Tesla board chair Robin Denholm argues that not paying Elon Musk his agreed compensation is unfair, emphasizing the principle of honoring agreements. Tesla shareholders are set to vote next week to ratify Musk’s $56 billion stock option grant for a second time. This comes after the Delaware Chancery Court invalidated the award in January, citing a lack of independence among directors and improper negotiations between Musk and the board.
Speaking on CNBC, Denholm revealed that she has been discussing the impending June 13 vote on Musk’s compensation with Tesla’s biggest investors on a daily basis. She said that the vote is about “fairness to our CEO,” speaking directly to Tesla’s small shareholders. She emphasized that Tesla’s market value increased by $735 billion between 2018 and 2023, demonstrating the enormous value that Musk’s leadership has brought to the business. Denholm claims that Musk took a big gamble with his compensation arrangement, which would have prevented him from getting paid if he hadn’t reached the predetermined goals.
Denholm emphasized the importance of the risk-reward dynamic in corporate America, suggesting that ambitious goals and commensurate compensation drive innovation. She maintained that Musk’s stock options are “very well earned.”
Not all stockholders, though, concur. Investors, notably Brad Lander, the comptroller of New York City, intend to vote against Musk’s proposed pay plan and the reelection of Kimbal Musk, the brother of Musk, and James Murdoch as board members. Lander said that fair governance is undermined by Musk’s personal contacts with several board members.
Denholm acknowledged the potential for another legal challenge even if the pay plan is approved but argued that rejecting the plan would harm shareholders. She noted that ratifying the existing plan, rather than creating a new one, would be less costly in the long run. The initial stock-based compensation charge of over $2 billion would now be $25 billion. Denholm concluded by urging shareholders to consider Musk’s hard work and the transformational growth he led at Tesla, arguing that he deserves to be compensated accordingly.
