Tesla Inc. (NASDAQ:TSLA) saw a boost in its stock price during pre-market trading on Wednesday, as reports emerged that the company’s board is evaluating a fresh compensation strategy for CEO Elon Musk. This comes after a previous, historic pay agreement was invalidated in court last year.
The automaker’s shares rose by 2.5% in early activity and have climbed 32% since April 24.
In a regulatory filing submitted at the end of April, Tesla revealed that a Special Committee has been formed by the board to assess matters related to Musk’s compensation. According to the Financial Times, the committee comprises only two members: Board Chair Robyn Denholm and Kathleen Wilson-Thompson.
Beyond reconsidering Musk’s future compensation, the committee is also exploring alternative forms of recognition for his previous contributions. This is a contingency plan should Tesla’s ongoing appeal to reinstate Musk’s 2018 compensation package – currently valued at about $98 billion – fail in the Delaware Supreme Court later this year.
The original package was struck down by Delaware Chancellor Kathaleen McCormick, who ruled the award to be excessive.
The legal setback has led Musk to hint at seeking greater control over the company. He has suggested he might reduce his involvement with Tesla if a suitable agreement isn’t reached.
Adding to the developments, Tesla has announced a delay in filing its proxy statement, which could result in pushing back its annual shareholder meeting typically held in May or June. This delay provides more time for the committee to craft potential new compensation proposals for shareholder consideration.
As discussions remain in the early stages, the specifics of any revised compensation package are still undetermined. Sources cited by the Financial Times said any future plan would likely be performance-based, linking Musk’s rewards to the company’s financial outcomes, operational success, and stock performance. However, no decisions have been finalized, and there’s no certainty that a new plan will be put forward.
