With a week to go until Tesla's Annual Stockholders' Meeting, board chair Robyn Denholm has written to investors to make sure they ratify CEO Elon Musk's monster pay package - apparently out of fear he could walk.

Under a 2018 deal widely seen as a publicity stunt because it verged on ridiculous, Musk would earn nothing from his work unless Tesla's market cap grew to $650 billion from $53 billion. However unlikely, that sum peaked in November 2021 at $1.24 trillion, though it stands at $557.57 billion today.

In return, Musk would be granted massive options worth a nominal $56 billion at the time. It's now looking more like $46 billion due to the tribulations of one of the worse performing stocks in the S&P500 of 2024 so far, down about 28 percent year-to-date.

This was all torn up anyway by the Delaware Court of Chancery, which voided the compensation in January after a shareholder alleged the award was excessive. The court decided it was illegally approved due to Musk's close ties with the board and substantial influence over the electric car company.

Since then, Denholm has been cracking the whip among shareholders to re-ratify the compensation and incorporate in Texas to avoid another awkward ruling. Now with days to go until polls close, her letter, submitted to the US Securities and Exchange Commission, appears to be a last gasp to make sure everyone's following the party line - that Musk gets his billions lest he ditch Tesla.

The thrust is that retaining Musk's extraordinary talent takes extraordinary compensation, and focuses on the lengths Tesla is willing to go in order to maintain his "attention" and "motivation" when his business interests are so vast and disparate. Also, a deal's a deal, right?

"Fairness and respect require that we honor the collective commitment we made to Elon - a commitment that was, and fundamentally still is, about retaining Elon's attention and motivating him to focus on achieving astonishing growth for our company," Denholm wrote. "Elon's unique contributions have built Tesla from a company that was, in 2018, a loss-making, ambitious company with significant hurdles and challenges to overcome into what it is today - a company that is literally changing the world by driving so many critical initiatives that are making our planet more sustainable while at the same time delivering hundreds of billions of dollars of value to all of you who invested in Tesla's dream. These contributions should be respected."

Never mind that even the lower nominal value of $46 billion is 136 percent of the entire cumulative net profit Tesla has made since shareholders approved the package. But it's not about the money, Denholm insisted.

"We all know Elon is one of the wealthiest people on the planet, and he would remain so even if Tesla were to renege on the commitment we made in 2018. Elon is not a typical executive, and Tesla is not a typical company. So, the typical way in which companies compensate key executives is not going to drive results for Tesla. Motivating someone like Elon requires something different. This is one of the key reasons the Award also requires Elon to hold any shares he receives upon exercise of stock options for five years after he exercises the options - which can only serve to incentivize him to continue delivering value to Tesla and our stockholders."

As for domiciling in Texas, Denholm argued that "marrying our legal home to our operational home" provides shareholders "with substantially equivalent governance rights as Delaware, and is expected to provide more certainty for the innovative, big-ticket decisions that Tesla is known for," and definitely has nothing to do with the fact that the Delaware court struck down Musk's compensation.

"Being incorporated in Texas provides the best platform for Tesla to grow and innovate because we believe that Texas legislators and courts are in the best position to fairly develop and make decisions about corporate law that applies to Tesla, especially when our next big bet pays off beyond anyone's wildest expectations."

In the weeks leading up to the Annual Stockholders' Meeting, there has been equal pushback against Musk's award. Last month a bloc including hedge funds and the NYC Comptroller urged investors to turn him down for a litany of reasons, not least that "the lack of Board oversight has effectively enabled Musk to use Tesla as a coffer for himself and his other business endeavors, even if these actions come at Tesla's expense."

As for whether Musk deserves the largest payout in the history of corporate America, well, shouldn't he own the crash in market cap that wiped out about $680 billion too? Just our two cents. ®

https://www.theregister.com//2024/06/07/tesla_board_musk_payout/