Tesla board went about Musk pay package wrong way: Investor

The main reasons Tesla shareholders, including Gerber Kawasaki Wealth & Investment Management and CalPers, are voting against Elon Musk's pay package are as follows:

1. Negligence of the Board of Directors: Ross Gerber, the CEO of Gerber Kawasaki, argues that Tesla's board of directors has been negligent in not negotiating the size of Musk's pay package. He believes that the board should have worked with Musk to come up with a compensation package that was two-sided and fair.

2. Excessive Compensation: Gerber also believes that the $46 billion pay package is excessively large and that Musk does not need the incentive, as he already owns a significant amount of Tesla stock. He argues that such a massive compensation package detracts from Tesla's main objective, which is manufacturing and selling electric vehicles.

3. Potential Impact on Tesla's Future: Gerber is concerned about the potential impact of Musk's pay package on Tesla's future. He points out that Musk has already stepped back from the company and eliminated many top executives, which could leave Tesla without capable leadership if Musk were to leave the company.

4. Lack of Corporate Governance: Gerber argues that the way Tesla's board has handled Musk's pay package reflects a lack of corporate governance. He believes that the board should have crafted a fair compensation package for Musk with an independent board, as required by law.

5. Shareholder Costs: If the pay package is approved, shareholders may be responsible for a significant portion of the taxes on this compensation. Gerber argues that shareholders should consider whether they are willing to bear this cost.

6. Disconnect between Musk's Interests and Tesla's Success: Gerber also highlights a disconnect between what is best for Tesla and Musk's interests. He argues that Musk is focused on building AI outside of Tesla and moving chips from Tesla to XAI, which may not be in the best interest of Tesla.

Gerber foresees several potential consequences if Elon Musk's compensation package is rejected by the shareholders. Firstly, Musk may threaten to leave the company, which could put Tesla in a difficult position as there may not be anyone at Tesla to run it, given that Musk has eliminated many meaningful executives at Tesla over the last six months. Secondly, if the vote fails, Musk may retaliate against Tesla in some way, potentially further enabling the board in Gerber's view. Lastly, if the compensation package is rejected, it will likely be re-litigated, and the shareholders will be responsible for $25 billion of taxes on this, as Musk would have to liquidate stock to pay, and shareholders will bear that cost, which could be detrimental to the value of the company5.