A group of Tesla investors have come together to encourage other shareholders to vote against CEO Elon Musk’s historic compensation package.
$56 Billion Pay Package
Tesla CEO Elon Musk has spent years trying to push a staggering $56 billion payout for himself – but now, several shareholder groups invested in the company are pushing back.
Upcoming Tesla Meeting
The EV giant’s next shareholder meeting will take place on June 13, and Tesla shareholders must vote on whether to approve a historic pay package, made up of $56 billion worth of shares, for the company’s co-founder and CEO.
A Contradictory Letter
But now a letter has been sent out to Tesla shareholders. Written by the New York City Comptroller Brad Lander and signed by several of NYC’s largest employee pension funds and other investment groups, the letter urged investors to vote against the pay package.
A “Part-Time CEO”
It argued that the payment would do little to serve investors or the company, referring to Musk as a “part-time CEO” who was no longer fully committed to Tesla affairs and development, let alone shareholder interests.
Going Back to 2018
According to the letter, the original pay package which was first proposed in 2018, was established as an incentive to keep Musk focused on Tesla for the next decade.
His Commitments Aren’t With Tesla
“If this [time commitment incentive] was one of the primary reasons for the 2018 pay package, then it has been an abysmal failure,” Lander wrote. “As six years later Musk’s outside business commitments have only increased.”
Heading Several Companies
It is a reasonable accusation, as Musk is now the concurrent Chair and CTO of aerospace company SpaceX, and CEO of X and XAI, amongst other companies like NeuraLink.
No Incentivizing Effect
“Shareholders should not pretend that this award has any kind of incentivizing effect — it does not,” Lander continued. “What it does have is an excessiveness problem, which has been glaringly apparent from the start.”
Largest Compensation Package in History
Excessive certainly refers to the size of the package, which would make it the largest compensation package in corporate history.
Put to Vote in 2018
The package was first put to vote in 2018, and it passed. It might have been successful if a group of shareholders hadn’t taken their complaints to court.
Voiding the Package
Their case went to trial in 2022 and was finally settled in January of this year when a Delaware judge voided the package over claims that Tesla had misled their shareholders and that the company board had a conflict of interest due to several close relationships between Musk and board members.
“Material Governance Failure”
The letter went even further, claiming that Tesla was ”suffering from a material governance failure which requires our urgent attention and action.”
Not Enough Insurance from the Board
“Even as Tesla’s performance is floundering, the board has yet to ensure that Tesla has a full-time CEO who is adequately focused on the long-term sustainable success of our company,” Lander continued, referring to the drop in Tesla’s EV deliveries in the previous quarter.
Board Re-Election
Musk’s pay package isn’t the only decision shareholders will be asked to vote on. They will also be asked to vote on the re-election of Kimball Musk, Musk’s brother, and James Murdoch, son of Australian media magnate Rupert Murdoch.
Too Close to Musk
The letter also urged shareholders to vote against these reappointments on the grounds that both men had too close of a relationship and were thus too biased toward Musk.
Close Personal Ties
“Tesla’s Board is stacked with directors that have close personal ties to CEO Elon Musk, “ Lander elaborated. “There are multiple indications that these ties, coupled with excessive director compensation, prevent the level of critical and independent thinking required for effective governance.”
Other Investor Groups Involved
Aside from the New York pension funds signed to the newsletter, they were also joined by Amalgamated Bank, SOC Investment Group, Nordea Asset Management, United Church Funds, and Danish pension fund AkademikerPension, all of which have been critical of the compensation package.
Incorporating to Texas
The meeting will also include a vote to incorporate the firm into Texas, where the company headquarters is currently located.
Convincing Shareholders
On the opposite side of the discussion, Tesla and Musk have pushed hard to convince shareholders to approve the package.
Advertising Efforts
Earlier this month Tesla – which has historically eschewed mass advertising – made the unusual move of paying for several ads and promoted posts encouraging shareholders to ratify Musk’s 2018 pay package.
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The post – Major Pension Funds Urge Tesla Shareholders to Vote Against Musk’s $56 Billion Payday – first appeared on Liberty & Wealth.
Featured Image Credit: Shutterstock / Frederic Legrand – COMEO.
The content of this article is for informational purposes only and does not constitute or replace professional financial advice.
