February 6, 2024
Tornetta v. Musk: Corporate Governance Fallout?
Now that the Delaware Court of Chancery has taken the unusual step of invalidating the compensation package that Tesla’s board of directors awarded to Elon Musk back in 2018, shareholder proponents are saying they see an opening for higher support on traditional corporate governance resolutions – including a proposal urging annual director elections that has been submitted to the company this year. This Reuters article quotes prolific proponent John Chevedden:
“People are going to be looking to rein in what’s going on,” said John Chevedden, an independent activist investor. He has put forward a resolution at Tesla’s upcoming shareholder meeting expected this spring that would replace a requirement for major corporate changes to gain support from two-thirds of all shares outstanding with a simple majority vote.
The article also points out that ISS has in the past recommended votes against certain Tesla directors due to CEO compensation concerns. The question is whether this year, the court’s findings will contribute to a drop in support from significant institutional holders who have previously cast “management friendly” votes.
– Liz Dunshee