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A group of Tesla investors is urging shareholders to oppose a $46 billion compensation plan proposed for CEO Elon Musk, stating that it was not in the best interests of the electric vehicle manufacturer.
Tesla is currently facing challenges including a decline in global sales, reduced demand for electric vehicles, an outdated range of models, and a significant drop in its stock price of 30 per cent this year.
The group, led by New York City Comptroller Brad Lander, reached out to fellow Tesla shareholders to vote against Musk’s compensation and the re-election of two board members. They argue that the board’s close ties with Musk have compromised their ability to properly assess the compensation package.
Why Tesla shareholders don’t want a payout for Elon Musk
Concerns have been raised that approving Musk’s pay could lead to litigation over allegations of corporate waste. Musk is perceived as a “part-time CEO,” as he is increasingly involved with other business ventures, according to the group’s letter.
They stated, “Shareholders should not pretend that this award has any kind of incentivizing effect—it does not. What it does have is an excessiveness problem, which has been glaringly apparent from the start.”
In addition, the letter references a 2018 observation by the Institutional Shareholder Services (ISS) that the pay package was designed to ensure Musk’s commitment to Tesla over ten years. However, the group criticized this intention as “an abysmal failure,” noting Musk’s growing external business engagements.
The letter also warns that shareholder approval of the compensation could prompt a similar or larger award proposal next year.
The shareholders are also advocating for a vote against the re-election of board members Kimbal Musk, Elon’s brother, and James Murdoch, formerly of 21st Century Fox.
Last month, Tesla requested shareholders to reinstate Musk’s previously rejected pay package, valued at $56 billion, and to consider relocating the company’s headquarters to Texas. Judge Kathaleen McCormick in Delaware called the compensation an “unfathomable sum,” ruling that he “failed” to prove that it was fair. Musk pinned a post by Tesla on X, which he also owns, urging Tesla shareholders to grant him $50 billion in retroactive pay.
We have put forward two especially important proposals for our Annual Meeting of Stockholders—and we need your vote.
Protect your rights as stockholders & protect the value of your investment by voting FOR the ratification of the 2018 CEO Performance Award & FOR Reincorporating… pic.twitter.com/ONmB7oZfyM
— Tesla (@Tesla) May 20, 2024
These proposals will be decided upon at Tesla’s annual stockholders meeting scheduled for June 13.
In a regulatory filing last month, Chairperson Robyn Denholm claimed that Musk has achieved growth and met all the operational and stock value targets specified in the 2018 compensation package, which had been approved by shareholders. Since the initiation of that package, Tesla’s shares have increased by 571 per cent.
Tesla also relinquished its position as the top global electric vehicle provider in the last quarter of 2023.
Featured image: Canva / Steve Jurvetson / Debbie Rowe / The Royal Society
