Tesla (TSLA) shareholders are currently voting whether to approve CEO Elon Musk’s pay package, now valued at $46 billion based on the company’s current stock price. The results will be revealed Thursday, June 13 during Tesla’s annual shareholder meeting.
Ross Gerber, CEO of Gerber Kawasaki Wealth & Investment Management – a Tesla investor who owns around 300,000 shares – shares why he voted against Musk’s compensation package. The California Public Employees’ Retirement System (CalPers), which owns 9.2 million Tesla shares, also announced it would vote against the wage plan.
One of the main incentives for adopting this plan is that shareholders believe it will encourage Musk to remain CEO. Gerber states:
“I think he’s already removed himself from the company and that’s been going on for two years now. And then he just eliminated every important executive at Tesla over the last six months. So he put Tesla in a position where if we don’t vote for him and, let’s say, he threatens to leave the company and leaves the company, there’s actually no one at Tesla to run it.”
Gerber’s biggest complaints are against Tesla’s board, calling it “negligent” for not negotiating the amount of Musk’s compensation, which distracts from Tesla’s main goal: making and selling electric vehicles.
Yahoo Finance shared a poll at the start of the trading week, asking whether Tesla shareholders should approve Musk’s pay package. More than 400,000 people participated in the survey, 96% of whom voted “no”.
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This message was written by Luke Carberry Mogan.
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Video transcription
Our next guest says it’s a nightmare, lose-lose, lose-lose situation for shareholders.
Joining us now is Ross Gerber, CEO of Gerber Kawasaki Wealth and Investment Management.
It’s good to see you, Ross.
You love the people of Calpers, you plan to vote.
No or if you have already voted, have you already voted?
No, I understood you.
So, explain why you don’t approve of this salary package.
I mean, this is mainly due to the negligence of the board of directors and not just, you know, not, you know, the management of the compensation committee and proxies and the way that competition generally takes place in all other public companies other than Tesla work in independent board committees with the CEO to provide a two-sided compensation package.
This is not what happened with Tesla.
It was just Elon presenting his compensation package and they were saying sure and you know when he is rejected by the core because of lack of corporate governance then the answer is good, now let’s explain how it is arrived there.
Let’s vote on this again.
Then we’re going to appeal and say that the shareholders still want this and that doesn’t actually solve the real problem, which is that no one has negotiated with Elon on this pay package yet.
And it’s possible he accepted maybe half the size of the baby package.
So let’s say 25 billion instead of 50, you know, that would still have been a massively excessive amount of compensation.
That’s why I’m voting against it because I just think it’s caused more problems than it solves.
And I think the board should develop a real compensation plan for Elon with an independent board.
The way the law requires it when you’re talking about an actual compensation package, do you have any idea what, what that would look like for you?
Well, you know, again, I’m not against the basic structure of stock options and, and so on, you know, I don’t think Elon needs a lot of incentive in the sense that he has, you know, 80 or 90 billion dollars. worth of Tesla stock at the time of the compensation package, he owned $10 billion in Tesla stock.
So he made, you know, 70 to 90 billion in insignificant gains.
So, you know, we throw these numbers out there, but in the real world, the average American makes $65,1000 a year.
And so, when you really think about it, we’re talking about a compensation program for the richest person who ever lived.
That’s the stupidest thing I’ve ever heard.
It’s literally so stupid that Tesla is focusing on this and not selling cars when we’re coming to the end of a quarter where they’re going to miss all their numbers, miss all the numbers here.
But they did their part during the period in question that we’re talking about Ross.
I, I want to talk about it, I started from scratch.
I mean, you make numbers from scratch.
Yes.
So I mean, it’s a legitimate automaker.
Now, in a time where you know, you go back in time, a lot of people thought Tesla wasn’t going to make it.
But let me leave this out of the way, but we all benefited from it, including Elon.
Let me put that aside for a moment because I’m curious what you think would happen if indeed a nose like you succeeded here.
So what is the scenario?
