Elon Musk’s hefty $56 billion (€51.7 billion) compensation package is set to face a judgement on June 13th, months after a Delaware judge’s refusal and an impending shareholder vote at Tesla’s yearly conference. Despite nearly 75% of investors endorsing Musk’s remuneration in 2018, Judge Kathaleen McCormick expressed disdain for the lack of autonomy in Tesla’s board, dismissive described as “spineless lackeys to an overly controlling leader”.
The question arises if investors backed a reward they thought improbable. Was there genuine belief that Tesla, valued at $50 billion in March 2018, would surpass the $650 billion market valuation required for Musk to amass his entire incentive?
Musk’s supporters are present, including one of Tesla’s most prominent shareholders, the renowned Scottish Mortgage Investment Trust from Baillie Gifford. However, the trust’s shareholders, who have witnessed a fourth of its value erode over the last three years, might disagree. According to proxy advisory firm Glass Lewis, Musk’s remuneration arrangement would demand Tesla to generate 304 million additional shares, presenting a 9 percent dilution for existing stakeholders.
Thus, the shareholders’ approval of Musk’s reward package resembles self-defeating behaviour.
An opposing view suggests that a denial might destabilise Musk’s connection to Tesla, considering he has already threatened to produce AI products externally if his stake is not boosted. Yet, Musk’s xAI has recently drummed up $6 billion to compete with OpenAI. Rewarding Musk with $56 billion doesn’t guarantee that he will focus solely on Tesla as he could divert his attention to his own AI enterprises.