Robyn Denholm Warns Musk Might “Step Back” If Pay Package Is Not Restored

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There are a variety of vital elections occurring this yr — Mexico, France, South Africa, the UK, and the US being only a few of the extra notable ones. However there’s one vote occurring on June 13, 2024, that might profoundly alter the world as we all know it. That’s the day Tesla shareholders will determine whether or not to reinstate the $55.8 billion pay bundle for Elon Musk that Chancellor Kathaleen St. Jude McCormick of Delaware invalidated four months ago. In her resolution, she wrote, “Swept up by the rhetoric of ‘all upside,’ or perhaps starry-eyed by Musk’s superstar appeal, the board never asked the $55.8 billion question — Was the plan even necessary for Tesla to retain Musk and achieve its goals?”

McCormick decided that as a result of Musk was a controlling shareholder on the time the pay bundle was accepted, there was a possible battle of curiosity. That battle satisfied her that the pay bundle needs to be topic to a extra rigorous customary. “The process leading to the approval of Musk’s compensation plan was deeply flawed,” McCormick wrote in her 200-page-long resolution. “Musk had extensive ties with the persons tasked with negotiating on Tesla’s behalf.”

McCormick particularly cited Musk’s lengthy enterprise and private relationships with compensation committee chairman Ira Ehrenpreis and fellow committee member Antonio Gracias. She additionally famous that the group engaged on the pay bundle included basic counsel Todd Maron, who was Musk’s former divorce legal professional. “In fact, Maron was a primary go-between Musk and the committee, and it is unclear on whose side Maron viewed himself,” the choose wrote. “Yet many of the documents cited by the defendants as proof of a fair process were drafted by Maron.”

Present Me The Cash!

A few billion phrases have been written about Musk and his pay bundle — quite a few of them right here on CleanTechnica — and it’s truthful to say there are robust opinions on either side. A number of main shareholders have indicated they are going to vote in opposition to approving the pay bundle, as have a number of investor relations corporations, resembling Glass Lewis.

My colleague Carolyn Fortuna wrote an article final month that highlighted the efforts the Tesla board of directors is taking to get shareholders to vote in favor of Musk’s original pay package. That report says the Tesla board has employed a strategic adviser who’s working with an out of doors legislation agency to affect massive funding fund managers. These funds maintain about 46% of the corporate’s shares. The proponents of Musk’s pay bundle have created a Vote Tesla web site, which proclaims it’s “Protecting Your Investment and Tesla’s Future.” Vote Tesla takes the place that the Court docket’s resolution, if applied, would deprive Musk of “any compensation for the tremendous accomplishments that have generated significant stockholder returns in less than six years.”

In response to The GuardianDenholm despatched a letter to traders final week saying the vote is “obviously not about the money,” as a result of Musk will nonetheless be one of many richest folks in human historical past no matter whether or not the pay bundle is accepted or not. Musk’s fortune stands at $203 billion based on Bloombergmaking him the world’s third wealthiest individual.

Musk Would possibly “Step Away,” Denholm Says

Right here’s the zinger within the letter to traders. Denholm warned that Musk might step away from Tesla, or spend much less time on the firm, if the vote on June 13 went in opposition to him. “What we recognized in 2018 and continue to recognize today is that one thing Elon most certainly does not have is unlimited time. Nor does he face any shortage of ideas and other places he can make an incredible difference in the world. We want those ideas, that energy, and that time to be at Tesla, for the benefit of you, our owners. But that requires reciprocal respect.”

She went on to say in her letter that the aim of the 2018 deal was to “keep Elon focused on Tesla and motivated to achieve the company’s incomparable ambitions. Upholding our end of the bargain, then, by ratifying the decision we all made in 2018, is more important than ever. If Tesla is to retain Elon’s attention and motivate him to continue to devote his time, energy, ambition and vision to deliver comparable results in the future, we must stand by our deal.”

Musk owns roughly 13% of Tesla, however he can’t vote in favor of his personal pay bundle. Neither will his brother, Kimball Musk, have the ability to vote his shares.

Is The Tesla Board Neutral? Ought to It Be?

Now right here’s the factor, folks. In response to Salary.comin 2020, Robyn Denholm acquired a complete of $5.8 million in compensation for her companies as chair of the Tesla board of administrators. There was some controversy about how a lot Tesla board members are paid, however ask your self this. If you’re on the Tesla board incomes hundreds of thousands of {dollars} a yr, and your place depends on staying within the good graces of Elon Musk, how doubtless are you to do something to oppose the famously mercurial man? When you mentioned, “Not too likely,” give your self a gold star and go to the top of the category.

