June 17, 2024
“The Eagle Has Landed”: Tesla Shareholders Ratify Elon’s Moonshot Comp Award
In what I suppose was an unsurprising development, shareholders ratified Elon Musk’s $56 billion 2018 Tesla pay package late last week. Even less surprising, folks have plenty of opinions about it. This is the latest installment in the saga related to Musk’s potentially gargantuan comp payout and it likely isn’t the last.
A quick summary of how we got here: Earlier this year after many years in the court system, the Delaware Court of Chancery ordered Musk’s performance equity grants rescinded. Then, as Meredith flagged in April, Tesla included an unusual proposal for its AGM requesting that shareholders ratify Musk’s 2018 pay package. In its proxy statement, Tesla acknowledged that the practical effect of the vote was unclear under Delaware law. Nevertheless, at the AGM, the proposal passed with what a quick read suggests as over 70% of shares (excluding Musk and his brother, Kimbal) voting in favor.
The New York Times reported on the competing reactions to this development—ranging from “relief to Mr. Musk’s admirers, who feared that rejection would prompt him to spend less time managing Tesla or even quit” to concerns from investors that this does not set the right precedent for high CEO pay packages. Vanguard also issued a statement explaining its change of heart on the 2018 package:
Given the strong alignment of executive pay with shareholder returns since 2018 and the benefits the board asserted related to the motivational value for the CEO in preserving the original deal (which was approved by a majority of shareholders in 2018), the Vanguard-advised funds voted for the ratification of the CEO’s 2018 option award at the 2024 annual meeting.
Despite the shareholder approval, it’s still an open question about whether this resolves the matter under Delaware law. Since my crystal ball is broken at the moment, we’ll just have to all stay tuned to see how this eventually plays out.
– Meaghan Nelson