Tesla shareholders will vote next week to ratify Musk’s stock option grant for the second time after A judge overturned the arbitration award in JanuaryThe Delaware Chancery Court ruled that the administrators lacked independence and that improper negotiations had taken place between Musk and the board. Denholm, Speech on CNBCsaid she has spoken each day with Tesla’s largest investors over the past few weeks in regards to the vote on Musk’s salary on June 13.
On Thursday, nonetheless, Denholm said she had addressed Tesla’s cohort of small shareholders directly. The independent board chair explained the vote boiled right down to “fairness to our CEO.” Shareholders benefited enormously, she said, because Musk’s leadership brought a market value of $735 billion from 2018 to 2023. Employees, shareholders and customers all benefited – everyone except Musk himself, Denholm argued. The Tesla boss took “a huge risk” with the pay package, and had he not met the milestones of the plan approved by investors in 2018, he wouldn’t have received a penny.
“That risk-reward ratio is very important in the American economy,” Denholm said on CNBC. “It’s very important when you’re shooting for the stars, or in this case, Mars.” Ambitious goals and compensation to match are what drives innovation, and the stock options that underpin Musk’s pay package are “very well deserved,” Denholm said.
Not all shareholders are on board.
New York City Comptroller Brad Lander and other investors met this week to debate the Tesla vote. New York City pension funds hold about $627 million price of Tesla stock and can vote against Musk’s pay plan and the re-election bids of Kimbal Musk and James Murdoch. Musk’s brother and Murdoch are too near the Tesla CEO, as are other board members, Lander said.
“A billionaire cannot simply let his brother and his best friends decide what rules he will follow, what courts he will listen to and what rules he will abide by,” Lander said this week. Amalgamated Bank and a half-dozen other Tesla investors also indicated in a letter that they are going to not support Musk’s pay plan or the board members’ campaign bids.
Tesla didn’t immediately reply to a request for comment.
According to Denholm, the board deliberated what would occur if shareholders didn’t approve Musk’s pay, and directors concluded that a second vote with the extra disclosures required by the judge was the perfect option. She acknowledged that even when investors approved the pay plan, it could potentially change into the topic of one other legal challenge, but that doing so would harm shareholder primacy.
In addition, ratifying the previous plan as a substitute of crafting a brand new one would cost investors more in the long term, Denholm said. The company had already collected a stock-based compensation fee of greater than $2 billion when the choices were first granted. Today, that fee can be $25 billion. But costs aside, Denholm said, Musk deserves to be paid for his work.
“Put yourself in his shoes,” she said. “They’ve worked really hard, incredibly hard, for over six years to lead the company through transformational growth” that nobody thought possible. After all that effort to attain the goals, it might be incredibly difficult to take if the package was just overturned after a deal was made.
“How would you feel?” said Denholm.
