After the deal was struck down in court in January, investors will be asked to endorse it again this week
Tesla’s shares are down 28% this year. It has warned of “notably” slower growth as sales in its second-largest market, China, fall. A defect forced a recall of its highly anticipated latest product. The chief executive spends a lot of time at other companies or generating controversy. How do you reward him? With a record-breaking $56bn pay deal, if Tesla gets its way at its annual meeting on Thursday.
Elon Musk’s pay package – the largest ever granted to an executive at a US-listed company – is not based on Tesla’s current, or future, performance. It was granted in 2018, and built around targets for Tesla’s stock value, revenue and profitability.
The targets seemed steep at the time, but after three extraordinary surges – in Tesla production, demand for electric cars, and the group’s share price – every goal was cleared by 2022. The company’s transformation into the world’s most highly valued carmaker propelled Musk into the ranks of the world’s very richest people.
Back in January, a judge slammed on the brakes. Voiding the pay arrangement after a legal challenge by a Tesla shareholder, the Delaware court of chancery called his remuneration “an unfathomable sum”, and questioned whether compensating Musk at such levels was necessary to retain him as chief executive and achieve the company’s goals.
Tesla was not prepared to take that decision in its stride. “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,” Robyn Denholm, Tesla’s chair, said in April, adding that the ruling had been “fundamentally unfair, and inconsistent with the will of the stockholders who voted for it”.
