Yahoo Finance Tesla encourages investors to reinstate Musk's pay package
Tesla (TSLA) is asking shareholders to vote to reinstate Elon Musk's $56 billion pay package at its June 13 meeting. Yahoo Finance Legal Reporter Alexis Keenan details how investors are viewing this situation after the Delaware Chancery Court already rejected Musk's original claims for his sizable pay package and how much more legal scrutiny this could open up for the EV maker from regulators.
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This post was written by Luke Carberry Mogan.
Video transcript
ALEXANDRA CANAL: Sticking with Tesla. The company may be facing some new legal issues after asking shareholders to reinstate CEO Elon Musk's multi-billion dollar pay package. Yahoo Finance's Alexis Keenan is here to help break it all down. So what does this all mean for stakeholders when you think about Tesla? Obviously, a lot of issues at this company right now.
ALEXIS KEENAN: Yeah, you know, I think we've become used to big companies like Tesla being in a ton of litigation. But what I'm hearing from experts in corporate structuring and pay packages like this is that just expect more regardless of how this shareholder vote goes, should it make it to shareholders. There's still some steps the SEC has to review these proxy materials that the company submitted.
But once this whopping $56 billion pay package is voted on again, either way, they say, shareholders will have a beef with that because the money, that $56 billion, which is now amounts to about $47 billion with the change of the stock price since the court's decision in Delaware, that either-- that money is either going to stay within Tesla, maybe good for Tesla, some shareholders think, or it goes to Musk. Some shareholders might think that that's the best thing, that he gets compensated.
The company did say in these preliminary filings that Musk hasn't been paid in six years. And we need to compensate him somehow. And what they want is 100% reinstatement of this pay package. Now, Tesla has tried in this statement to cure what ails the Delaware Chancery Court. They have said that they formed a special committee to evaluate this compensation, that they've had third party analysis. They've also attached the court ruling to these materials.
But look, that special committee is one person. That's coming from one individual-- one independent board members recommendation. And so the shareholders could say, you know, that's not good enough, that approval is not enough, that these ties that the Delaware court had issues with between Musk and the board and Musk's influence having too heavy a hand in the negotiations to get that pay package. They might say, it's not good enough to come from this one director as a recommendation. They also might say that, look, there's inadequate peer review. That's a standard that happens in corporate America, where the compensation committee goes out and tries to benchmark these proposals, what should be the executive pay against others in the industry.
On the other hand, maybe there is no Musk peer. Maybe there's no comparison that is going to be appropriate for him because he is a pioneer in his industry. So a lot to think about, but certainly more litigation and whether or not shareholders want to compensate him what is something like $9,000 per vehicle sold so far. More to come.
JOSH LIPTON: Get to work if you can get it. Alexis, thank you. Appreciate it.
