In response to criticism of being overly beholden to Elon Musk, Tesla’s board of directors announced plans to give him what he wanted, including the biggest pay package in corporate history. Despite setbacks in court and the car market, the board continues to support Musk, risking backlash from investors and further legal challenges. The board’s decision to seek shareholder approval for a $47 billion compensation plan for Musk comes after a Delaware judge voided a similar plan for being excessive and inadequately disclosed to shareholders. This move by the board is expected to lead to more lawsuits against the company, which is already facing legal pressure from various parties.
Following the announcement of Musk’s compensation plan, Tesla disclosed intentions to lay off 10 percent of its workforce, raising concerns about the company’s decision-making and financial stability. The move has been criticized as poor optics, especially as Tesla’s sales have been declining, and its stock price has fallen significantly. Despite these challenges, the board appears to be standing firmly behind Musk, with plans to relocate Tesla’s corporate domicile to Texas and reappoint directors, including James Murdoch and Kimbal Musk, who have close ties to Musk.
The board’s actions have been seen as a rebuke of the Delaware judge who struck down Musk’s pay plan, with the board rejecting the court’s decision and expressing disagreement with how corporate law should apply in this case. Board chair Robyn Denholm defended the reinstatement of Musk’s compensation, arguing that it would be unfair to deny him promised compensation, even though he had not been paid in the past six years besides the invalidated plan. Some investors have raised concerns about the timing of seeking approval for such a large pay package given Tesla’s current challenges, and have called for more transparency in decision-making processes.
Amidst the controversy surrounding Musk’s compensation and layoffs, Tesla’s board insisted on its independence and maintained that it engages with shareholders regularly to address concerns and issues. The board highlighted the ongoing dialogue with shareholders to ensure their input is considered in decision-making processes. However, critics have pointed out the lack of transparency in how decisions on layoffs and executive compensation are made, raising doubts about the board’s accountability and alignment with shareholder interests.
Despite the challenges faced by Tesla and the criticism surrounding Musk’s compensation, the board remains optimistic about the company’s future. Denholm presented a positive outlook on Tesla’s prospects, emphasizing its innovative products and services, visionary leadership, and dedicated employees. The decision to cut 10 percent of the workforce was framed as a strategic move to reduce costs, increase productivity, and prepare for future growth. However, questions remain about Tesla’s ability to maintain its market position in the electric car industry and how it will navigate ongoing legal and financial challenges.
