Investors clash over Elon Musk’s $46 billion pay package: ‘The board has yet to ensure that Tesla has a full-time CEO’

Tesla investors are pushing to shoot down the largest lunar compensation plan in history.

A group including New York City pension funds filed a notice Monday urging others to vote against Tesla CEO Elon Musk’s $46 billion stock option package at the annual meeting. shareholders of the company on June 13. New York City Comptroller Brad Lander, who serves as an investment advisor. to the funds of the city with 260 billion dollars in assets, organizes the charge.

According to the letter he signed, Tesla’s board is “too beholden” to Musk and didn’t bother to intervene when Musk ignores Tesla to focus on his roles at Boring Company, Neuralink, SpaceX, X and other companies. Investors complained that Musk split his time between companies, focusing on one business per day. “The board has yet to ensure that Tesla has a full-time CEO,” the investors said.

Meanwhile, he is siphoning off key talent from Tesla. “More recently, Musk began poaching top engineers from Tesla’s AI and Autonomy team for his new company, xAI, including Ethan Knight, who was head of computer vision at Tesla,” the letter said. ‘investor.

The announcement foreshadows a showdown next month between some investors in Tesla’s pension funds, who believe they are paying too much for a part-time CEO, and the electric vehicle maker’s individual investor base who see Musk as a leader visionary who must stay at Tesla at all costs. At issue is the shareholder vote to ratify Elon Musk’s compensation plan, now valued at around $46 billion, after it was overturned by a judge in January. Tesla proposed the compensation plan a second time in the spring and lent its support to the proposal.

Musk rallied support from the retail base with tweets thanking them for voting and with Tesla’s own ads promoting a vote in favor of Musk’s compensation plan. Since April 29, Tesla has informed investors 11 times that Musk had tweeted about the meeting or updated its voting website, titled “Protecting Your Investment and the Future of Tesla.”

According to the dissident investors, including Amalgamated Bank, AkademikerPension and SOC Investment Group, Musk poses a major risk to the stock’s value because he has pledged part of his 20% stake in Tesla as collateral for loans. “If Musk were ever forced to sell his promised shares, it could cause a massive drop in the stock price to the detriment of shareholders,” the investor’s letter said.

Additionally, the hands-off nature of the board means Musk treats Tesla “like a vault” for himself and his other companies, investors say. Musk admitted to using Tesla engineers to work on issues at Tesla for its other businesses,” according to the letter. These “distractions” played a significant role in Tesla’s underperformance compared to the S&P 500, General Motors and Ford, investors said.

Tesla’s board of directors, however, is no different. The website Tesla created to support its wage ratification vote features voting instructions and other information about the shareholder meeting, including a video with independent board chairwoman Robyn Denholm. In it, Denholm said Musk’s compensation plan was set up a decade ago with goals so “far-fetched, so extraordinarily ambitious, that skeptics laughingly called them impossible.”

“If he failed, Elon was entitled to no salary, no cash bonus and no equity,” Denholm said. “But if Elon were able to pull this off, you and all the other shareholders would reap the benefits.” The price worked. In half the time, Musk grew his revenue from $11.8 billion to $96.8 billion and transformed his profitability from $2.2 billion in the red to a profit of $15 billion, Denholm said.

Indeed, one of the main reasons the vote to ratify Musk’s Moonshot compensation plan was successful in 2018 was that the stakes were markedly different from those of other CEOs. Tesla’s board was willing to pay Musk $0 if he didn’t meet targets, rather than applying what’s known as “board discretion,” whereby Corporate directors continue to pay CEOs who have failed to meet financial targets.

Often, boards of directors tell investors that they do not want to hold CEOs or executives accountable for economic headwinds or other factors beyond their control that contributed to their failure to meet stated financial goals or objectives. However, boards must balance the need for discretion with the need to retain executives and CEOs in office. Only in an extreme case would a CEO receive no compensation for long-term reward – in addition to no salary, cash bonus or time-based shares – because the risk to lose the manager and destabilize the company would be too high.

What makes Musk’s compensation plan complicated is that investors are likely foreseeing problems ahead for Tesla, while the board appears to be focused on compensating Musk for the goals he achieved in the past. Additionally, the size of his salary and the fact that Tesla’s performance has struggled this year added to the complexity. The company announced it would lay off 10% of its staff and even cut its summer internship program, while devoting resources to reinstate Musk’s Moonshot. Musk himself ignores the standards that most publicly traded company CEOs follow and appears to act – and tweet – impulsively and without speaking with independent board directors, which does little to reassure the public. investors.

In addition to ratifying its compensation plan, Tesla is seeking investor approval to move from its Delaware headquarters to Texas, a move that appears driven by the Delaware judge’s ruling on Musk’s compensation. According to the voting site: “The Delaware court has shown that it will ignore the wishes of our shareholders. We believe in shareholder rights. We believe Texas courts will respect these rights.

In addition to rallying other investors to vote against Musk’s salary, the splinter group is asking shareholders to withhold support for Musk’s brother Kimbal Musk and former 21st Century Fox CEO James Murdoch . Kimbal has been on the board for 20 years and Murdoch is friends with Musk. Neither is truly independent, investors said.

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Sara Adm

Aimant les mots, Sara Smith a commencé à écrire dès son plus jeune âge. En tant qu'éditeur en chef de son journal scolaire, il met en valeur ses compétences en racontant des récits impactants. Smith a ensuite étudié le journalisme à l'université Columbia, où il est diplômé en tête de sa classe. Après avoir étudié au New York Times, Sara décroche un poste de journaliste de nouvelles. Depuis dix ans, il a couvert des événements majeurs tels que les élections présidentielles et les catastrophes naturelles. Il a été acclamé pour sa capacité à créer des récits captivants qui capturent l'expérience humaine.
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