Tesla investors, including state officials, have opposed the electric vehicle maker’s proposed $1 trillion pay package for Elon Musk in a letter sent last week, Forbes reported.
Shareholders sent the letter on October 2, which urged other investors to reject the pay package at Tesla’s annual shareholder meeting on November 6, as per the report. Further, the letter accused the board of “harming Tesla’s reputation” in their fight to retain Elon Musk.
Who signed the letter?
Forbes reported that the letter was signed by prominent investors, including the SOC Investment Group, and American Federation of Teachers; the state treasurers of Nevada, New Mexico, Connecticut, Massachusetts, Colorado and the comptrollers of Maryland and New York City.
Tesla opposition letter: Top 5 highlights
- Investors express low faith in board impartiality: In the letter, signatories alleged no confidence in impartiality from the board, in regards to Elon Musk. They claimed that Tesla’s board is “made up of directors with close ties to the CEO” and the proposed pay packages “provide so much discretion to Tesla’s Board that shareholders cannot be confident of impartial treatment.”
Noting Tesla’s “negative and highly volatile” performance during the past year, the letter criticised the board’s ability to “provide objective, rigorous oversight of management”.
“We believe that these relationships have enabled a culture where the Board consistently fails to challenge Mr. Musk, even when his actions are detrimental to the Company’s value and its public shareholders,” they alleged.
- Elon Musk’s government role causing issues: The letter also accused the board of failing to ensure that Elon Musk devotes his “full attention” to Tesla. This was a jibe at the world’s richest man’s stint into US politics. As part of the Trump administration, he ran the Department of Government Efficiency (DOGE) — an assignment that brought blow back to all Elon Musk related brands, especially Tesla.
“The Board has permitted Mr. Musk to be overcommitted for years, allowing him to continue as CEO while taking time consuming leadership roles at his other companies, xAI/X, SpaceX, Neuralink, and Boring Company. Most recently, the Board apparently failed to intervene when Mr. Musk took a leadership position at the US Department of Government Efficiency (DOGE), a role widely seen as having a negative impact on the Company’s performance and brand,” the letter said.
- Shareholders announce disapproval: In his own separate statement, New York State Comptroller Thomas P DiNapoli said shareholder the New York State Common Retirement Fund will vote against the pay proposal.
“Musk’s significant stake in Tesla has failed to focus his attention on the company. Now, despite these distractions, Tesla proposes to reward Musk, currently one of the richest men in the world, with another unprecedented pay package. We have long opposed Musk’s excessive compensation proposals, and this package continues the troubling pattern of prioritizing him over the interests of every other Tesla shareholder,” he posted on social media platform X (formerly Twitter).
- Has Tesla responded? Reacting to DiNapoli’s statement, Tesla’s official account on X justified the pay proposal as one that “completely aligns Elon’s compensation and shareholder value creation.”
“Tesla’s Special Committee designed a performance incentive plan that completely aligns Elon’s compensation and shareholder value creation. If Elon Musk doesn’t deliver results, he receives nothing. We’re talking about trillions of dollars of value for shareholders + efforts that will accelerate global prosperity. Under Elon’s leadership, Tesla has achieved an annualized return of 49% since the beginning of 2018. That’s the difference that engaged leadership & a focus on value creation can make. Hard to argue Elon’s leadership & the Tesla Board’s governance haven’t been effective,” the automaker stated.
- What was the board proposal? Tesla board in its filing with the United States Securities and Exchange Commission (SEC) last month proposed an additional 12 per cent stake in the company for Elon Musk. These are set in 12 tranches over the next 10 years, subject to completion of specific goals. To nab the full $1 trillion pay, Elon Musk would have to rocket Tesla’s market cap from $1.37 trillion to $8.5 trillion over the next 10 years, it said.
Notably, on October 2, Elon Musk became the first person in history to reach a net worth of $500 billion, according to Forbes Real-Time Billionaires.
As per a Reuters report quoting Forbes Real-Time Billionaires, Elon Musk had a net worth of $500.1 billion as of 4:15 pm ET. This is closely tied to his stake in Tesla, where he holds over 12.4 per cent shares as of mid-September.
(With inputs from Agencies)
