Tesla Chair Signals Elon Musk Could Exit Without 'Motivating' Pay Deal (2024)

Tesla (TSLA) Board Chair Robyn Denholm says it is imperative that Chief Executive Elon Musk's 2018 $56 billion compensation package is reapproved if the EV giant wants to continue "motivating him" to work for the company, according to a regulatory filing Thursday. TSLA shares angled lower Friday.


In a letter sent to Tesla shareholders Wednesday, Denholm implored investors to give Musk his 2018 pay deal. A Delaware court voided the plan earlier this year. Denholm signaled in the letter that without voting in favor of the compensation package, Musk could move away from Tesla.

"If Tesla is to retain Elon's attention and motivate him to continue to devote his time, energy, ambition and vision to deliver comparable results in the future, we must stand by our deal," Denholm wrote to shareholders Wednesday.

Denholm added that with Musk being one of the richest people in the world, the deal is "obviously not about the money."

"Motivating someone like Elon requires something different," she wrote. "This is one of the key reasons the award also requires Elon to hold any shares he receives upon exercise of stock options for five years after he exercises the options — which can only serve to incentivize him to continue delivering value to Tesla and our stockholders."

Tesla Voting Underway

Denholm's letter about the need to "motivate" Musk comes with shareholders currently voting just ahead of the June 13 annual shareholder meeting.

Since Tesla on April 17 requested shareholders ratify Musk's 2018 pay package, the EV giant has been attempting to drum up votes among its retail investor base. Musk's compensation deal is currently valued at around $45 billion.

In 2018, the Tesla board won approval for the pay package with 73% of the vote.

Tesla shareholders are also currently voting on whether to shift Tesla's state of incorporation to Texas, from Delaware.

Musk, Nvidia Chips And Tesla Control

CNBC reported on June 4 that in December Musk had Nvidia (NVDA) send AI processors, earmarked for the EV giant, instead to his social media enterprise X, formerly Twitter, which Musk purchased in October 2022.

Musk has hinted throughout the year he feels he needs more TSLA shares and voting power before making Tesla a "leader in AI & robotics."

In January, Musk posted on X that he's "uncomfortable growing Tesla to be a leader in AI & robotics without having ~25% voting control." The chief executive added that he wants enough shares to be "influential but not so much that I can't be overturned."

"This is primarily about ensuring the right amount of voting influence at Tesla," Musk said. "At 15% or lower the for/against ratio to override me makes a taker by dubious interests too easy."

Adam Jonas, Morgan Stanley's high-profile autos analyst and a Tesla bull, wrote on June 4 that if Musk does not achieve a 25% voting stake in the EV giant, "Tesla shareholders should be prepared for Tesla to significantly slow down/curtail its direct investment in sensitive/advanced AI efforts."

"While Tesla may still be in position to benefit indirectly from AI advancements, we believe that most of the adjacent AI efforts could be concentrated within non-Tesla entities where Elon Musk has control," Jonas added.

Musk currently has a nearly 13% stake in Tesla. Prior to selling TSLA shares to purchase Twitter, now X, for $44 billion in late 2022, Musk owned around 22% of Tesla.

Tesla Stock Performance

TSLA shares fell 0.2% to 177.60 during market action on Friday. Tesla stock gained 1.7% to 177.94 Thursday and was down a fraction on the week ahead of Friday's regular trade.

TSLA shares dropped 2.8% in May and have sunk around 30% so far this year.

Tesla has rallied since reporting first-quarter earnings and revenue on April 23, finding support at its 50-day moving average, according to MarketSurge analysis. On April 22, Tesla stock hit a 52-week low of 138.80.

The annual shareholder meeting is on June 13. The EV giant will then report second-quarter earnings in mid-July.

Tesla stock ranks seventh in the 35-member IBD Auto Manufacturers industry group. The stock has a weak 41 Composite Rating out of a best-possible 99. Shares have a 16 Relative Strength Rating and a 62 EPS Rating.

Please follow Kit Norton on X @KitNorton for more coverage.


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Tesla Chair Signals Elon Musk Could Exit Without 'Motivating' Pay Deal (2024)
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