Tesla’s chair has said the carmaker needs to climb “Mt Everest” as it faces shareholder votes on relocating to Texas and Elon Musk’s US$56 billion pay deal, while dismissing criticism she is too close to
EV company Tesla must climb ‘Mount Everest’ to win shareholder vote, chair warns
Robyn Denholm, the chair of Tesla, is trying to prove that investors support a pay deal that a Delaware court struck down. Photo / 123RF
When asked about Musk’s plans should he lose, Denholm, 60, said: “There is always a risk, but he’s not holding a gun to anybody’s head . . . He hasn’t said one way or another quite frankly. And do I believe he’s committed to Tesla? Absolutely.”
Tesla’s spat with Delaware dates to February, when a judge voided a package of stock options awarded to Musk in 2018 that grew to be worth US$56b — the most in US corporate history — after the company hit ambitious growth targets.
Tesla shareholders overwhelmingly backed the proposals when they were first outlined in 2018, but the court ruled Tesla’s board had failed to act in shareholders’ interests, criticising directors as “supine servants of an overweening master” and Denholm as having a “lackadaisical approach to her oversight obligations”.
Denholm, a former chief financial officer of telecoms group Telstra, dismissed those findings as “absolute BS” and “crap”.
In response to the Delaware decision, the board introduced proposals to move Tesla’s state of incorporation to Texas and to reaffirm Musk’s pay. The pay vote will not directly supersede the court’s decision but Tesla hopes it will prove decisive in any future legal battle.
In a social media campaign, Denholm has told shareholders she is defending their rights against a “Delaware Court [that] second-guessed your decision” in “a matter of fundamental fairness and respect to our CEO”. Ensuring Musk is paid in full was essential to keep him motivated and reward him for generating returns of more than 1000 per cent in five years, she said.
![Tesla CEO Elon Musk. Photo / AP](https://www.nzherald.co.nz/resizer/v2/FJ4I7KNHBVETVFBYUR237Q73Z4.jpg?auth=1271cd29ee3a6ff8c852a2d317f6538228593653d6ec70ec686382bb76c1fb9c&width=16&height=11&quality=70&smart=true)
On the new pay vote, a simple majority of votes must be in favour, excluding those owned by Musk and his brother Kimbal. However, the path to reincorporate in Texas is steeper, requiring a majority of all shares outstanding; those not cast are counted as a “no”.
“It’s like Mt Everest. It’s a huge hill to climb because getting 50 per cent of the shareholders to vote, let alone what they vote for, is quite tough,” Denholm said.
Roughly a third of Tesla’s shares are held by retail investors. Denholm must also convince institutional shareholders that rejected the pay package in 2018 — including Vanguard, its largest outside owner — to change their minds now that the pay award is a reality rather than a hypothetical scenario for Musk.
“Every shareholder that I’ve ever talked to says that [the compensation plan] worked,” said Denholm. “They actually appreciate the fact that it drove a lot of shareholder value.”
She added that the plan was originally seen as “impossible, ludicrous, overly ambitious”, with targets including a market capitalisation of US$650b at a time when Tesla was valued at only US$59b. Musk would get nothing if the valuation did not reach the US$100b mark but took the carmaker to a peak of more than US$1 trillion.
Denholm said “knowing Elon, they needed to be really ambitious goals” to incentivise him to focus on growing Tesla. Musk runs several other companies including SpaceX, Neuralink and the Boring Company, and in 2022 he bought Twitter, later renaming it X, for US$44b.
Written by: Stephen Morris and Tabby Kinder
© Financial Times