According to the tycoon, Tesla’s board of directors approved Elon Musk’s multimillion-dollar bonus by a large margin | Economy

Elon Musk acted as a luxury tour guide to the Tesla plant in Austin, Texas, this Wednesday for the winners of a shareholder drawing. The lottery was one of the ways the tycoon was trying to attract participation in the crucial shareholders meeting this Thursday. There are two main points on the meeting agenda where Musk weighs his support for the electric car maker’s capital. One proposed ratification of a multimillion-dollar executive bonus, then valued at $56 billion (about €52 billion), which a Delaware judge overturned. In another case, the vote is on the issue of transferring Tesla’s legal residence from Delaware to Texas. As the mogul tweeted, both are guaranteed approval by wide margins based on early voting.

According to Judge Kathleen McCormick’s ruling, Musk is seeking a kind of retroactive approval for an unprecedented award that was already approved by the board but with a flawed process. Even if the company’s CEO ultimately wins the vote as expected, it’s unclear whether it would allow him to receive shares in the company, but it would give him strength in appealing the decision to revoke the award.

Numerous institutional investors and shareholder advisory firms opposed the payouts, unprecedented in American corporate history, which would significantly weaken the value of their own shares. Musk subjected his shareholders to a form of blackmail, implying that their commitment to the company he runs would be diminished if they did not support him.

Some investors don’t buy this argument. They argue that Musk’s 13% stake in Tesla, valued at about $75 billion, and his history with the company make it unlikely that he will leave and that if he neglects his management responsibilities, he could face more lawsuits from shareholders. However, the majority decided to support him.

In 2018, Tesla estimated the value of Musk’s compensation package at $2.28 billion, already a record, but the actual amount increased as shares rose. The bonus consists of options to purchase 303,960,630 shares, which at the current market price ($176 per share) is worth $53.6 billion. Since the exercise price of these options is $23.34 per share, the implicit benefit will now be valued at approximately $46.4 billion (€42.8 billion).

All the revenue, gross operating profit and market capitalization targets that the reward was subject to (and which were very ambitious) have already been achieved, so the meeting is about whether to recognize this amount or not. “We are now turning to you to help us resolve this issue, which is a matter of fundamental fairness and respect for our CEO. They have the opportunity to reset their vote and make it count. “We ask you to make your voice heard—once again—by ​​voting to ratify Elon’s 2018 compensation plan,” Robin Denholm, the company’s chairman, wrote in a letter to shareholders accompanying the announcement. rally at which he addressed “corporate democracy.”

The judge wrote in a 201-page ruling that “the process that led to the approval of Musk’s compensation plan was deeply flawed. “Musk had extensive connections to the people responsible for negotiating on behalf of Tesla.” According to McCormick, Musk had a 15-year relationship with compensation committee president Ira Ehrenpreism, as well as a business and personal relationship, including a family vacation, with another compensation committee member who was part of the work group. group, Antonio Thank you. The same task force included Todd Marohn, who served as Musk’s divorce lawyer and whose admiration for Musk brought him to tears while testifying at the trial.

Tesla included McCormick’s decision in board filings, according to a notice sent to the U.S. Securities and Exchange Commission (SEC). Their thesis is that the approval demonstrates that shareholders support the package while fully aware of the judge’s criticism. But approval doesn’t guarantee Musk will get his bonus.

If the company fails to convince McCormick to change his decision, which has not yet taken effect, Tesla plans to appeal to the Delaware Supreme Court, a process that will take months.

McCormick’s final decision still requires a decision on a payout appropriate for the plaintiffs. The lawyers say about 10% of the estimated savings they brought to the company would mean about $5 billion in fees for the legal team led by Richard Tornetta, the small shareholder whose lawsuit led to the payment being reversed. Tesla categorically denies this claim and believes the corresponding bill would be a maximum of 13.6 million.

Another stellar proposal is to move the company’s legal address to Texas, where its operational headquarters is located, from Delaware, where it is currently registered. This required not only a majority of the board of directors, but also a majority of all capital, but according to Musk, this was also achieved.

The vast majority of large U.S. companies choose Delaware for its flexible and business-friendly laws, tax advantages, and overall business-enabling ecosystem, including regulatory and dispute resolution mechanisms.

Musk, however, was taken aback by Delaware’s seriousness in corporate matters. When he signed an agreement to buy Twitter and then wanted to back out on false excuses, the company’s lawsuit against him to enforce the agreement had every sign of success. Musk eventually gave in and continued the operation. After purchasing the company, he moved the headquarters to Nevada. Also in Delaware, a judge threw out his sky-high compensation. After this failed, Musk set up a poll on his social network in which his followers voted for the transfer.

Allegations of sexual harassment

Tesla’s shareholder meeting will take place immediately after Wall Street Magazine released an extensive investigation into how Musk stalked and sexually harassed women who worked at SpaceX, where he is also CEO, including a former intern. The New York newspaper cited an affidavit signed by one of the women and other interviews with people close to them. Former company executives describe a culture of sexism and harassment, which Gwynne Shotwell, SpaceX’s president, denies, saying the company thoroughly investigates all harassment complaints and takes appropriate action in response.

In 2013, one of the women working under Musk’s direct orders left the company and said the CEO asked her to have his children, according to the information, their relationship soured after she rejected his proposal.

In another case in 2014, a woman who had a sexual relationship with Musk while she was directly dependent on him faced recriminations when the relationship ended badly. According to Musk, she left the company and signed an agreement that prohibited her from talking about her work for Musk. Wall Street Magazine.

There have been allegations of sexual harassment and retaliation at SpaceX before, including civil rights violations in California earlier this year. News published in 2022 by the publishing house Business Insider It alleged that SpaceX paid $250,000 to a flight attendant on the company’s corporate jet in exchange for her burying a complaint about harassment she suffered from the tycoon in 2016. The information goes into some detail about what happened. In accordance with Insider, According to interviews and documents obtained by the publication, the flight attendant accused Musk of showing her his erect penis, rubbing her leg without consent and offering to give her a horse in exchange for an erotic massage.

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