Why Tesla is mulling new pay package for Elon Musk
What's the story
Tesla has established a special committee to reassess CEO Elon Musk's pay. The decision comes after a recent court ruling that voided his former $56 billion pay deal. According to the Financial Times, the committee, headed by board chair Robyn Denholm and director Kathleen Wilson-Thompson, is weighing a stock-based pay package for Musk amid increasing fears about his dedication to Tesla.
CEO's ultimatum
Musk's potential departure and his stake in Tesla
Musk, who hasn't taken a salary as CEO in years, threatened to leave Tesla in 2024 unless he is given more control over the company. He currently owns 13% of Tesla's shares. The now-defunct 2018 compensation package would have boosted his stake to over 20%.
Market challenges
Shareholder pressure and Tesla's recent performance
Shareholder pressure on Tesla has grown stronger amid falling electric vehicle sales, a 32% drop in stock price since December, and Musk's controversial political involvement with the Donald Trump administration. However, Tesla's stock has witnessed an upturn of over 20% in the last five days. Amid these challenges, Musk had pledged to devote more time to Tesla during the company's latest earnings call.
Legal challenges
Legal implications of a new compensation package
Musk's 2018 compensation package was annulled by a Delaware judge in January, who criticized the board for behaving like "supine servants" to an "overweening master." The decision is currently under appeal with Delaware's Supreme Court. However, any new pay deal for Musk would be subject to Texas law rather than Delaware's, as Tesla is now incorporated in Austin, Texas.