Tesla's compensation plan rejected, major shareholder's reduction of holdings attracts market attention
Recently, Tesla CEO Elon Musk's $56 billion compensation plan was ruled invalid again by a Delaware court, and at the same time, major shareholder Liao Kaiyuan announced a reduction in holdings, bringing Tesla back into the spotlight.
Compensation plan rejected again
On December 2, Judge Kathaleen St. Jude McCormick of the Delaware Supreme Court upheld the January ruling, rejecting Tesla's lawyers' request to overturn it. The judge found that Musk had dominated this massive compensation plan through false negotiations in 2018, and the new evidence provided by Tesla could not change this ruling. Tesla's board had argued that shareholders who reapproved the compensation plan in June had received comprehensive disclosure of information, but the judge pointed out that this did not address the core issues mentioned in the ruling. Musk is currently planning to appeal to the Delaware Supreme Court for legal relief.
Major shareholder Liao Kaiyuan reduces holdings
On the eve of the ruling's release, major shareholder Liao Kaiyuan announced that he was gradually reducing his holdings in Tesla and investing the proceeds in short-term U.S. Treasury bonds. Liao stated that he is cautious about the future performance of Tesla's stock and warned that the U.S. economy may face risks similar to the 1929 stock market crash. This action has attracted widespread market attention, and analysts point out that it marks a significant shift in the attitude of one of Tesla's most important individual shareholders toward the company's prospects.
Liao Kaiyuan was once a staunch supporter of Musk, but in recent years, criticism of Musk has increased. This reduction in holdings also reflects his concerns about the risks facing Tesla in the future, especially after Musk's acquisition of the social media platform X, which Liao believes has affected Tesla's operations.
Tesla's governance issues under scrutiny
Tesla warned in its appeal statement that if the ruling is not overturned, it would mean that corporate governance in Delaware is controlled by judges and plaintiff lawyers, rather than shareholders. However, legal experts generally believe the ruling is reasonable and defends investor interests. Charles Elson, a corporate governance expert at the University of Delaware, stated that the close relationship between Tesla and Musk has made the compensation plan controversy a focal point of Delaware's anti-conflict of interest law.
The ruling on Tesla's compensation plan and the major shareholder Liao Kaiyuan's reduction of holdings not only reflect the dual challenges of internal governance and external market trust for Tesla, but also raise market and investor concerns about the balance of corporate governance and shareholder rights. In the future, how Tesla balances corporate governance and shareholder rights, as well as whether Musk can formulate a new compensation plan, will become focal points of market attention.
Market reaction
As a result of the above events, Tesla's stock price fell by 1.59% at Tuesday's close. This reaction shows the market's concern over Tesla's governance issues and shareholder dynamics, reminding investors to take a more cautious view of Tesla's future prospects.
The ruling on Tesla's compensation plan and the major shareholder's reduction of holdings have both had a significant impact on the company. In the future, Tesla needs to work harder to balance corporate governance and shareholder rights to gain the trust of the market and investors.
The views in this article represent the author's personal opinions and do not constitute investment advice. The author makes no guarantees regarding the accuracy, completeness, or timeliness of the information in the article and is not responsible for any losses arising from the use or reliance on the article's information.