Tesla CEO Elon Musk has hit back at a California pension fund that claimed it would not support a vote for a historic $56 billion pay package for Musk.
CalPERs’ Votes No
America’s largest pension fund, California Public Employees’ Retirement System (CalPERS), has declared its intentions to vote against a historic $56 billion compensation package for Tesla CEO Elon Musk.
CEO Confirms It
On Wednesday CalPERS CEO Marcie Frost confirmed the decision while speaking to CNBC. “As of today, minus the conversation that has yet to happen with Tesla, we would not be voting in favor of that proposal,” she said in reference to the annual shareholders meeting on June 13.
Other Investor Groups Follow
CalPERS is a major investor in the EV company and is the next in a line of pension funds and investor groups encouraging shareholders to vote against the proposal. Now, Musk is taking a stand.
Doing It for “Social Reasons”
Soon after the statement came out, Musk took to his social media platform X to rubbish CalPERS stance on the $56 billion proposal. “They are doing this for social reasons, at the expense of the state and their constituents,” he told his followers.
“Breaking Their Word”
“What she’s saying makes no sense, as all the contractual milestones were met. CalPERS is breaking their word,” he wrote in another post.
“They Have No Honor”
In a third post, he elaborated that, “CalPERS broke the deal. Shame on them, they have no honor.”
Details of the Deal
These statements refer to the initial $56 billion pay deal that was first proposed back in 2018. Under the deal, Musk could be awarded up to 12% of Tesla stock for every $50 billion increase in market capitalization, as well as the achievement of other financial goals.
Back in 2018
Since these financial milestones were achieved, a $56 billion pay agreement was successfully put to vote in 2018 but was later struck down after a group of shareholders filed a complaint against the company.
Voided in Court
The deal was voided in a Delaware court, where Tesla is currently incorporated, on the grounds that it was “unfathomable,” and that Musk had undue influence over the company’s Board of Directors due to close relationships with several board members.
Upcoming Vote
Since then, Musk and Tesla have been gunning to ratify the historic pay package for a second time. It will go to vote again at the annual shareholders meeting on June 13.
Almost a Quarter of Company Shares
If passed, Musk’s stake in the company would shoot up from 12.89% to 22.4%. He would become the largest shareholder by a staggering margin.
In Tesla’s Top 30
CalPERS’ latest announcement is surely a blow to Musk’s chances. The pension fund is in the top 30 Tesla investors, with 9.5 million shares.
Huge Value for CalPERS
Musk’s anger at the pension fund’s criticisms over his performance is understandable. CalPERS began acquiring Tesla shares in 2018 and under Musk’s leadership, those shares have increased in value by eleven times.
From $40 to $500 Million
CalPER’s initial investment, amounting to 183,343 shares, has risen from $40 million to $500 million.
$1.7 Billion Stake
Since then the pension fund has acquired 9.5 million shares which are worth $1.7 billion altogether, in large part thanks to the financial milestones that were stipulated as part of the pay package agreement.
Various Groups Speak Out
The announcement by Frost is just the latest in a string of Tesla shareholder groups who have spoken against the $56 billion compensation for Musk.
Not Enough Commitment?
Most groups have given similar reasons, largely being that the payout will not serve shareholders or the company, as they believe that Musk is not adequately committed to Tesla due to his myriad other companies and commitments.
Pension Funds and Advisory Firms
On May 20 a group of major pension funds in the US released a statement urging investors to vote “no” in a letter represented by New York City Comptroller Brad Lander. On Sunday last week, the proxy advisory firm Glass Lewis also encouraged investors to vote against the package, calling it “excessive.”
Tesla Defends Musk
Tesla jumped to defend its CEO and to criticize Glass Lewis in a letter to shareholders, describing the firm’s report as “scaremongering” and being based on “faulty logic” and “speculation.”
Value Creation Over CEO Speculation
“Stockholders should care enormously about value creation (which Glass Lewis inexplicably ignores), and not about whether Elon’s perceived ‘focus’ was strong enough,” the company wrote.
“Tesla’s Performance Speaks for Itself”
“Glass Lewis may believe that Elon should have done so with more ‘focus,’ but the fact is that Tesla’s performance speaks for itself,” it added.
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The content of this article is for informational purposes only and does not constitute or replace professional financial advice.
