Tesla is embroiled once again in a contentious debate over CEO Elon Musk’s compensation, reviving a colossal $56 billion pay deal rejected by a US judge in January. Shareholders will face a re-vote on the 2018 package, which hinges on Tesla’s market value reaching specific milestones over a decade.
This renewed push for the record-breaking pay package comes on the heels of Musk announcing workforce reductions, further intensifying the scrutiny surrounding the deal. Unlike traditional compensation structures, the 2018 plan offers no salary or bonus to Musk. Instead, it awards him equity based on ambitious market cap targets for Tesla.
The largest job cut in Tesla’s history turned out to be a surprise and misstep, as CEO Elon Musk took the blame for errors in severance packages. Based on an email received by Bloomberg News, Musk admitted that some of the packages offered to those sacked were “incorrectly low,” and then he apologized for it. The email vowed prompt amendment, an unusual display of remorse from the ordinarily self-assured CEO.
On the other hand, this apology is being made in the midst of Tesla’s crisis. In response to what the company said is a decline in demand for EVs, the announcement made by the firm indicated it had ordered a retrenchment that will see its workforce reduced by more than 10% across all markets. Meanwhile, the layoffs themselves occurred quickly and without regard to who was leaving; a group that included former production supervisor Nico Murillo, who wrote on social media about his disbelief at being told he could not even enter the factory after returning from vacation until he handed over his security pass.
Musk himself has faced a barrage of negative publicity in the past year. Tesla has been forced to recall vehicles due to safety issues, and Musk has been embroiled in controversies surrounding social media conduct and antisemitic conspiracy theories.
And, despite the challenges that will continue to be present, Musk still retains his position as the wealthiest man in the world with a net worth surpassing $198 billion. According to Tesla, Musk has not accepted a salary from the company over the last six years, and this suggestion for compensation in kind is a worthy way to pay him back as a result of his command.
With the voting of the shareholders just around the corner, it will be a turning point for both Tesla and Musk in this corporate war. The vote is to determine whether or not executive compensation plans are fair, Tesla’s governance practices, and, most importantly, the direction of the company. Investors have to analyze Elon’s achievements vis-à-vis the level of financial reward offered by their pay-for-performance system at hand as well as take into account recent controversies and the current performance of Tesla. Undoubtedly, this vote will either seal success or failure for Tesla Motors but also impact the world on how other companies respond to similar situations.
