Investors clash over Elon Musk's $46 billion pay package: 'The board has yet to ensure that Tesla has a full-time CEO'
Is Musk Worth $46B Amid Tesla Turmoil?
Tesla investors, led by the New York City pension funds, are urging a vote against Elon Musk's $46 billion compensation plan, citing concerns over his divided attention among multiple companies and his recruitment of Tesla talent for other projects. A shareholder meeting on June 13 will decide on the proposal, which has been supported by Tesla but criticized for potentially destabilizing stock values if Musk were forced to sell his shares.
The board defends the compensation plan, highlighting its success in significantly boosting Tesla's revenue and profitability since its inception. However, dissenting investors argue that Musk's distractions and the use of Tesla resources for other ventures have negatively impacted the company's performance. The upcoming vote also includes a proposal to relocate Tesla's incorporation from Delaware to Texas, following a critical court ruling.
How has the Tesla board defended Elon Musk's compensation plan, especially in terms of the targets set and achievements made?
The Tesla board has staunchly defended Elon Musk's compensation plan by highlighting the ambitious nature of the targets set and the significant achievements Musk has accomplished2. Robyn Denholm, the independent board chair, emphasized in a video that the compensation plan was established with targets that were considered extremely ambitious and nearly impossible by skeptics at the time2. These targets were set a decade ago and were designed in such a way that if Musk failed to meet them, he would receive no salary, no cash bonuses, and no equity stakes2.
Denholm pointed out that not only did Musk meet these targets, but he also exceeded them in significantly less time than anticipated. Specifically, under Musk’s leadership, Tesla's revenues surged from $11.8 billion to $96.8 billion, and the company turned a profit of $15 billion, a stark turnaround from a previous $2.2 billion deficit. This performance, according to Denholm, validated the structure of the compensation plan, which was uniquely contingent on achieving these high stakes, unlike typical CEO compensation packages that might allow for some earnings despite unmet targets2. This approach, she argued, aligned Musk’s incentives directly with the interests and profitability of the shareholders.
How has Elon Musk's involvement with other companies like SpaceX and Neuralink affected his role and focus as CEO of Tesla, according to the investor letter?
Elon Musk's involvement with other companies such as SpaceX, Neuralink, and his new venture xAI has notably impacted his focus and role as the CEO of Tesla, as highlighted in the investor letter126. The letter, signed by New York City Comptroller Brad Lander and other pension fund investors, criticizes Musk for not dedicating sufficient time and attention to Tesla, pointing out that he splits his week focusing on different companies each day1. This arrangement has led to concerns among investors that Tesla lacks a full-time CEO, which they believe is necessary for the company's success.
Furthermore, the letter accuses Musk of diverting key resources from Tesla to his other business ventures6. It specifically mentions that Musk has begun poaching top engineers from Tesla’s AI and autonomy teams to work for his new company, xAI. This action not only siphons critical talent from Tesla but also raises issues about the prioritization of Musk’s time and resources, potentially jeopardizing Tesla’s operational effectiveness and innovation capacity. The investors express that these distractions have materially contributed to Tesla’s underperformance compared to its competitors and the broader market.