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Can Elon Musk Leave Tesla? Tussle Over $56 Billion Package Sparks Major Row 

A Delaware court rejected a $55.8 billion compensation plan for Tesla CEO Elon Musk which he received from his board back in 2018.

Tesla CEO Elon Musk has a new fight on his hands. After a court in Delaware rejected the company’s bid to increase his pay package to $55.8 billion, there have been several speculations about what Musk’s next move might be. Going by the recent statements of the firm’s founder, the battle to get the package is set to continue.  

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A statement by Musk on X last month sparked some discussions of whether the billionaire can take the step to build products outside of Tesla. He wrote on X, “I am uncomfortable growing Tesla to be a leader in AI and robotics without having ~25 per cent voting control. Unless that is the case, I would prefer to build products outside of Tesla.” A lot has happened since then.  

A Delaware court rejected a $55.8 billion compensation plan for Musk which he received from his board back in 2018. The deal faced legal challenges due to questions over the independence of the board. The decision led to Musk losing his place as the world’s richest person. Tesla’s shares have also lost over 27 per cent in value so far this year. But how did it come to this? 

Musk’s Compensation Dispute 

Back in 2018, the board of Tesla had accepted a $55.8 billion package for Musk which constituted of share awards. A shareholder Richard Tornetta questioned the 10-year package deal and moved to a court in Delaware where he eventually emerged victorious.  

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Musk had been waiting for a new compensation plan which was stalled due to this decision. In between 2018 and 2023, a major deal saw the Tesla CEO buy Twitter at the valuation of $44 billion. To finance this deal, Musk sold a substantial number of shares which brought his stake down from 22 per cent to 13 per cent.  

On X, he explained that more stake will ensure that he has more say without the possibility of going unchallenged. He wrote, “If I have 25 , it means I am influential, but can be overridden if twice as many shareholders vote against me vs for me. At 15 per cent or lower, for/against ratio to override me makes a takeover by dubious interests too easy. I would be fine with a dual class voting structure to achieve this but am told it is impossible to achieve post-IPO in Delaware.” 

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The dispute has sparked a discussion over the role of Musk at Tesla and how close he is to the board whose independence has been questioned. As per a Wall Street Journal report, some board members have done drugs in the past with the CEO. A Washington Post report last month had also suggested that Musk’s use of illegal drugs had concerned some board members.  

Musk's role has been scanner in the past few months at Tesla, and some have wondered if the dispute over control of the firm can result in the founder leaving. However, Musk seems to have other plans.  

 Pursuit Of Compensation 

Post the decision of Delaware court, Musk criticised it and suggested founders that they should not incorporate their companies in Delaware. Going even further, the founder conducted a poll on X, asking whether he should move the incorporation of his company out of Delaware. He has suggested Texas as the next location. The poll favoured the change of location, and the CEO has said that the company will soon hold a shareholder's vote.  

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While the new state might provide a more relaxed regulatory atmosphere, some have noted that a new state bill has implemented the setting up of business courts. They are expected to come into operation from September this year and could pose the same challenge to Musk he faced in Delaware.  

But for now, investors are speculating what the move means for the company and going by the performance on the American stock market, many are cautious at the moment. BBC quoted Dan Ives, an analyst at Wedbush Securities, as saying, "If Musk ultimately went down the path to create his own company (separate from Tesla) for his next generation AI projects this would clearly be a big negative for the Tesla story," he wrote. 

Ives said he expected the board to be able to resolve the issue, but that in the meantime the comments would generate "drama". Only time can tell how the compensation saga will end for Tesla and Musk

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