000% in the past decade, far outperforming the around 200% increase in the benchmark SP 500 index.
But the stock has come under pressure this year, losing about a quarter of its value as Tesla grapples with a sales decline wrought by its aging vehicle line-up, tough competition and Musk's political stances that have alienated some buyers.
The challenges have been worsened by U.S. government cuts in support for EVs. Musk said at a post-earnings call last month the waning subsidies could lead to a "few rough quarters" before a wave of revenue from self-driving software and services begins late next year. Analysts expect Tesla to post another annual sales decline in 2025 after its first one last year.
SP Global Mobility data shared exclusively with Reuters showed on Monday that Tesla's brand loyalty had plunged since Musk endorsed U.S. President Donald Trump last summer.
The world's most powerful person and its richest had a falling out earlier this year. And Musk has raised fears about whether he will be able to devote enough time and attention to Tesla after he locked horns with Trump by forming a new political party.
The company also faces a long regulatory road to its robotaxi bet. It started a small trial of its robotaxis in Austin, Texas, June with about a dozen Model Y SUVs.
But it lacks permits to offer the service in California, where it last week launched a ride-hailing service in the San Francisco Bay Area without indicating whether it would be using self-driving vehicles that power its Austin operations.
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