tag

Legal Perspective Shareholders are the owners of the company as they have the shares that constitute the company. With this in mind, I would like to stress the point that it is important for each shareholder, particularly, in joint-stock companies to learn that the company law gives shareholders certain legal rights and protection against some specifics by the company or the Board or other 3rd parties. The shareholders, it goes without saying, are supposed to know their rights and their duties as well, in their company. The statutory protection given to shareholders is provided for in the company law, wherein, the different assemblies of the company are not authorised nor allowed to take, add or amend any of the legal rights conferred on the shareholder by the law particularly the company law. This important statutory right has been vested with all shareholders regardless of the fact that they are individuals or institutions, small or big, smart or dull, active or otherwise, etc. This legal stand constitutes a healthy environment and should give each shareholder the necessary boost and charisma to preserve such statutory rights and to maintain them all through his holder-ship. It would be very interesting to mention that many shareholders in many companies are either ignorant about this de jure situation or merely they don’t understand that this statutory right and privilege should be maintained and exercised all through their equity shareholding. In certain instances, it has been observed that the general assembly has gone astray in relation to certain rights of shareholders. A good example, could be the emergence of certain discussions in some issues during the general assembly and their refusal for discussion because they are not included in the agenda as required by the law. This could be a good excuse to escape from the situation. This practice, to my knowledge, happens frequently as there is provision that says, only issues in the agenda are to be discussed. However, this provision should not be taken as absolute prohibition otherwise this will be against the intention of the lawlegislature. It should be clear that decisions or resolutions taken in such instances could be considered illegal, void “ab initio” and of no effect. Particularly, when such matters raised for discussion are of prime importance for the company and or there is urgent need to discuss and deliberate during the on-going session. The door for discussion should be open and not closed for good. The chairman presiding the session should have a key of wisdom and professionalism. The shareholders statutory rights are many, such as the right to attend meetings, right to participate in discussions, right to call for meetings due to certain reasons and ultimately, the right to exercise the voting powers and the like. At certain times there could be difference of opinion in relation to certain issues between the Board, the executive management on one hand and shareholders on the other hand. We believe this is normal and encourageable, however, the differences shall not affect or jeopardise the statutory rights given to the shareholders as attending assemblies or participation in discussing any issue during meetings. Differences or disagreements could happen when the shareholders are active or knowledgeable, for example, when the company is planning a merger or acquisition, increase or decrease of the capital or involvement in mega projects, etc. There are examples wherein extensive debates had been going on in many countries between the shareholders and the management regarding such important issues. Some companies, have changed or stopped certain projects after facing justifiable resistance from the shareholders. Each shareholder, and likewise each company, shall work to achieve this result in good faith and high spirit to the betterment of the company and the shareholders who own the company through all tenure. Dr AbdelGadir Warsama Ghalib is a corporate legal counsel. Email: [email protected]

Tesla's $1tn, 10-year pay package to retain CEO Elon Musk is likely to be approved by shareholders at the company's annual meeting in November even though the amount is staggering.That is because it was crafted with an eye on keeping Musk in place, addressing concerns about the company's technical outlook and giving big company owners just enough reason to back the massive amount, investors and executive pay analysts said.Earlier on Friday, the automaker's board approved what it called "A Super Ambitious Incentive Package for a Pioneering, Ambitious and Unique CEO" that sets out lofty earnings and valuation targets awarding Musk millions of shares over the next decade if he hits them. It immediately gives Musk 96mn shares of restricted stock worth more than $31bn as of intraday trading on Friday that vests over the next two years, as well as more control over the company. His total 2025 compensation package is worth north of $113bn, executive compensation research firm Equilar has estimated."The pay package, which makes a big bet on the future of robots, may see shareholder support," said Taufiq Rahim, a SpaceX investor and principal at 2040 Advisory. "But it raises larger social questions about the outsized gains going to relatively few capital holders, which is likely not sustainable and will face public pressures.”The package is designed to keep Musk from leaving and is squarely focused on transforming Tesla into an artificial-intelligence and robotics powerhouse, the board said in a securities filing. It said Musk is the only person on the planet who can unlock Tesla's full potential.The compensation committee started negotiating Musk's pay package in February, it said, meeting with lawyers 37 times and directly with Musk 10 times over seven months. Certain items were non-negotiable for the idiosyncratic CEO: he wanted 25% of the company, to control Tesla's future direction and to be fully compensated for a 2018 pay package that was hung up in litigation.Musk threatened to leave more than once, and the board worried the company's AI talent would follow him out the door, it said in the filing.The $31bn in restricted shares, which he cannot sell for at least five years, is partial payback for a $56bn 2018 pay plan that a Delaware court voided last year. If Musk wins in court within a certain time frame, he will not receive the one-time payment "so there can be no 'double dip,'" the board said."Musk also raised the possibility that he may pursue his other interests and leave Tesla if he did not receive such assurance," the board said.The pay plan is by far the largest ever for any CEO, Equilar said. And while it is likely to face legal challenges, compensation experts see it winning shareholder approval."Time and time again, Tesla's shareholders have approved these grants over the years," Equilar Research Director Courtney Yu told Reuters. "While it may seem outlandish now, shareholders will get tremendous value out of it if Elon Musk is successful."None of Tesla's three largest outside investors, Vanguard Group, BlackRock or State Street, immediately said on Friday how they would vote. Among them, Vanguard and BlackRock supported Musk's $56bn pay package last year, disclosures show, while State Street funds voted against it.Tesla and top funds can still expect pressure over the pay, however, with a number of union figures and public-sector treasurers voicing concern."We urge shareholders to reject Musk’s money grab, take away the Tesla board’s rubber stamp, and restore basic corporate governance standards," said Randi Weingarten, president of the American Federation of Teachers, in a statement.Musk, who currently controls close to 13% of the company, would own 25% if the plan is approved, so long as he hits his performance targets and sticks around for at least seven more years. Payable over 12 tranches after hitting certain milestones, the ultimate prize could make Tesla the most valuable company in the world with an aspirational market capitalisation of $8.5tn, making it worth more than Microsoft, Meta Platforms and Alphabet combined, today, the board noted.Kristin Hull, founder and chief investment officer of Tesla investor Nia Impact Capital, called the package irresponsible. "This is investor money that could go into R&D or acquisitions, places that would really benefit Tesla in the long term," she said, adding that she is considering a challenge with other shareholders.Dan Coatsworth, investment analyst at AJ Bell, called Musk a visionary but said the pay plan was excessive and could set a bad precedent in corporate governance. He questioned whether Musk was worth that much."He also presides over a company that has lost its edge, is being overtaken by rivals, and whose brand has been tarnished by Musk’s actions outside of Tesla," he said.Tesla’s shares closed up 3.6% at $350.84 on Friday. They are down 13% for 2025, although they have recovered from their lows. Investors worry about its deteriorating electric vehicle business and rising foreign competition."One minute Tesla’s board is wondering if Elon Musk is a liability to the company given his outspoken views and political distractions, the next they’re effectively saying ‘pick a number, any number’ to lock him in for as long as possible," Coatsworth said."Surely Musk should be fighting for his job, not Tesla’s board fighting to keep him?"