Elon Musk’s future at Tesla hinges on shareholders’ vote on pay package

SAN FRANCISCO — For weeks, Tesla CEO Elon Musk has been campaigning to persuade Tesla shareholders to reinstate his nearly $50 billion pay package, which is the “largest ever in the public markets,” according to the Delaware judge who struck it down.

The company released a video telling shareholders how to vote while showing Musk’s humanoid robot Optimus. Those who voted were offered the chance to win a Musk-escorted tour of the company’s “gigafactory” in Austin. And Musk tweeted repeatedly about the vote on his social media platform X, where this weekend he predicted victory: “Public sentiment clearly supports,” he wrote.

But with voting set to end Thursday at the company’s annual shareholder meeting in Austin, the outcome appeared far from certain. Major shareholders are divided over whether Musk, one of the world’s richest people and a sometimes-disturbing leader, deserves such an award. That means the outcome could depend on the votes of individual investors, many of whom bought shares because of Musk’s public image as a generational genius.

The outcome will have a significant impact not just on Musk’s fortunes but also on the future of Tesla, which is struggling with weak sales, global competition and mass layoffs. If shareholders refuse to grant him a compensation package, Musk has threatened to leave the company and build future technology elsewhere, including robotics and artificial intelligence. If shareholders approve the package, Musk will gain greater control over Tesla’s board through stock options.

In a letter to investors earlier this month, Tesla Chairperson Robin Denholm urged investors to support Musk because he is “not a typical executive” and “requires something different” to motivate him.

“Elon’s unique contributions have transformed Tesla from a loss-making, ambitious company in 2018 that had to overcome many obstacles and challenges, to what it is today – a company that is literally changing the world,” he wrote. “These contributions must be respected.”

But New York City Comptroller Brad Lander, whose office holds about 3.4 million Tesla shares and makes investments on behalf of public employees, said the package is inappropriate given Tesla’s struggles and Musk’s insistence on dividing his attention among multiple companies, including a new artificial intelligence effort called xAI.

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“We need a full-time CEO who is focused on growing the company and delivering superior returns to shareholders, not someone who is distracted or chasing shiny new objects,” Lander said.

When a majority of Tesla shareholders approved Musk’s compensation in 2018 — a package of stock options in lieu of salary that was then worth $56 billion — it elevated Musk from eccentric CEO to the world’s richest person, boosting his bets to explore the universe, digitize the human brain and acquire Twitter’s “real town square.” But some shareholders sued, claiming the process was unfair.

Earlier this year, a Delaware judge agreed. He dismissed the pay package, calling it “an unfathomable amount” — “more than 33 times more than the plan’s closest comparison, which was Musk’s previous compensation plan” — and said it was approved by a board filled with Musk’s old friends and former divorce lawyer.

The board is now asking shareholders to reinstate the pay package, which would increase Musk’s voting power to about 25 percent, and give the company the right to move its corporate headquarters from Delaware to Texas.

It’s unclear which way the vote will go: While some major investors have vowed to oppose the package, others have remained silent. Vanguard Group, BlackRock and State Street Corp., which collectively own about 17 percent of Tesla stock, have not publicly stated their position. None responded to requests for comment.

Meanwhile, about 40 percent of Tesla is owned by non-institutional investors, including individual retail investors. Many are Musk fans, such as billionaire Ron Baron, who called Musk indispensable to Tesla and said his compensation should recognize that fact.

“Our answer is clear, loud and unanimous: Tesla is better with Allen. Tesla is Allen,” Baron said.

But others are growing frustrated with Musk as the company’s performance has declined. Leo Koguan, one of Tesla’s largest individual shareholders, said “enough is enough,” adding that he would vote against the proposal.

In recent weeks, a coalition of seven large institutional investors, including the NYC Comptroller and Amalgamated Bank, has urged shareholders to vote against the package, citing “material governance failures.” Proxy advisory firm ISS called the package excessive despite Tesla’s success, noting that it’s unclear whether it will “increase Musk’s focus on Tesla.”

Marcy Frost, CEO of the California Public Employees Retirement System, which represents 2.2 million public workers in the state and is among Tesla’s largest shareholders, said she would also vote against the package, as she did in 2018. Frost said the vote against Musk wasn’t “personal,” arguing that his “enormous” compensation could flow to shareholders.

“It’s really important that we as shareholders get a return on the capital that we’re allocating to these public companies,” Frost said.

James Park, a professor at UCLA School of Law who studies securities regulation and corporate law, said a vote in favor of the proposal would be a “powerful statement” that shareholders want Musk to remain integrally involved in the company and that they “can’t imagine Tesla without him.” However, a vote no would reflect dissatisfaction with Musk’s leadership and the company’s current state.

Denholm said in a letter to investors this month that Musk had driven the company’s growth in size and profitability over the past six years, and said approving the pay package is “more important than ever.”

“If Tesla is to retain Elon’s attention and motivate him to devote his time, energy, ambition, and vision to delivering comparable results in the future, we must stick to our agreement,” he wrote.

In a tweet in January, Musk emphasized his desire for greater control over the company.

“I’m uncomfortable with Tesla being a leader in AI and robotics without ~25% voting control,” he wrote. “Enough to be influential, but not so much that I can’t be flipped.”

Musk and Tesla did not respond to requests for comment.

A ‘no’ vote could slow down AI efforts

The high-profile vote comes at a sensitive time for Tesla, which has lost more than 30 percent of its stock value since the start of the year. In April, the company reported a far bigger-than-expected 55 percent drop in first-quarter profit due to a drop in sales. To assuage investor concerns, Musk has made lofty promises about launching fully autonomous “robotaxi” in August, an ambitious deadline that left many observers skeptical about how he would actually accomplish it.

UCLA professor Park said the current economic backdrop will heavily influence voters’ choices.

“There may be a group of retail investors who are very devoted to Musk who are willing to overlook some of these events and may not be aware of them and they may vote in favor of the package,” Park said. “And there may be others who are disappointed and may be disillusioned about Musk.”

Morgan Stanley analyst Adam Jonas said if Musk doesn’t succeed in getting his point across, Tesla shareholders should be prepared for a significant slowdown in AI efforts.

Some are willing to take that risk. Nell Minow, a vice president at ValueEdge Advisors, said she donated most of her Tesla stock to charity after voting “no” on the pay package. As an individual investor, she said she is angry with Musk, calling corporate governance at the company “catastrophically poor.”

“You can’t consider this board independent in any way,” Minow said. “If it doesn’t have enough incentive from its existing holdings, I don’t know if that large sum of money will make a difference.”

Kevin Smith, a software engineer who says he owns a small number of Tesla shares, said he was frustrated by the excessive campaigning by both Musk and Tesla, which viewed the vote as an opportunity to make a statement about the court’s decision rather than focusing solely on how much money Musk should be awarded.

“It seems to be a symbolic gesture against the court,” Smith said. “So my symbolic vote is ‘no.'”

Julian Mark and Aaron Shaffer contributed to this report.


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