Elon Musk just half-kiddingly dropped a huge one. Unless he can gain more control over the company, he does plan to create competing artificial intelligence and robotics products outside Tesla. Delaware Chancellor Kathaleen McCormick made some waves this past week with an important ruling in a major case. Her ruling last January that found Musk’s 2018 CEO pay package had been awarded in error. The ruling touches off a historic corporate coup de tat that leads Musk to double down and work even harder to consolidate power, independence and authority within Tesla.
In an effort to fend off the legal challenges, Musk launched an anti-Delaware campaign and moved Tesla’s place of incorporation from Delaware to Texas. This old public law was not helpful to him, and his new move underlines his growing frustration with the legal landscape in Delaware. The court’s ruling endangers his own retroactive pay package. Musk’s new compensation plan awards him shares that will vest in two years, provided he remains CEO or holds another key executive position. At today’s stock prices, these shares are worth around $29 billion. If the ongoing legal fight over his 2018 salary allows him to cash in shares from that package, he’ll lose them even though they were worth $56 billion when granted.
Musk too has very little at stake Musk currently owns less than 13% of Tesla’s outstanding shares. Public records from the state of Nevada indicate that he started a company named xAI in March 2023. Tesla’s shareholders were never told about its existence. The company’s egregious lack of disclosure, with respect to their own transparency policy, raises serious questions about transparency. This worry increases as Musk continually doubles down on pursuits outside of Tesla’s main oeuvre.
Tesla’s board still approved Musk’s new interim CEO pay plan. A special committee—including board chair Robyn Denholm and director Kathleen Wilson-Thompson—guided the decision. The automaker got approved at a particularly rough time. In July, the company surprised almost everyone with a horrid earnings miss. Sales dropped for the second straight quarter, with automotive revenue down 16%. Musk admitted that Tesla’s biggest hurdle as they look ahead is the incremental loss of attractive EV tax credits.
Musky aside, there’s a lot to be excited about Tesla’s rapid developments. He stated, “We probably could have a few rough quarters. I am not saying that we will, but we could.” He expressed ambitions for Tesla’s future capabilities in autonomous driving, claiming that the company could potentially have “hundreds of thousands of full self-driving Teslas by the end of next year.”
What’s behind the outrage Musk’s engagement in political causes has raised concerns for years. He left Tesla temporarily to assist with the reelection efforts of former President Donald Trump. Through all of this, he doubled as a special government employee, heading up DOGE, an effort aimed at downsizing federal agencies. His political pursuits have fueled a consumer-led revolt against the Tesla brand, adding to the nascent company’s markdown reputation.
In light of these developments, Musk expressed concerns regarding his ability to lead Tesla into new sectors without retaining approximately 25% voting control. “I am uncomfortable growing Tesla to be a leader in AI & robotics without having ~25% voting control,” he remarked. This seemingly innocuous statement emphasizes Musk’s wish for greater control over the firm as he faces a growing litany of legal and market headwinds.