Special Committee Formed
Attempt to Reinstate 2018 Compensation Package
Musk's Tesla Stake to Rise from 13% to Over 20%
The Financial Times (FT) reported on May 14 (local time) that the board of directors of American electric vehicle company Tesla is seeking a new compensation plan for CEO Elon Musk.
Citing multiple sources, FT stated that the Tesla board of directors has formed a special committee to develop a performance-based compensation plan for CEO Musk.
According to FT, this committee will not only work on a new compensation package, but also consider ways to compensate Musk for his past work if Tesla fails to reinstate the 2018 compensation plan in the appeal currently before the Delaware Supreme Court. FT also reported that the company has decided to tentatively postpone its annual shareholders' meeting, which is typically held in May or June, in order to secure time to establish a new compensation plan.
The compensation package agreed upon in 2018 included a stepwise reward system based on Musk's management performance. However, Tesla minority shareholder Richard Tornetta filed a lawsuit opposing it. Subsequently, a Delaware court ruled in favor of Tornetta, stating that "the amount was excessive."
Judge Kathaleen McCormick of the Delaware court, who presided over the lawsuit, ruled that the board members were excessively influenced by CEO Musk. She pointed out that they "acted like subservient lackeys serving a master intoxicated with power." CEO Musk and the Tesla board have appealed this decision to the Delaware Supreme Court.
The 2018 compensation package included 304 million stock options, which were valued at $56 billion (approximately 78 trillion won) at the time of the court's provisional ruling in January last year, $146 billion (approximately 204 trillion won) at Tesla's peak share price in December last year, and about $98 billion (approximately 137 trillion won) based on the current share price.
If the Delaware Supreme Court accepts the appeal and the compensation package is reinstated, CEO Musk's stake in Tesla is expected to increase from just under 13% to over 20%.
In a post on X (formerly Twitter) in January last year, CEO Musk stated, "I feel uncomfortable growing Tesla into a leader in AI and robotics without 25% voting control (equity)," and suggested that he might leave Tesla if he cannot secure such a stake.
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