At the end of January, Judge Kathaleen McCormick declared the compensation package that the electric car manufacturer Tesla had negotiated with its CEO Elon Musk in 2018 invalid. Not only Musk himself is now opposing the verdict, the company’s shareholders also want to challenge the decision.
• Judge overturns Musk’s pay package
• Musk wants to move Tesla’s administrative headquarters to Austin
• Shareholders start petition
Judge gives verdict on Musk’s compensation package
Elon Musk As CEO of the electric car manufacturer Tesla, he does not receive a salary in the actual sense, but rather receives compensation consisting of stock options for managing the group. The 2018 plan is linked to twelve goals that Musk should achieve as the company’s managing director in order to be able to purchase Tesla shares at attractive conditions. However, one of the shareholders of the NASDAQ group was apparently of the opinion that Musk earned too much – and filed a lawsuit against the billion-dollar share package. At the end of January, Judge Kathaleen McCormick in the US state of Delaware made a judgment in favor of the plaintiff and declared Tesla’s compensation plan invalid. Musk had too much influence in agreeing the plan, so there was no fair process.
“Plaintiff has a right to annulment”
However, McCormick explained that the agreement between Tesla and Musk could not be automatically canceled, as the plaintiff had requested, but that the plaintiff should work together with Tesla to find a solution. If there is no agreement here, cancellation is still conceivable, reported the German Press Agency. “The plaintiff has a right to annulment,” the agency quoted the judge as saying.
Tesla’s administrative headquarters are to be moved to Austin
The decision was made by a court in Delaware because Tesla has its administrative headquarters there. After the decision, Musk railed against the US state on the short messaging service X, which he took over under the name Twitter more than a year ago. “Never start your business in the state of Delaware,” he wrote on his profile. He continued: “I recommend incorporating a corporation in Nevada or Texas if you prefer that shareholders decide matters.” He then published a survey on
Should Tesla change its state of incorporation to Texas, home of its physical headquarters?
– Elon Musk (@elonmusk) January 31, 2024
More than 87 percent of participants voted for a move. Musk also responded promptly to this and promised to immediately hold a shareholder vote to relocate the company’s headquarters.
Tesla shareholders see shareholder rights threatened
But apparently the decision angered not only Musk himself, but also some of the electric car pioneer’s shareholders, as “Barron’s” reports. Amy Steffens and Alexandra Merz, both shareholders in the Musk Group, are actively campaigning for an objection to McCormick’s decision. “Above all, it’s about the inviolability of shareholders’ rights,” complained Steffens to the Wirtschaftsblatt. Accordingly, the two see the rights of shareholders eliminated “with the stroke of a pen” if the ruling remains.
Cleaning up the Tesla board
“The board was less independent in 2018 than it is today,” Merz pointed out. The shareholder recalled that Musk himself was chairman of the board when the compensation plan was decided. However, after he tweeted about wanting to take Tesla off the stock exchange, thereby triggering price fluctuations in Tesla shares, he had to vacate his seat. “There was a lot of cleanup work to do,” Merz added. Nevertheless, both shareholders believe that shareholders knew exactly what they were voting for in the compensation plan. “You would have to have been living under a rock not to know all the details of this compensation plan,” Steffens added, according to the weekly. Nonetheless, she would like to see the Tesla board revise Musk’s compensation in light of challenging targets and large stock awards.
Satisfaction with Tesla board and Musk
Overall, the shareholders were satisfied with Musk’s leadership role in the group – especially with regard to companies in which the board of directors worked against the group management. “One of our worst fears as Tesla investors is that we will get a board that behaves like Apple’s board behaved when they removed Steve Jobs,” Barron’s quoted Steffens and Merz as saying. Apple co-founder Steve Jobs was forced out of the company in 1985, only to return in 1996.
Opposing voices are also becoming loud
But not all Tesla shareholders agree with Steffens and Merz. “I’m not worried…Tesla is [Musks] Piggy bank and power base,” commented major Tesla shareholder Leo KoGuan. After Musk and Larry Ellison According to Barron’s, he is the third largest individual shareholder in Tesla. “I support Delaware’s decision. It is the right decision. The compensation package is outrageous.”
Petition in full swing
Steffens and Merz still want to take action against McCormick’s ruling and have started a petition to the Tesla board for this purpose. In an open letter, the two demanded that the management staff object to the judge’s decision. So far, the volume of the letter is said to amount to 5,800 signatures from Tesla shareholders. In total, the signatories are said to hold more than 23 million Tesla shares. For comparison: the asset manager Fidelity alone holds a similar number of shares. It remains to be seen whether the petition will be successful.
Editorial team finanzen.net
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