Elon Musk, CEO of Tesla, is set to receive a shareholder-approved remuneration package valued at approximately $29 billion in equity. This substantial reward comes in response to the escalating competition for AI expertise and the pivotal juncture Tesla finds itself in.
The considerable sum of equity is granted through a 2019 Equity Incentive Plan previously ratified by company shareholders. As such, no further assembly for voting is necessary, according to a recent regulatory statement.
Tesla has voiced its plans for a long-term remuneration strategy for Musk and other top executives, which is expected to be discussed and voted on in the annual shareholders meeting slated for November.
However, the award may become null and void dependent on the ruling of the Delaware Supreme Court. If the court overrules the earlier dismissal of Musk’s compensation package from 2018 due to behind-the-scenes negotiations, the new reward may be invalidated. The previous package was stupendously valued at about $56 billion.
Musk has previously voiced concerns over his control in AI and robotics at Tesla, hinting at possible discontinuation of his work if not granted more authority. This came before a competitive battle for talent among the industry’s giants, accompanied with a flurry of mergers and acquisitions.
Furthermore, Musk has undertaken a separate AI-focused venture independent of Tesla. Meanwhile, Tesla has seen a decline in sales growth and a tarnish to its generally positive brand image.
Tesla disclosed on Monday that, earlier this year, a special committee was appointed to explore anew the CEO’s compensation package. The committee, which included board chairperson Robyn Denholm and board member Kathleen Wilson-Thompson, eventually settled on granting Musk an allotment of 96 million shares.
These shares will become vested after a period of two years, on the condition that Musk continues his tenure in an executive role at Tesla. Additionally, the CEO is required to hold onto the stocks for a minimum of five years.
In a clear departure from previous bonus initiatives for Musk, this new package does not seem to be dependent on specific guiding objectives like escalation of the company’s stock value.
Given the trading values preceding the announcement, Musk’s share would hypothetically value around $29 billion. He would have to shell out a purchase price of $23.34 per share, bringing the estimated present value of the award to approximately $26.7 billion.
The reward may be nullified depending on the ruling of the Delaware Supreme Court on Tesla’s appeal against the strike down of the 2018 compensation package, thereby preventing the prospect of ‘double dipping’, according to Tesla.
During the conception of this novel payment plan, Musk and his brother withdrew themselves from any participation. The pair’s involvement in the previous incentives scheme was a factor in a Delaware Chancery Court Judge’s move to strike it down.
The 2018 remuneration plan was deemed ‘deeply flawed’ by the Judge owing to biased input and improper ties to Tesla’s board members. Furthermore, the lack of clauses that tied Musk to Tesla for a stipulated amount of time was a point of criticism.
Tesla’s decision to overturn the previous package caused a stir among its most loyal fans and many shareholders. The move also prompted Tesla to relocate its corporate registration from Delaware to Texas, a state less stringent on shareholder protection laws.
Tesla even initiated a vote among shareholders to validate the stalled remuneration package again. The Judge, however, upheld her ruling, citing the unique legal arguments and voting initiative by Tesla as deviating from established legal precedents.
Despite Tesla’s efforts and the surrounding controversy, the Delaware Supreme Court’s ruling, much anticipated by all stakeholders, will ultimately define the fate of Musk’s new compensation plan.
The post Tesla CEO, Elon Musk, Set to Receive $29bn Equity Reward Amid AI Competition appeared first on Real News Now.
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