Today, Tesla shareholders will finally answer a $56 billion question hanging over the company: Can CEO Elon Musk keep his record salary?
While some on Wall Street expect Musk to secure the lucrative compensation pact, it won’t come without a battle — and the drama around Musk is intensifying as the final votes are set to be counted Thursday afternoon.
Watch again: Musk’s all-stock pay package, awarded in 2018, was embroiled in controversy and was struck down by a Delaware court earlier this year, with the judge finding that Tesla’s board of directors did not had not acted “in the best interests” of Tesla. shareholders by approving the allocation of $56 billion.
Since then, Musk and the Tesla board, led by Chairman Robyn Denholm, have advocated quite forcefully for Tesla shareholders to approve a new pay package, which is very similar to the invalidated initial 2018 award by the judge.
On the eve of these results, Musk and Tesla are being attacked on several fronts.
Late Tuesday, the Rhode Island Employees’ Retirement System (ERSRI) filed another lawsuit in Delaware, accusing Musk and his brother Kimbal Musk of selling a total of $30 billion in stock using inside information – given that both knew the proceeds would be used to finance Elon’s capital. purchase of Twitter (now X), and that two brothers also knew that Tesla vehicle deliveries were lower than expected.
Meanwhile, the Wall Street Journal reported that Elon Musk participated in recent meetings with proxy advisor Glass Lewis and investors including “Vanguard, State Street and BlackRock, alongside Tesla Chairman Robyn Denholm and others,” to garner support for Musk’s wage plan.
As if that wasn’t enough, the Journal also published an article Tuesday evening alleging that Musk had numerous inappropriate relationships with employees of SpaceX, the rocket and spacecraft company Musk founded and still serves as CEO.
Then, on Wednesday, eight former SpaceX employees filed a sexual harassment and retaliation lawsuit against Musk in California state court, alleging that Musk created a “hostile and unwelcome work environment” because of his behavior, among other allegations.
“Motivating” musk
The drama around the vote has been escalating for weeks now. The battle to pass Musk’s compensation package intensified last week when Denholm submitted an open letter urging shareholders to approve Musk’s compensation package.
“Fairness and respect demand that we honor the collective commitment we made to Elon – a commitment that was, and fundamentally still is, to keep Elon’s attention and motivate him to focus on astonishing growth of our company,” Denholm wrote in his letter.
Denholm’s choice of words – “get Elon’s attention and motivate him” – raised eyebrows, because most independent board chairs do not typically write open letters urging shareholders to approve compensation packages. of executives, let alone claiming that compensation is necessary to keep the CEO motivated.
Even before the 2018 pay package was struck down by the Delaware court, Musk threatened shareholders with his divided attention because he runs or spends significant time at SpaceX, X.com (formerly Twitter) and Boring Co., among others. other companies.
“I’m not comfortable making Tesla a leader in AI and robotics without having 25% voting control. Enough to have influence, but not so much that I can’t be reversed”, Musk said from his X account in January. “If that’s not the case, I would prefer to build products outside of Tesla.”
Case in point: Tesla recently faced reports that Musk ordered Nvidia (NVDA) AI chips intended for Tesla to be diverted to X.com. Musk defended the decision after the report was released, saying Tesla lacked space to use the chips and they would have otherwise sat in a warehouse.
Musk also just withdrew his lawsuit against OpenAI, the creator of ChatGPT, ahead of a hearing on Wednesday, without giving any explanation. Musk’s xAI company competes directly with OpenAI, among others.
Musk’s threat of AI and robotics, his strange strategic moves and backtracking, and his own advocacy of his pay package have shareholders worried he won’t care as much about Tesla’s ‘he doesn’t get what he wants. Denholm even acknowledged as much, saying there are “other places” where Musk could spend his time and energy.
“What we recognized in 2018 and continue to recognize today is that one thing Elon certainly does not have is unlimited time. He also has no shortage of ideas and “other areas where he can make an incredible difference in the world,” she wrote.
Musk’s supporters have doubled down on the argument that his presence is necessary for Tesla’s future.
Longtime Tesla shareholder Baillie Gifford said he would vote in favor of Musk’s plan, according to Bloomberg sources, the reasoning being that the plan was aligned with shareholder returns.
“Elon is the ultimate key risk man,” billionaire Tesla investor Ron Baron wrote in an open letter last week. “Without his relentless drive and uncompromising standards, there would be no Tesla.”
“I would say no other leader is as aligned with shareholders as @elonmusk who has committed to paying no salary, no bonus, no stock compensation FOR 10 YEARS unless he has created tremendous value for @Tesla shareholders,” Cathie, founder and CEO of ARK Invest. Wood posted on X late last week.
Conversely, proxy advisory firm Glass Lewis urged shareholders to vote against Elon Musk’s compensation, arguing that the “excessive size” of the award and its dilutive effect on existing shareholders were major concerns . ISS, the other major proxy advisory firm, recommended that shareholders also vote against the bill.
While a few small groups of shareholders have spoken out against Elon Musk’s pay package, one sizable group has come out against Musk this weekend: Norway’s $1.7 trillion sovereign wealth fund.
“We remain concerned about the total amount of the award, the structure considering performance triggers, dilution and lack of key person risk mitigation,” said Norges Bank Investment Management (NBIM), the fund operator.
The fund, which also opposed Musk’s wage plan in 2018, has a $5.6 billion stake comprising 31.57 million shares, or 0.99% of all shares outstanding, which actually Tesla’s seventh shareholder, according to Capital IQ.
And earlier this week, the California State Teachers’ Retirement System (CalSTRS) also said it would vote against Musk’s pay package, with the pension fund’s chief investment officer telling CNBC that the stock awards were “ridiculous “. CalSTRS owns approximately 4.7 million shares of Tesla.
The other major funds that hold the largest stakes in Tesla – Vanguard, BlackRock and State Street, among others – have not commented on Musk’s pay package.
The drama could, however, be much ado about nothing when the votes are counted, with shareholders expected to give Musk what he wants.
“(Musk’s pay package) has been a hot topic of controversy among some investors, but we expect the 2018 package to be overwhelmingly re-approved,” Wedbush analyst Dan Ives predicted in a note to investors at the end of last week.
Although approval of the pay plan will eliminate a “hangover” in Tesla stock, Ives believes Tesla needs Musk more than ever to guide the company through a crucial period.
“Musk must commit that all AI initiatives are under Tesla’s hood and not separated,” Ives said, reiterating his outperform rating and $275 price target.
CFRA’s Garrett Nelson believes the vote will be closer than expected.
“Clearly the board is concerned about the vote given its shareholder outreach efforts,” Nelson said in a statement to Yahoo Finance, writing that the vote will likely be lower than the 73% approval that the plan received in 2018.
Nelson added: “We have long argued that one of the main reasons the stock trades so high relative to the rest of the industry is Musk’s innovation. If the salary package were to be rejected, it could increase uncertainty regarding the future direction and leadership of the company.
Pras Subramanian is a journalist for Yahoo Finance. You can follow it Twitter and on Instagram.
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