Tesla’s Board Takes a Dim View of Elon Musk’s Online Polls but Urges Shareholders to Re-Ratify His 2018 Compensation Package

Until recently, Elon Musk was widely considered Tesla's core strength. Yet, the mega-billionaire's penchant for delving head-first into needless controversies has gone quite a long way in dimming the appeal of this thesis. Look no further than Tesla's board, which has now dared to publicly criticize its famously incalcitrant CEO, albeit in an euphemistic manner, while still trying to retain his good graces.

The Drama Elon Musk's 2018 Compensation Package

Back in 2018, Tesla awarded Elon Musk one of the biggest compensation packages in American corporate history, worth around $56 billion. The package played a pivotal role in allowing Elon Musk to clinch the title of the world's richest person.

Tesla underwent a trial in 2022, where some shareholders asserted that the Delaware Court of Chancery should void Elon Musk's 2018 compensation plan as it was a result of sham negotiations. The plaintiffs argued that Tesla's shareholders were never informed that Elon Musk directly dictated the specific terms of the package and that the company's directors were personally beholden to Musk.

Delaware Chancery Court Chief Judge Kathaleen St. J. McCormick ultimately agreed with the plaintiffs and voided Elon Musk's $56 billion compensation plan. This action also voided Elon Musk's 304 million unexercised stock options, which entitled the EV giant's CEO to around 9 percent of Tesla's 3.2 billion outstanding common shares. Bear in mind that Musk currently owns roughly 13 percent of Tesla, corresponding to around 412 million shares.

This then prompted Musk to declare that he was uncomfortable working at Tesla with his current voting power. While demanding voting power within Tesla's board that exceeded the 25 percent threshold, Musk complained that his current control was just enough to allow him to be "influential" but not sufficient to prevent being "overturned" on occasion. The ultra-billionaire then laid down the gauntlet, threatening to "build products outside of Tesla" should the EV giant's board not acquiesce to his demands.

Tesla Board’s Delicate Balancing Act Vis-A-Vis Elon Musk

This brings us to the crux of the matter. Tesla's board has now issued a preliminary proxy statement ahead of the upcoming Annual General Meeting (AGM), urging all shareholders to re-ratify Elon Musk's 2018 compensation package. The statement notes:

"Because the Delaware Court second-guessed your decision, Elon has not been paid for any of his work for Tesla for the past six years that has helped to generate significant growth and stockholder value."

The proxy statement adds:

"So we are coming to you now so you can help fix this issue — which is a matter of fundamental fairness and respect to our CEO. You have the chance to reinstate your vote and make it count."

The board has also urged shareholders to re-elect Kimball Musk and James Murdoch as board members.

Interestingly, as highlighted by Ann Lipton, a Professor of Law at Tulane University, the board has taken a very dim view of Elon Musk's penchant for placing the outcome of serious business proposals at the whim of online votes:

"Following the Tornetta Opinion, on January 30, 2024, Mr. Musk ran a poll on X asking whether Tesla should “change its state of incorporation to Texas, home of its physical headquarters?” Of 1,102,554 votes on X, 87.1% were in favor. The following day, Mr. Musk posted on X that “Tesla will move immediately to hold a shareholder vote to transfer state of incorporation to Texas.” Mr. Musk made other posts on X regarding the same subject in the days following the Tornetta Opinion. Notwithstanding these communications, redomestication is a Board decision, not a decision for a chief executive officer. And on February 4, 2024, the Board met to discuss these issues, among others, including the multi-year history of Company discussions regarding a potential redomestication."

Do you think Tesla's shareholders will re-authorize Musk's 2018 compensation package? Let us know your thoughts in the comments section below.

About the author: Writing is my one incontrovertible passion. Over the past six years, he has authored over 2,200 distinct articles on financial and tech-related topics, spanning nearly 1 million words. And he has been a member of Wcctech mobile team since 2025. As an alumnus of the University of Toronto, Rotman Commerce Program, I bring nuance, in-depth knowledge, and a unique perspective to every topic that I cover. When I'm not writing, I'm traveling the world, exploring hidden confectionaries and restaurants as an aspiring food connoisseur.

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