Tesla's compensation plan rejected, major shareholder's reduction of holdings draws market attention
Recently, Tesla CEO Elon Musk's $56 billion compensation plan was ruled invalid again in Delaware courts, while major shareholder Liao Kaiyuan also announced a reduction in his holdings. These two major events have once again brought Tesla into the spotlight.
Compensation plan rejected again
On December 2, Delaware Supreme Court Judge Kathaleen St. Jude McCormick upheld the January ruling, rejecting Tesla's lawyers' request to overturn it. The judge found that Musk had led 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 re-approved the compensation plan in June had received comprehensive disclosure, but the judge pointed out that this did not address the core issues mentioned in the ruling. Musk currently plans to appeal to the Delaware Supreme Court for legal relief.
Major shareholder Liao Kaiyuan's reduction of holdings
On the eve of the ruling's release, Tesla's major shareholder Liao Kaiyuan announced that he was gradually reducing his stake in Tesla and investing the proceeds in short-term U.S. Treasury bonds. Liao expressed a cautious attitude towards Tesla's stock future performance and warned that the U.S. economy might face risks similar to the 1929 stock market crash. This action has drawn widespread attention from the market, with analysts pointing out that it marks a significant shift in the outlook of one of Tesla's most important individual shareholders regarding the company's future.
Liao Kaiyuan was once a staunch supporter of Musk, but criticisms of Musk have gradually increased in recent years. This reduction in holdings also reflects his concerns about Tesla's future risks, especially after Musk's acquisition of the social media platform X, which Liao believes has impacted 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 controversy over the compensation plan a focal point of Delaware's anti-conflict of interest laws.
The ruling on Tesla's compensation plan and the reduction of holdings by major shareholder Liao Kaiyuan not only reflect the dual challenges of internal governance and external market trust for Tesla, but also raise concerns among the market and investors about the balance between corporate governance and shareholder rights. In the future, how Tesla balances corporate governance and shareholder rights, and whether Musk can formulate a new compensation plan, will become the focus of market attention.
Market reaction
Affected by the above events, Tesla's stock price fell by 1.59% at Tuesday's close. This reaction indicates the market's concern over Tesla's governance issues and shareholder dynamics, and it reminds 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, nor does he assume any responsibility for any losses arising from the use or reliance on the information in the article.