Final month, ISS, a prime proxy advisory agency, really useful shareholders vote in opposition to the Musk pay bundle, calling the compensation extreme. Glass Lewis, one other advisory agency, has really useful a vote in opposition to it as properly. Bailie Gifford, a prime 15 investor in Tesla, has mentioned it plans to again the bundle, whereas Calpers, the US public pension fund and a prime 25 shareholder, has mentioned it plans to vote in opposition to. Ross Gerber, a outstanding Tesla shareholder, has additionally introduced he’s voting in opposition to the proposal, saying Musk’s escapades on X, previously Twitter, have “absolutely damaged the (Tesla) brand.”

Ought to Musk’s habits following the preliminary approval of the big pay bundle depend in opposition to him? Arguably not, however on the subject of voting, feelings are extra highly effective than info or logic. If you’re a small investor with just a few shares of Tesla, your vote received’t depend for a lot. There may be an expression in Vietnamese tradition that claims, “When the elephants fight, the grass gets trampled.” We small shareholders are the grass on this battle.

Tesla & Texas

In her letter, Denholm additionally requested shareholders to approve transferring the corporate’s authorized base to Texas. Tesla is integrated in Delaware however Musk moved instantly to modify its registration to Texas, the place its headquarters are actually. “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,” wrote Denholm.

That subsequent massive guess, presumably, is the grand announcement on August 8 that Musk hinted about earlier this yr. It’s extensively assumed we shall be instructed on that date that Tesla has cracked the code on autonomous driving software program and a bevy of Tesla robotaxis are about to situation forth from its meeting vegetation worldwide. Which may be so, however Musk is understood for making grand pronouncements years earlier than they turn out to be actuality. Anticipate extra of the identical come August.

With regard to Denholm’s backhanded slap at Delaware, that state is residence to many of the main companies in America exactly as a result of it has over a century of authorized expertise in company issues and is seen as a mannequin for a way company governance needs to be performed. CleanTechnica readers will notice that Musk up and moved the corporate headquarters to Texas due to a public spat with a well being official in Fremont, California. Now he desires to maneuver the corporate’s state of incorporation to Texas as a result of he’s miffed on the resolution of a Delaware choose.

One will get the impressing the Nice and Highly effective Musk is little greater than a petulant youngster who will take his ball and go residence if he doesn’t get his method. It also needs to be identified that regardless of Denholm’s glorification of Texas in her letter, that state nonetheless refuses to permit Tesla to promote is vehicles on to Texas residents. A lot for it being a pleasant venue for Tesla.

What If Musk Steps Again?

Dan Ives, an analyst at Wedbush Securities, instructed The Guardian“Musk is not going anywhere but if the comp package is denied he will potentially shed his CEO title and become less involved in Tesla over time.” That’s one situation. One other is that he pulls one other stunt like he did when he fired your entire Supercharger staff in a match of pique lately. Something might occur when Musk is the ladle stirring the soup.

Zachary Shahan, the glue that holds CleanTechnica collectively, wrote recently about what would possibly occur if Musk loses the shareholder vote. One risk is that Tesla the automotive firm will get offered to a competitor and Musk refocuses his consideration on SpaceX, X.com, Xai, or another enterprise with X within the title. Would that be a crushing blow to the EV revolution, which is what most CleanTechnica readers actually care about? Most likely not. Tesla has largely achieved all a primary mover in new know-how might hope for. It has compelled the remainder of the auto trade to confront the long run. It has spurred exponential development in battery know-how and compelled a sea change in what prospects anticipate in an car. By that measure, Tesla has been wildly profitable, far past what anybody thought attainable greater than a decade in the past when Tesla first burst upon the scene.

Think about, for a second, that Tesla the automotive firm will get taken over by an skilled world automaker, one which is aware of the right way to construct high quality vehicles in excessive numbers and market them to a world viewers. Hyundai Motor Group involves thoughts first on this dialogue, however what whether it is BYD? Apple has squandered greater than $2 billion on creating an car and has extra money within the financial institution than it is aware of what to do with. What a scrumptious irony it will be if Tim Prepare dinner, who refused to take Elon’s calls years in the past, wound up including Tesla to the Apple empire?

That’s all idle hypothesis, in fact. Musk’s pay bundle will get accepted by a slim margin and issues will go on a lot as they did earlier than the vote, with Musk flitting in entrance time to time to create some chaos earlier than flitting out once more to create some chaos elsewhere. Nonetheless, it’s intriguing to assume what Tesla could possibly be if managed professionally, somewhat than on the premise of whims.