What Musk's Tesla pay package vote means for his wealth
What's the story
Elon Musk, the influential founder and CEO behind Tesla, is calling on shareholders to reapprove his $56 billion compensation package initially approved in 2018.
This appeal comes after a Delaware court invalidated the original pay package earlier this year, arguing that Tesla's board "wasn't looking out for the best interests of investors" when it approved the 2018 compensation plan.
The disputed package represents nearly a quarter of Musk's net worth, according to data from the Bloomberg Billionaires Index.
Repercussions
Potential impact on Musk's future involvement with Tesla
Should the compensation package fail to gain approval, Tesla may need to devise a new pay plan for Musk.
This could potentially affect his motivation to continue investing his time and energy into the company, as per Tesla's 2024 proxy statement filed yesterday.
The 2018 compensation package offered Musk options dependent on the company hitting increasingly steep targets related to market value, revenue, and adjusted earnings.
Changing times
Shareholders' initial approval and current scenario
In 2018, about 73% of neutral shareholders approved the package, despite concerns raised by major proxy advisers regarding its cost and necessity.
However, the ambitious targets set by the package have already been met and now only Musk stands to benefit from it.
This comes at a time when Tesla has reduced its workforce by over 10% due to slower growth, seen a nearly 37% drop in shares this year, and faces lower demand for its EVs.
Continued support
Institutional shareholders and Tesla's board stand by Musk
Despite the changes, several institutional shareholders continue to support the 2018 compensation plan.
T. Rowe Price Group Inc., one of Tesla's largest shareholders, termed the ruling "a negative surprise," and proposed that the package be put up for another vote.
Tesla's board maintains that annulling Musk's 2018 pay package implies he hasn't been compensated for any of his work over the past six years.
Financial fallout
Musk's stake in Tesla and potential financial impact
It's worth noting that Musk holds about 13% of the company, excluding the options package.
This stake has seen an appreciation of more than $55 billion over the past six years.
If the package is turned down, Musk's net worth would take a hit of $40.2 billion, positioning him as the eighth-richest person in the world, just behind Google co-founder Larry Page.
As of today, Musk is world's fourth-richest with a net worth of $174 billion.
Final decision
Tesla's efforts to rally shareholders and upcoming vote
Tesla has set up a website advocating for the compensation deal and a move to Texas in an effort to rally its shareholders.
It's highly likely that Tesla's board would have to promptly approve a substitute package, and it's doubtful that Musk would settle for much less.
The final decision will be made at Tesla's annual shareholder meeting on June 13.