Welcome to readin – the best world tech news chanel.

Tesla seeks to revive Musk's $47 billion pay settlement after judge says no| GuyWhoKnowsThings


Facing criticism that it is too beholden to Elon Musk, Tesla's board said Wednesday it would essentially give him anything he wanted, including the largest pay package in corporate history.

If setbacks in the courts and in the auto market have induced any soul-searching among Tesla's board, there was no sign of it in the latest announcement. If anything, the board redoubled its support for Musk, Tesla's chief executive, at the risk of irritating activist investors and provoking more litigation.

The board's decision to ask shareholders to back a compensation plan for Musk worth about $47 billion came less than three months later. a Delaware judge overturned the same salary package. The judge said it was excessive and that the company had not adequately disclosed details about it to shareholders who approved it in 2018.

Tesla will now provide shareholders with more information about how the plan was devised and ask them to approve it again. That vote will come at a time when investors are increasingly concerned about the electric car company because its sales are declining, and its shares have fallen by more than a third this year. Additionally, Musk hasn't laid out a grand plan to restore the company's momentum.

Attorneys representing shareholders in the Delaware case were not immediately available to comment Wednesday on what steps they might take. But the board's action is likely to spark more lawsuits against the company, which is under legal pressure from regulators, customers and people who say they were victims of failures in Tesla's systems. driver assistance system.

Two days before the move to restore Musk's status as one of the world's richest people, Tesla told employees that Lay off 10 percent of its workforce, or about 14,000 people.

“The optics certainly don't look good,” said Jason Schloetzer, an associate professor at Georgetown University's McDonough School of Business who studies corporate governance.

There are no signs that Tesla's board is trying to exert tighter control over Musk, whose support for right-wing conspiracy theories has turned away many potential customers. On the contrary, in documents presented Wednesday for a shareholder meeting in June, the board signaled it strongly supported Musk.

The board asked shareholders to approve moving Tesla's corporate headquarters to Texas from Delaware, a change Musk requested the day the Delaware court vacated his pay package in January. And the board asked shareholders to reappoint two directors with close ties to Musk: media executive James Murdoch, who has been on vacation with Musk, and Kimbal Musk, his brother.

The company's actions effectively amounted to a rebuke of the judge who struck down Musk's 2018 pay plan, Chancellor Kathaleen St. J. McCormick of the Delaware Court of Chancery. In her ruling, the judge rebuked the board for negligence in supervising Musk.

“The board and shareholders were controlled by Musk,” Lynne Vincent, an associate professor at Syracuse University's Whitman School of Management, said of the court decision. “The people advocating for this deal were not active protectors of shareholder interests. They were integrated into his personal and financial life.”

By asking shareholders to reinstate Musk's compensation, Tesla's board is trying to make Chancellor McCormick's decision moot.

“We do not agree with what the Delaware Court decided, and we do not believe that what the Delaware Court said is how corporate law should or works,” Robyn Denholm, Tesla's chairman, said in a message. to shareholders on Wednesday. The company has separately said it plans to appeal the judge's decision.

Denholm said it would be “fundamentally unfair” to deny Musk the compensation he had been promised. He noted that Tesla had not paid Musk anything for the past six years, aside from the compensation plan that was voided.

But Musk has made billions from his Tesla shares. Brian Dunn, a former compensation consultant and visiting professor at Cornell University's School of Industrial and Labor Relations, said pay plans were supposed to provide incentives for executives to perform in the future, not reward them for work in the future. last.

“There's nothing in the plan that requires him to focus on Tesla,” Dunn said, noting that Musk owns X, the social media platform, and companies like SpaceX. “It's proof that the board is still very accommodating,” he added.

But some investors found the equity argument jarring, given Tesla's recent troubles.

“Asking people to approve one of the largest pay packages of all time, when the company fails to meet current targets and lays off 10 percent of employees, is terrible timing,” said Antoine Argouges, CEO of Tulipshare , an activist investment group. .

Tulipshare has proposed a shareholder vote on whether Tesla executives' compensation should depend on compliance with standards on carbon emissions and workers' rights. Tesla's board of directors opposes the proposal.

Denholm framed the decision to leave Delaware as a logical step for a company with a growing presence in Texas, rather than an attempt to escape the state's justice system. “We have a significant number of manufacturing, operations and engineering employees in Texas, and our executives are based there,” he told shareholders.

He insisted that the board is independent. The board member who evaluated Musk's compensation plan, Denholm said, was Kathleen Wilson-Thompson, a former Kellogg and Walgreens human resources executive who does not appear to have any personal ties to him.

Tesla board members are listening to shareholders, the board said in a proxy statement filed Wednesday. “The board maintains an active dialogue throughout the year with our largest shareholders to ensure that Tesla's board and management understand and consider the issues that matter most to our shareholders,” the statement said.

Denholm and the board of directors did not respond to statements Musk made in January that if he was not given control of more than 25 percent of the company's shares, he would pursue certain ventures outside of Tesla. He currently owns about 13 percent of Tesla shares, down from 22 percent after he sold billions of dollars in stock to finance the acquisition of Twitter, now known as X.

But Syracuse University's Vincent said Tesla had offered little information about how layoff and compensation decisions were made. “I don't think any of this was transparent,” he said.

Tesla's board of directors did not address concerns that the company was losing control in the electric car market. Ms. Denholm presented an optimistic view of Tesla's future.

“Tesla is an agile organization with an unmatched pace of innovation that has resulted in products and services that exceed all expectations driven by visionary leadership and, most importantly, the best and most dedicated employees in the world,” he said in his message to shareholders. .

The decision to lay off 10 percent of those employees, he added, was necessary to reduce costs, increase productivity and “prepare for our next phase of growth.”


Share this article:
you may also like
Next magazine you need
most popular

what you need to know

in your inbox every morning