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Tesla’s pay battle tests the strength of Elon Musk’s mystique

Tesla’s pay battle tests the strength of Elon Musk’s mystique

Image source, Getty Images

  • author, Natalie Sherman
  • Role, BBC News

In 2018, Tesla shareholders approved the largest pay package in history for Elon Musk. Six years later, would they do it again?

The electric car company will find out this week at its annual meeting, as it seeks to show support for the nearly $50 billion deal.

The package – valued at about 300 times what the highest paid manager in the United States received last year – received the support of 73% of shareholders who voted six years ago.

The compensation plan gives Mr. Musk rights to nearly 300 million shares — roughly 10% of the company’s stock — as a reward for the company for achieving goals that were once considered laughable, such as becoming a $650 billion company.

But earlier this year, a Delaware judge invalidated the deal after a small investor sued, ruling that the amount was “unfair” and that the process of determining the package, by a Musk-dominated board, was “deeply flawed.”

Instead of backing down, Tesla said it would put the deal to another vote and seek to reincorporate the company outside of Delaware, calling the decision “fundamentally unfair and inconsistent with the will of shareholders.”

Tesla is under pressure

Tesla says the goals were ambitious and that compensation was necessary to keep the billionaire involved.

“We must stick to our deal,” Chairman Robin Denholm wrote to shareholders this month.

The pay deal, which was presented to the world six years ago, sparked controversy, but few questioned Musk’s importance to Tesla’s future.

Musk has been criticized for alienating potential buyers with controversial political musings, and has been accused of diverting attention — and resources — to his other companies, including social media site X, formerly Twitter, which he bought in 2022.

“I voted no.”

Comment on the photo, Ven Kolli wants to send a message to the board

“If this had been 2018, I would have voted yes, but today, after everything that happened, I voted no,” says investor Vin Cooley, an IT consultant from Colorado, who owns one of the company’s cars and was the first to buy a Tesla. stocks for nearly a decade.

Although the 42-year-old expects the deal to pass, he hopes the tough vote will send a message to Tesla’s board, which for years has faced concerns that it is not exercising enough oversight over Mr. Musk. He’s not worried about losing Mr. Musk, believing Tesla has reached a point where it can succeed without him.

“Since the Twitter acquisition closed, a lot of the decisions that Elon Musk has made specifically have been very questionable,” he says.

“Ultimately, while he is CEO, his responsibility lies with Tesla and I think the board has lost sight of that,” he says. “This is my chance to have my voice heard, no matter how small.”

Legal experts say it is not clear whether the court will accept the re-vote, which is non-binding, and allow the company to restore the pay package. At least one shareholder has already filed a lawsuit against the company’s move.

“If shareholders overwhelmingly approve the pay package, Musk hopes, and perhaps rightly, that the court will think twice before striking it down again,” she says.

As the vote approached, Musk and the company continued to make their case with a barrage of letters and television appearances, even announcing a lottery for shareholders to take a Musk-led tour of the company’s factory in Texas.

Musk sparked drama on social media, celebrating investors who voted for him, while berating opponents as “oath breakers.”

The businessman, who already owns about 13% of the company, also raised the specter of leaving Tesla unless he takes a larger stake.

But keeping Musk may be a less compelling argument than it used to be, says Steve Westley, founder of the Westley Group, an early backer of Tesla.

“Elon is a unique visionary… but I don’t know if that means he should run any or all of these companies today,” says Westley, who no longer owns shares.

“No one stays at the top forever, especially when you’re trying to lead seven companies at once.”

“We think it should be paid.”

Image source, Getty Images

Comment on the photo, Tesla is also asking shareholders to approve a plan to reincorporate the company in Texas, where it has a large factory

Opponents of the deal include shareholder advisory firms ISS and Glass-Lewis, as well as several major government investors, including Norges Bank, which manages the Norwegian pension fund and is one of Tesla’s 10 biggest backers.

The foundation, which owns about 3.1 million shares, says it backed the deal in 2018 because it “provided extremely stretch targets that would generate a huge amount of money for shareholders if reached.”

“And now that we have agreed to that, we believe it should be paid.”

Executive pay packages at major companies are usually approved by 90% of the vote.

Although the deal may not get that far, analysts give it a good chance of passing, especially if Musk’s efforts to rally support among his large fan base are successful.

“Making better cars should be the focus.”

Image source, Getty Images

Comment on the photo, The Tesla Model Y is the world’s best-selling electric car

Individual investors, unlike professional firms, own more than 40% of Tesla shares, an unusually high figure, reflecting the company’s popular appeal.

Some say their enthusiasm has waned.

“There were a lot of distractions that weren’t related to developing the brand and making better cars, and I feel like that should be the focus,” says Khairallah Ashkar, a 28-year-old engineer in Washington, D.C., who was the first to invest in the company. . The company in 2020.

“He did a good job but I don’t think it’s good enough to validate the crazy money they’re asking us to give him.”

But on stock trading platform eToro, where Tesla has long been one of the most popular stocks, 97% of votes were in favor of the plan.

Nearly a third of the nearly 2 million shares owned on the platform have voted, an unusually high number.

“We were surprised by the amount of participation but I don’t think we were surprised by the direction of the vote,” says eToro CEO, Yoni Asia.

“We have a lot of Tesla fans on eToro and a lot of Elon fans… It will be very interesting to see the results of the voting.”