Tesla board navigates Musk's complex compensation dilemma
Tesla is contemplating a new compensation agreement for its founder and CEO, Elon Musk. According to the "Financial Times," the company's board seeks to address the uncertainty surrounding the protracted legal battle over Musk's substantial bonus. Several proposals are currently under consideration.
Tesla's board has formed a special committee to propose a new compensation package for Elon Musk. The "Financial Times" notes that this effort aims to resolve the ongoing dispute over the invalidated 2018 package valued at up to $56 (CAD 78) billion. This refers to a stock options package that was a prerequisite for Musk's additional compensation.
Dispute between Musk and Tesla: Previous agreement blocked by the court
Tesla and Musk have been embroiled in a legal conflict over this issue for seven years. In January 2024, a court in Delaware ruled that the amount Musk sought was "highly overvalued," and that the Tesla board members under his influence acted, in the judge's words, like supine servants of an overweening master." As a result of the verdict, the billionaire did not receive the mentioned payout. However, he did not concede and has filed an appeal with the Delaware Supreme Court.
The committee reviewing Musk's compensation package consists of two members: Tesla's chairperson, Robyn Denholm, and Kathleen Wilson-Thompson, a Tesla board member. The "FT" reports, citing sources familiar with the situation, that the committee is considering both a new stock options package and alternative forms of compensation for Musk's past contributions, should the Delaware court not reinstate the invalidated agreement.
The value of the options Elon Musk was set to receive peaked at $146 (CAD 204) billion. The billionaire has made it clear that he seeks more control over Tesla. In early 2024, he stated that without holding at least 25% of the shares, he would be unable to fend off activists and ensure "responsible AI development." Tesla did not respond to inquiries from the "FT" regarding this matter.
According to "Financial Times" sources, several scenarios are being explored, although none have been finalized yet. The issues include the high accounting cost of potentially reassigning the options (exceeding $50 billion - CAD 70 billion) and a possible 57% tax for Musk if the rewards are provided in cash.
