A group of Tesla shareholders is urging fellow investors to vote against a proposed $56 billion compensation package for CEO Elon Musk. This move comes ahead of Tesla’s annual shareholder meeting, scheduled for June 13, 2024. The controversy centers around Musk’s hefty pay deal, which was previously invalidated by a Delaware court due to governance issues.
Background of the Compensation Package
In 2018, Tesla shareholders approved one of the largest compensation Tesla Shareholders Urge Vote Against Musk’s Compensation Package in corporate history, potentially worth $56 billion for Musk. This package was contingent on Musk meeting certain performance milestones, which he achieved, driving Tesla’s market value to over $650 billion by mid-2021. However, Tesla’s market capitalization has since fallen below $600 billion, leading to increased scrutiny of Musk’s compensation.
Earlier this year, a Delaware judge voided the compensation package, citing concerns over whether Tesla’s board had adequately protected shareholders’ interests when approving the deal.
Shareholder Opposition
Leo Koguan, Tesla’s largest retail shareholder, is leading the opposition against Musk’s pay package. Koguan, who owns more than 27 million shares, has publicly announced his intention to vote against the deal. He has also voiced his concerns over the management of Tesla, describing the company as a “family business masquerading as a public company”.
Koguan’s opposition is significant, given his substantial investment in Tesla. Despite his previous support for Musk, Koguan’s stance reflects growing frustration among some shareholders regarding Musk’s management style and the perceived lack of governance.
Institutional Investors and Retail Support
While Koguan’s opposition is notable, the outcome of the vote will heavily depend on the stance of institutional investors, who hold a large portion of Tesla’s shares. Major shareholders like Vanguard Group and BlackRock have yet to disclose their voting intentions. The recommendations of proxy advisory firms such as Institutional Shareholder Services Inc. (ISS) and Glass Lewis & Co. are also expected to influence the vote.
On the other hand, Musk retains significant support among retail investors, many of whom have voiced their backing on social media platforms. Campaigns on platforms like X (formerly Twitter) are urging retail investors to vote in favor of Musk’s compensation package, with some shareholders using hashtags like #VotedTesla24 to show their support.
Implications for Tesla
The upcoming vote on Musk’s compensation package is more than just about the CEO’s pay. It also reflects broader concerns about corporate governance and the direction of Tesla under Musk’s leadership. Shareholders are also set to vote on moving Tesla’s state of incorporation from Delaware to Texas, another contentious issue following the court’s decision.
Tesla’s financial performance adds another layer of complexity to the situation. The company has faced a decline in EV sales and has recently announced significant job cuts. These challenges, combined with executive departures and Musk’s involvement in multiple ventures, have raised questions about the sustainability of Tesla’s growth and Musk’s ability to manage the company effectively.
