Elon Musk's $56B Tesla Pay Plan Voidance By Delaware Court Spurs Activist Calls For Corporate Governance Reform

In a recent development, activist investors are leveraging a court ruling that could potentially reshape Tesla Inc.’s TSLA corporate governance, potentially curtailing Elon Musk’s influence.

What Happened: A Delaware judge’s decision to nullify Musk’s approximately $56 billion stock compensation plan has emboldened activist investors to push for more significant governance changes at Tesla, reported Reuters. This ruling could catalyze reformers to gain support from major index funds and other investors.

These investors have been advocating for corporate governance changes at Tesla’s annual shareholder meetings, such as director term lengths and voting thresholds for new bylaws. Despite their efforts, they have seen little success in effecting change.

See Also: Tesla CEO Elon Musk’s Compensation In Limbo After Judge Voids $55-Billion Plan: ‘Never Incorporate Your Company In Delaware’ (UPDATED)

A resolution proposed by independent activist investor John Chevedden at Tesla’s upcoming shareholder meeting aims to replace the requirement for major corporate changes to gain support from two-thirds of all shares outstanding with a simple majority vote.

With the judge’s ruling questioning the board’s independence, these activists hope to garner more support from major index funds and other investors to sway shareholder votes in their favor.

Why It Matters: The voiding of Musk’s $56 billion pay package has sparked significant discussions about Tesla’s corporate governance. The ruling can potentially change Musk’s future compensation and affect the company’s trajectory.

Earlier, investor concerns about Tesla’s future under Musk’s leadership were highlighted, with the CEO being called the “most delusional CEO” by long-term Tesla investor Ross Gerber. The recent ruling could potentially lead to a significant overhaul of Tesla’s corporate governance, addressing these concerns and potentially reshaping the company’s future.

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