Is Elon getting out of the business?
Like, is he taking his AI technology, you know, somewhere to one of his other properties?
Well, there are two sides to this: I think he has already retired from the company and this has been going on for two years now.
And then he just eliminated every important executive at Tesla in the last six months.
So he put Tesla in a position where if we don’t fall in love with him, he threatens to, let’s say, leave the company and leaves the company.
In fact, there is no one at Tesla to manage it.
So he did this while the board turned a blind eye again and was fined when he just let go of, you know, a ton of really talented long-term executives at Tesla for a reason or another.
So, you know, Tesla is in a very bad position, you know, because Elon put Tesla in this position for the benefit of Xa I and X and his other investments.
So right now he told us he wants to build AI outside of Tesla, he’s moving the chips from Tesla to Xai.
It seems to me that there is a disconnect between what is actually happening, which is an absentee CEO doing what is best for the AI to control it, and what is best for Tesla and the board is not willing to step in and say, hey, you know, this is not what’s best for Tesla.
So for me the problem is if the vote fails, how is he going to retaliate against Tesla?
I mean, that’s absurd for someone who’s the majority owner of the company.
I mean, it’s an absurd conversation.
He should do what’s best for Tesla no matter what.
And Ross too, no matter the outcome of the vote.
He has 80 to 90 billion euros in the company.
Well, then, in addition to what allows the board, in your opinion, if they get this vote to go their way, what are the other downsides to them getting this vote to go their way.
Well, I kind of think the vote is around 5,050 right now.
Like I would flip a coin.
I don’t know what it’s going to do.
Um, if this passes, you know, the good news is we can just go back to litigating this comp package as is, it will be litigated again, I’m sure.
And the shareholders will be responsible for $25 billion in taxes on that, you know, he’ll have to liquidate his shares to pay and the shareholders will bear that cost.
So as long as shareholders are OK with, you know, when that happens, it’s going to hurt the value of the company.
So it’s very expensive to pay someone $50 billion.
So, you know, it’s the shareholders who pay them.
So, you know, does he deserve it or doesn’t he deserve it?
You know, we could debate this until we’re blue in the face.
I don’t think anyone deserves $50 billion to run a company for five years, but that’s just me, Ross.
When did you start working at Tesla?
I got into it in 20, it was 2014, when it was $2.
It’s a good, it’s a good return under Mr. Musk.
That’s right.
It’s a wonderful return and, and let’s not forget, if the US government hadn’t lent Tesla money and if it hadn’t been investors like me and other institutional investors who supported Elon during this time, Tesla would be gone. went bankrupt five times.
And, in 2018, in particular, I supported Elon at the most pivotal moment in Tesla’s history.
It was literally all these people, people on Twitter who think they’re such big fans that they were nowhere to be found in 2018, except for Ross Gerber.
And so, you know, I’m here to help Elon and help Tesla succeed.
Now, this is certainly only a small part of the overall story.
And Elon has built a wonderful company, but as I said, he has benefited the most from Tesla’s success and all of us, the rest of his shareholders, rightly benefit with him.
And that’s how businesses work.
But that said, uh, I think Elon deserves some compensation.
I’m not saying he doesn’t deserve to be compensated.
What I’m saying is they need to do these things the right way and the right way is to negotiate, that’s right.
The typical CEO makes $20 million a year, but he’s not a typical CEO.
So let’s look at a guy like Steve Jobs.
When he returned to Apple, he was granted 7.5 million stock options.
It was, the value was significantly lower than anything Elon had even looked at and, you know, actually, Steve Jobs, he didn’t really have a stake in Apple when he came back.
So it was like they had to motivate him.
So, you know, there’s precedent for founding CEOs who are also incredible innovators with option packages.
And I think the board should work hard to find something fair that will compensate Elon for the past and the future and that is defensible in a court of law.
Well, we’ll see if that happens.
Ross.
Thank you very much for joining us.
Nice to see you again as always.
Thank you for.