Hey, everybody. Welcome back to the Elon Musk
Podcast. This is a show where we discuss
the critical crossroads, the Shape, SpaceX, Tesla X, The
Boring Company, and Neurolink. I'm your host, Will Walden.
Tesla shareholders have approved a $29 billion stock grant for
Elon Musk, reviving a massive pay package that a Delaware
court had voided earlier this year.
This vote gives Musk the green light to claim one of the
largest compensation deals in corporate history, but it also
raises new questions about the control of the shareholders and
executive oversight for Elon Musk.
The approved deal allows Musk to access 303,000,000 stock
options, which had originally been valued at around $56
billion when first agreed upon in 2018.
A Delaware judge struck down the plan in January, calling it an
unfathomable sum and ruling the Tesla's board had not negotiated
the package fairly. Now, the board has now
reapproved the same terms after a June shareholder meeting that
Tesla said reaffirmed investors support for Musk's leadership
and the future of the company. Now, Tesla made the package
contingent on hitting certain performance goals, though Musk
has already met those. These include Tesla reaching a
$650 billion market valuation and achieving specific revenue
and profit benchmarks. And while the company has seen
its market cap drop below the level in recent months, the
targets had already been achieved prior to the legal
ruling that nullify the award. Now, Tesla argue that this made
Musk eligible to receive the options regardless of the
stock's current trading value. Tesla relocated its legal home
from Delaware to Texas following the January ruling.
They were done with it. The move came after the Delaware
Chancery Court's decision blocked the original
compensation agreement. Tesla used the transition to
push for a shareholder vote under Texas corporate law, which
lacks some of the stricter legal standards found in Delaware, and
the vote passed by a huge margin, according to the
company. Tesla has framed the approval as
necessary to retain Musk, who has increasingly divided his
attention across several companies, SpaceX, XAIX, and
Neurolink, etcetera. And the board and Musk himself
have claimed that failure to approve the package could cause
him to disengage from Tesla or even shift its AI and robotics
projects to one of his other ventures.
So he's kind of holding them hostage.
If he doesn't get his money, he's going to leave or take some
of his technologies someplace else.
Is that the right thing for somebody like Elon Musk to do?
Let me know in the comments of whatever platform you're on
right now. It's an interesting thing to
think about. Is he able to do this?
Is he allowed to do this? I want to hear what you say.
Let's talk about this now. Some of these shareholders argue
that Musk's ongoing involvement is essential to Tesla's future
product pipeline, particularly full self driving and optimists.
Tesla didn't provide updated financial details or accounting
for the new approval, but analysts estimate the package's
current value at around $29 billion due to the stocks lower
trading price. And if exercised, the options
would grant Musk a roughly 20% stake in Tesla, further
consolidating his control. Also, Musk also already owns
around 13% of the company, even after selling billions of
dollars worth of stock to fund his $44 billion acquisition of
Twitter. Now, there's a thing with the
institutional investors here. Norge's bank and California's
public employee retirement system, They oppose this deal.
They're part of the shareholders.
They cited governance concerns and warned that the plan gives
Musk too much unchecked authority.
So smaller shareholders argued that Musk's pay package creates
A distorted incentive structure that could lead Tesla to
prioritize high risk growth targets over sustainable long
term positioning and planning. Tesla's retail show holder base,
which includes many vocal Trump supporters and Musk supporters,
played a major role in swinging the vote in his favor.
The legal situation remains unresolved.
Chancellor Kathleen McCormick of the Delaware Court of Chancery,
who originally voided the package, has not yet ruled on
whether Tesla's Texas vote overrides her decision.
The challenge is likely, especially since the case
effects how companies can retroactively approve executive
compensation, and Musk has not indicated whether he will
exercise the stock options immediately or wait.
But his voting power in Tesla is now set to increase regardless.
The board has maintained that the 2018 plan was based entirely
on performance and required Musk to deliver concrete results
before gaining any compensation. The company claims that the
approval shows that shareholders remain aligned with Musk's
aggressive goals for expansion in autonomous driving, battery
storage, and AI. However, several watchdog groups
argue that Tesla's board structure remains too close to
Musk to provide independent oversight.
Now, some people will argue that the structure of Musk's deal
continues to set a dangerous precedent for executive
compensation, say it could influence other public companies
to approve similar huge payouts that reward already wealthy
executives with massive stock windfalls.
A Musk's original 2018 package had no salary or cash bonuses,
only stock options that vested upon hitting very high growth
targets. The new approval does not change
that structure, but cements its results.
And Musk has not committed to dedicating full time focus on
Tesla, though he's still at SpaceX.
And that's even after security vote.
SpaceX, XAI, they all continue to expand and overlapping
sectors. XAI recently raised $6 billion
and lost a chatbot that directly competes with ChatGPT in factor.
Investors will now watch whether Musk prioritizes Tesla's AI over
his other interests like XAI and SpaceX, given that much of
Tesla's value is tied to expectations on full self
driving, autonomy for driving, and also cyber cab and the
robots too. Hey, thank you so much for
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