Denholm warns Musk could leave Tesla if USD1t pay is rejected
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The news: Chair of Tesla, Robyn Denholm, warned shareholders that should Elon Musk’s almost USD1 trillion ($1.53 trillion) pay package be rejected at the company’s annual general meeting next week, that the CEO could leave the company.
The context: In a letter to shareholders penned by Denholm on Monday, the chair said that Musk plays a key role in the future of the EV maker as it evolves beyond being “just another car company.”
“Without Elon, Tesla could lose significant value, as our company may no longer be valued for what we aim to become,” Denholm wrote.
The letter, shared by Tesla on Musk’s social media platform X, added that on the question of whether shareholders want to retain Musk as Tesla CEO under his payment terms, “The bottom line is simple: Elon is rewarded only if and when he delivers extraordinary performance that benefits all Tesla shareholders. When negotiating this performance award, we necessarily considered what Tesla’s future without Elon would look like, and we did not believe it was the future that our shareholders deserve.”
The proposed package on which shareholders will vote on 6 November, could grant Musk 12 tranches of stock options tied to onerous targets, including the company reaching a market capitalisation of USD8.5 trillion and milestones in autonomous driving and robotics.
“If we fail to foster an environment that motivates Elon to achieve great things through an equitable pay-for-performance plan, we run the risk that he gives up his executive position, and Tesla may lose his time, talent and vision, which have been essential to delivering extraordinary shareholder returns,” Denholm wrote.
Denholm said that Tesla is at a “critical inflection point” and that as companies are competing to be the first to bring “groundbreaking AI technologies to market, we could not risk losing the best leader in the industry to put Tesla on top.”
This is not the first time Musk has asked shareholders to approve a huge pay package. Earlier this year a Delaware court struck down his 2018 pay deal, arguing that it was improperly awarded and negotiated by directors who were not fully independent. In August, Tesla granted Musk an interim stock award worth about USD29 billion ($44.9 billion) as a “good faith” payment while legal efforts continue to reinstate his voided 2018 compensation plan
The source: Tesla chair letter to shareholders
