Tesla launches review of Elon Musk's remuneration package

Tesla's board of directors has set up a special committee to review CEO Elon Musk's remuneration package. According to reports in the Financial Times, the introduction of a new stock option scheme, pegged to financial, operational and stock market performance targets, is being considered. The decision comes at a turning point: Tesla, which is paying the price for Musk's political exposure and in recent months has seen sales and profits fall, is engaged in a strategic repositioning, focusing progressively less on mass-market electric vehicles, with the ambition to reinvent itself as a leader in artificial intelligence for mobility, with self-driving taxis and humanoid robots.

Composing the committee are Robyn Denholm, chairman of the board, and Kathleen Wilson-Thompson, independent director. Their task is twofold: on the one hand to evaluate a new incentive structure for Musk, and on the other hand to consider alternative remuneration formulas in the event that the now-discussed 2018 stock option plan is not reinstated.

That plan - which could have earned Musk up to $56 billion - was overturned last January by a ruling of the Delaware court (a state from which a flight of listed companies is taking place, a phenomenon dubbed 'Dexit'), which found the decision-making process flawed by conflicts of interest and a lack of transparency. Musk appealed in March to the First State Supreme Court (the first to ratify the US Constitution), challenging Justice Kathleen McCormick's use of the so-called standard of substantial fairness. This expression refers to a criterion used by judges in corporate law contexts: even if the process has been formally fair, a judge may invalidate or correct an agreement if he or she considers it substantially unfair.

But beyond the judicial plan, the question of Musk's remuneration raises deeper questions about Tesla's fate. With 13% of the shares, Musk remains the largest shareholder. However, the trajectory he has in mind for the company is moving further and further away from the traditional carmaker model. As the market grows but Tesla's sales slow down and competition - especially from China - becomes fiercer, Musk is betting everything on cutting-edge technologies: autonomous driving, artificial intelligence and robotics.

It is no coincidence that Tesla strongly refuted the Wall Street Journal's rumours that the board was looking for a potential successor to Musk. Chairman Denholm confirmed the ceo's central importance and reiterated her intention to align his compensation with the company's future goals.