A coalition of Tesla investors and state officials is calling on shareholders to oppose a new compensation proposal for CEO Elon Musk. This plan, which could amount to $1 trillion, is contingent on the company achieving specific ambitious goals over the next decade.
Shareholder Opposition to Musk’s Pay Package
A letter issued on Thursday urged Tesla shareholders to reject the compensation package during the upcoming annual shareholder meeting on November 6. The authors criticized the board, claiming it is impacting Tesla’s reputation by striving to retain Musk excessively.
Who Are the Signatories?
- SOC Investment Group
- American Federation of Teachers
- State Treasurers of Nevada, New Mexico, Connecticut, Massachusetts, Colorado
- Comptrollers of Maryland and New York City
The letter accuses Tesla’s board of having members with strong connections to Musk, compromising the fairness of the proposed pay package. It emphasizes that this arrangement grants excessive discretion to the board, undermining shareholder confidence in impartial governance.
Concerns About Tesla’s Performance
The investors cited Tesla’s challenging operational and financial performance from the previous year. They pointed out declining sales in key European markets and questioned the board’s ability to provide effective oversight. The letter suggests that close ties between board members and Musk have fostered a culture that allows him to evade necessary challenges regarding his management decisions.
Main Arguments Against the Proposal
Key complaints focus on Musk’s divided attention among various leadership roles. The board allegedly enabled Musk to juggle responsibilities across ventures such as SpaceX, Neuralink, and xAI/X. Recently, he also took a position with the U.S. Department of Government Efficiency, which some believe negatively influenced Tesla’s brand and performance.
Commentary from State Officials
New York State Comptroller Thomas P. DiNapoli remarked that the New York State Common Retirement Fund, a holder of Tesla shares, will vote against the pay package. DiNapoli criticized Musk’s significant stake in Tesla, saying it distracts him from focusing on the company. He expressed ongoing opposition to Musk’s excessive compensation proposals.
Tesla’s Defense of the Proposal
In response to these criticisms, Tesla defended the proposed pay package on social media platform X. The company insists that Musk’s compensation aligns with shareholder value creation. They emphasized the notion that Musk would receive nothing if he does not meet established targets, linking his potential success to significant value for shareholders, alongside broader economic benefits.
Details of the Compensation Package
In an SEC filing last month, Tesla outlined the specifics of the pay package for Musk. Should he achieve his goals, Musk could acquire an additional 12% stake in Tesla over a ten-year period, raising the company’s market capitalization from approximately $1.37 trillion to $8.5 trillion.
As discussions continue, the outcome of the vote on Musk’s proposed compensation package remains to be seen, garnering attention from investors and corporate governance advocates alike.
