“Today Tesla shareholders will finally answer a $56 billion question hanging over the company: Can CEO Elon Musk keep his record-breaking pay?” writes Pras Subramanian in Yahoo Finance.
Tesla shareholders are facing a critical decision as they prepare to vote on CEO Elon Musk's $56 billion all-stock compensation package. Awarded in 2018, this record-breaking pay package has been mired in controversy, particularly after a Delaware court deemed it invalid earlier this year. The court found that Tesla’s board had not acted in the best interests of shareholders when approving the award. Now, the board, led by Chair Robyn Denholm, is pushing for shareholder approval of a newly proposed pay package that closely resembles the invalidated 2018 plan.
The backdrop to this high-stakes vote is a series of escalating dramas involving Musk. The Employees' Retirement System of Rhode Island has filed a lawsuit accusing Musk and his brother of using insider information to sell $30 billion in stock, allegedly to fund Musk’s acquisition of Twitter (now X). Meanwhile, reports have surfaced about Musk’s inappropriate relationships with SpaceX employees and new allegations of creating a hostile work environment.
Despite these controversies, Musk's supporters, including prominent investors like Cathie Wood of ARK Invest and Ron Baron, argue that his leadership is crucial to Tesla’s future. They emphasize that Musk’s relentless drive and vision have been key to Tesla’s success. "Without his relentless drive and uncompromising standards, there would be no Tesla," wrote Ron Baron in an open letter.
Proxy advisory firms Glass Lewis and ISS, however, recommend voting against the pay package, citing concerns over its size and potential dilution of shareholder value. Significant shareholders like Norway’s $1.7 trillion sovereign wealth fund and the California State Teachers' Retirement System have also voiced opposition.
As the vote nears, the outcome remains uncertain. Some analysts predict that Musk’s pay package will be approved, arguing that his presence is vital for Tesla’s continued innovation and growth. However, others warn that rejection could lead to increased uncertainty about the company's future direction.
In the words of CFRA’s Garrett Nelson, “We have long argued that one of the primary reasons the stock trades at such a massive premium to the rest of the industry is the innovation of Musk. If the pay package were to be voted down, it could increase uncertainty regarding the future direction and leadership of the company.”
Tesla’s shareholders now hold the power to decide whether to reward Musk’s contributions with the proposed compensation or to push back against what some see as an excessive and controversial pay package. The final vote is set to be counted, and the decision will undoubtedly have significant implications for the future of Tesla and its CEO.