Tesla has approved a new temporary scholarship worth around $ 29 billion for the CEO Elon Musk, reviving the debate on the remuneration of managers and raising legal issues as to the latter package will be confronted with the same fate as its predecessor – a plan of $ 56 billion which was canceled by a judge Delaware earlier this year.
The new subsidy, including 96 million Tesla shares, was announced in a file at the US Securities and Exchange Commission. Tesla’s board of directors said that the stock is intended for an incentive of “good faith” to maintain the emphasis on Musk’s business, in particular at a time when the manufacturer of electric vehicles rotates AI, robotics and autonomous driving as future income engines.
In the letter to the shareholders, the members of the committee noted: “Although we recognize that Elon’s commercial companies, the interests and other potential requests for his time and his attention are extended and varied … We are convinced that this price will encourage Elon to stay in Tesla.”
Register For Tekedia Mini-MBA Edition 18 (Sept. 15 Annual made for access to Blurara.com.
Tekedia ai in Business Masterclass opens registration.
Join Tekedia Capital Syndicate and Co-Investment in large world startups.
Register For Tekedia Ai Lab: from technical design to deployment.
The members of the board of directors also noted: “Losing Elon would not only mean the loss of his talents, but also the loss of a leader who is a magnet for hiring and retention of talents in Tesla.”
The Board of Directors added that a longer -term CEO remuneration package will be presented at the annual meeting of Tesla shareholders on November 6.
But this decision is delivered with significant legal luggage.
A legal background that shook Tesla’s governance
In 2018, Tesla’s board of directors awarded Musk a performance -based remuneration package of $ 56 billion – one of the largest in business history – designed that Tesla has achieved a series of operational milestones and ambitious market capitalization. Musk finally met most of the conditions, triggering large tranches of rewards in stock.
However, the agreement has become the subject of a trial brought by Tesla’s shareholder, Richard Tornetta, who argued that the Council had failed in his fiduciary duty and had essentially buffed a agreement shaped by Musk himself. The trial said that the process was lacking in independence, transparency and fairness, noting that Musk had deep ties with several members of the board of directors who approved the package.
In 2024, the judge of the Court of Chancellery of Delaware, Kathaleen McCormick, ruled in favor of the shareholder, canceling the package of $ 56 billion and the appellant “an unfathomable sum” not justified by the standard standards of corporate governance. The court concluded that Musk had exerted a significant influence on the process and that the board of directors of Tesla had not correctly justified the price if necessary to keep it or motivate it.
Musk’s response: exit delaware
Following the court’s decision, Musk reacted quickly. In April, he moved the headquarters of Tesla du Delaware – where it was set up – in Texas, a state considered more favorable to corporate governance adapted to managers. This decision was largely interpreted both as a rejection of the legal surveillance of Delaware and a signal that Musk would not tolerate the intervention of the courts in the internal affairs of Tesla.
The new 29 billion dollars prize announced this week is not an official replacement for the canceled package of $ 56 billion, but parallels are already the subject of a meticulous examination. Although it remains to be seen whether a shareholder will dispute this new subsidy in terms of legal delivery, legal analysts warn that it could face similar disputes, especially if the shareholders believe that the sentence contributes to the spirit of the prior decision of the Tribunal.
A bet to keep the musk near
In a letter published on Tesla’s X account, the chairman of the company’s board of directors, Robyn Denholm, and director Kathleen Wilson-Thompson said: “We know that one of your main concerns is to keep Elon’s energies focused on Tesla.” They described the price of actions as a “first critical step” to ensure that the CEO remains engaged in the midst of his growing commitments to businesses like SpaceX, Neuralink, the IA startup XAI, and above all, politics.
The Committee said that it “deliberately carefully” had to grant this interim scholarship to Musk “in the context of the AI and Tesla talent war, in context, to a critical inflection point”.
Tesla’s share price increased by 2% after the news, reflecting the optimism of investors according to which Musk’s renewed objective could restore momentum to a company that has lost more than 20% of its market value this year.
However, some analysts think that with Tesla betting more and more on AI, robotics and getting involved in politics, governance tensions surrounding Musk’s salary can linger.
