Dispute Over Elon Musk's $46B Pay Sparks Concerns About Tesla's Leadership

Tesla Faces Crucial Decisions at Upcoming Shareholder Meeting.

by Nouman Rasool
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Dispute Over Elon Musk's $46B Pay Sparks Concerns About Tesla's Leadership
© Apu Gomes/Getty Images

Tesla investors are gearing up for a potentially brutal showdown at the June 13 shareholder meeting. At issue is Tesla CEO Elon Musk's almost-unfathomable $46 billion stock-option package. Shareholder groups, led by New York City Comptroller Brad Lander, acting on behalf of the New York City pension funds, are focused critics of the compensation scheme.

The combined funds managed total assets of $260 billion and are resisting what they consider an excessive contract for a part-time CEO. The controversy is that Musk overexerts himself with his various projects—SpaceX, Neuralink, and the Boring Company.

According to opposing investors, this has led him to neglect his duties at Tesla. Instead, critics argue, other projects—contributing to yet another new one, xAI—have taken critical talent away from Tesla's AI and autonomy teams, in turn imperiling the company's leadership in those areas.

At its simplest level, the complaint is that the Tesla board has been all too permissive, far too willing to let Musk do his thing without insisting he live up to his job of being a full-time CEO at Tesla. This dissent has, however been heightened by more recent moves on Musk's part such as recently reallocating some of the top Tesla engineers to work at X, once known as Twitter.

this has ignited a fear that Musk is using Tesla more as a personal tool and not necessarily an individual entity with potentially negative consequences of Tesla's stock performances. The dissidents do argue that the actions of Musk have accounted for Tesla's underperformance to its counterparts and the major market indices like S&P 500, General Motors, and Ford.

Board Defends Musk's Pay

The board at Tesla and its defenders, however, are totally on board with the proposed remuneration package. They point to Musk’s past achievements under a similarly ambitious compensation scheme set a decade ago, which, they argue, brought significant financial growth and profitability to Tesla.

Robyn Denholm, Tesla's independent board chair, emphasized in a recent video that the previous targets were so ambitious that skeptics deemed them nearly impossible. Yet, Musk not only met these targets but also significantly enhanced shareholder value, justifying the structure of his compensation.

The upcoming vote also encompasses other crucial decisions, including a proposal to relocate Tesla’s incorporation from Delaware to Texas. This move is seen as a strategic shift following a Delaware court's adverse decision regarding Musk's previous compensation package.

Tesla argues that this relocation would better respect shareholder rights, highlighting a growing discontent with the Delaware judiciary's stance on corporate governance. Adding to the complexity, the dissenting investors are urging fellow shareholders to withhold support from board members close to Musk, including his brother Kimbal and James Murdoch. They argue that these relationships compromise the board’s independence and its ability to govern without bias.

Elon Musk
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