STOCK CLIMBS, INVESTORS REACT
Tesla shares rose nearly 2 per cent in early trading on Monday, easing concerns over Musk’s long-term commitment and the future leadership of the EV pioneer. The stock has lost about 25 per cent this year, as of Friday’s close.
“Under normal circumstances, a compensation package in the billions would raise some eyebrows. (But) clearly investors have benefited from Musk’s stewardship of Tesla,” said Camelthorn Investments adviser Shawn Campbell. “This stock grant will bind Musk to Tesla for the next two years.”
Musk’s new award boosts his stake in the company to more than 15 per cent, up from 12.7 per cent, according to Reuters calculations based on LSEG data.
2018 PACKAGE APPEAL ONGOING
The Delaware court’s January ruling invalidated Musk’s 2018 pay plan, which was the largest in US corporate history. The court cited procedural flaws and found the package to be unfair to shareholders.
Musk has appealed the decision, arguing that the package spurred tremendous value creation and was twice approved by investors.
Tesla shares have surged nearly 2,000 per cent over the past decade, compared to a 200 per cent rise in the benchmark S&P 500 index.
Still, some governance experts questioned the latest move.
“This is simply a repackaged version of what was done years ago and was ruled improper by a judge. It renders the Delaware court decision effectively meaningless,” said Charles Elson, founding director of the Weinberg Center for Corporate Governance at the University of Delaware.
“You don’t have to incentivise him to stay. If he leaves, he throws away 13 per cent of the company, which is still a huge part of his net worth,” Elson added.
