A recent ruling by a Delaware court has declared the pay package of Tesla CEO Elon Musk null and void. This package had granted Musk around 300 million options, contingent upon achieving specific performance milestones. As news of this verdict circulated, Tesla’s stock experienced a slight decline, leaving the board and leadership with a significant challenge ahead.
Amidst the aftermath of the court ruling, Tesla’s shares fell by 2.5%, settling at $186.81 during after-hours trading. While the S&P 500 and Nasdaq Composite indices saw declines of 0.1% and 0.8%, respectively, Tesla’s stock managed to rise by 0.4% in regular trading.
The staggering compensatory nature of Musk’s pay package cannot be denied. At current Tesla prices, the package holds an approximate value of $50 billion. However, if the company were to be valued at its previously estimated height of $650 billion, the package would amount to nearly $56 billion.
Notably, it is exceptionally rare for any CEO to receive such a substantial remuneration in a single pay award. Yet, shareholders had previously voted in favor of this arrangement in 2018.
Presently, Tesla has yet to offer an official response regarding the potential implications of the court’s ruling. Furthermore, it remains uncertain whether Tesla or Musk will pursue an appeal.
As a result of this verdict, Tesla’s board may be compelled to reevaluate Musk’s compensation structure. In a recent conference call, Musk expressed his desire to gain a 25% voting control over Tesla. He suggested that a supervoting class of stock could be an acceptable solution.
The implementation of super-voting stock would inevitably require shareholder approval. The final outcome of this situation remains uncertain. However, it is reasonable to expect that a new pay package, once again subject to shareholder approval, will be arranged in order to ensure the continued satisfaction of Musk and Tesla’s investors.