With its headquarters based in Austin, Texas, Tesla Inc serves as a multinational automotive and clean energy company. Business operations revolve around the design, manufacturing and sale of BEVs or battery electric vehicles, stationary battery energy storage devices as well as other related services and products. Elon Musk took on the role as chairman in 2004, becoming CEO in 2008. Service areas for this company are scattered across the globe.
Giving someone a share of what he is due
Tesla TSLA.O has granted CEO Elon Musk shares worth about $29 billion in a new pay deal aimed at keeping the billionaire entrepreneur at the helm during a crucial pivot from its struggling core auto business to robotaxis and humanoid robots. The company described the “interim award” of the 96 million new shares as a first step, “good faith” payment to honor Musk’s more than $50 billion pay package from 2018 that was struck down by a Delaware court last year.
Musk can claim the new award if he remains in a top executive role for another two years and a court does not reinstate the 2018 package currently on appeal. He has to hold the shares for five years and can buy them for $23.34 per share, the same as the exercise price of the 2018 award. Tesla will also put to vote a longer-term CEO compensation plan at its annual investor meeting on November 6.
Tesla as it was yesterday and how it will be
The move is meant to keep Musk, the public face of Tesla and architect of its robotaxi strategy, focused on the electric-vehicle maker as it navigates a shift to cybercabs and robotics from its mainstay auto business. Tesla’s planned cybercabs are two-passenger battery-electric self-driving cars. The plan is for these vehicles to be fully autonomous. It forms part of the company’s Robotaxi service.
It also seems to quell any speculation that the board’s patience with Musk could be wearing thin because of the recent tumultuous months, including the CEO’s foray into politics. The move to give Musk greater control of the company suggests that directors still see him as best suited to tackle Tesla’s growing list of challenges in the years ahead. Musk’s involvement in politics and his wider business empire, including AI startup xAI, have also sparked concerns about his devotion to Tesla, the main source of his wealth.
Elon Musk at the helm of things
Musk has threatened to leave unless he gets more control over Tesla. xAI has come into business a mere 2 years ago. This public-benefit corporation works within the areas of social media, technology and AI. Before Monday’s grant, Musk had no active compensation plan and Tesla said he had not received meaningful pay since 2017. With the legal fight over his 2018 package expected to continue, the board said it moved to retain Musk’s “extraordinary talent.”
The company said it would not record compensation expense for the award as it does not currently expect the performance condition to be “probable of being met.” It will re-evaluate and recognize the expense if it determines the award is likely to be met, including after the two-year vesting period. Last year, the company said a new compensation package for Musk on par with the 2018 plan would result in an accounting charge of more than $25 billion. While the plan unveiled Monday is about one-third of the size of the 2018 plan, the share price has nearly doubled in the past year, increasing the potential cost.
The new shares will also be forfeited or offset if the Delaware courts fully reinstate the 2018 stock award, ensuring there is no “double dip,” the special committee said. The Delaware matter showed, in a broader perspective, the importance of balance in a company. Specifically, where it related to a need to provide competitive compensation packages with the fiduciary and legal responsibilities of its board. It is also important that care should be taken of the potential that may exist between the board and its executives.
GCN.com/REUTERS.
