Tesla pay fight tests power of Elon Musk’s mystique – BBC News

In 2018, Tesla shareholders approved the biggest pay package in history for Elon Musk. Six years later, will they do it again?

The electric car company will find out this week at its annual meeting, where it is seeking a show of support for the roughly $50bn deal.

The package – worth an estimated 300 times what the top-earning boss in the US made last year – won backing from 73% of shareholders who voted six years ago.

The compensation plan gives Mr Musk rights to roughly 300 million shares – a roughly 10% stake in the firm – as a reward for the firm meeting goals once considered laughable, like becoming a $650bn firm.

But earlier this year, a Delaware judge voided the deal after a small investor sued, ruling that the sum was “unfair” and the process for determining the package, by a board dominated by Mr Musk, was “deeply flawed”.

Instead of backing down, Tesla said it would submit the deal to another vote – and seek to reincorporate the company outside of Delaware – calling the decision “fundamentally unfair, and inconsistent with the will of the stockholders”.

Tesla says the targets were ambitious and the compensation is essential to keep the billionaire engaged.

“We must stand by our deal,” board chair Robyn Denholm wrote to shareholders this month.

Presented to the world six years ago, the pay deal stirred debate, but few doubted Mr Musk’s importance to Tesla’s future.

This time, however, the fight is raising tough questions about his leadership, at a time when Tesla’s shares have dropped sharply from their highs and its commanding lead of the electric car industry is under pressure.

Mr Musk has been faulted for alienating potential buyers with controversial political musings and accused of diverting attention – and resources – to his other companies, including social media site X, formerly Twitter, which he purchased in 2022.

“If this was back in 2018, I would have voted yes, but today, after everything that has happened, I voted no,” says investor Ven Kolli, an IT consultant from Colorado, who owns one of the company’s cars and first purchased Tesla stock nearly a decade ago.

Though the 42-year-old expects the deal to pass, he hopes a tough vote will send a message to Tesla’s board, which for years has faced concerns that it does not exert sufficient oversight of Mr Musk. He is not worried about losing Mr Musk, believing Tesla has gotten to a point where it can succeed without him.

“Since the Twitter acquisition closed, a lot of the decisions made specifically by Elon Musk have been very questionable,” he says.

“Ultimately, while he’s CEO, his responsibility is to Tesla and I think the board has lost sight of that,” he says. “It’s my opportunity to let my voice be heard, as small as it may be.”

Legal experts say it is not clear if the court will accept the re-vote, which is not binding, and allow the company to restore the pay package. At least one shareholder has sued over the company’s move already.

But Tesla appears to be hoping that a resounding victory will help as its legal fight continues, says Ann Lipton, law professor at Tulane University.

“If shareholders overwhelmingly approve the pay package then Musk is hoping, and maybe he’s right, that the court will think twice about overturning it again,” she says.