Ratifying Tesla CEO Elon Musk's $56 billion pay package in the upcoming shareholder vote on June 13 is unlikely to overturn a judge's prior decision to void the 2018 compensation plan. This is because the vote carries more symbolic significance than legal authority.
Further complicating the issue, some individuals and organisations actively oppose Musk's substantial compensation package. Let's delve deeper into who these opponents are and their reasons for contesting Musk's substantial compensation package.
1) ISS
Leading proxy advisor Institutional Shareholder Services (ISS), urged Tesla shareholders to reject CEO Elon Musk's $56 billion pay package, deeming it excessive and disapproval of the plan proposed by the electric carmaker's board.
Additionally, ISS recommended shareholders reject Tesla director James Murdoch in their November 2023 report. However, they supported votes for Kimbal Musk, Elon Musk's brother, and the company's proposed switch of incorporation from Delaware to Texas.
This recommendation aligns with a recent call from another proxy advisory firm, Glass Lewis, urging shareholders to reject Musk's pay package.
2) Glass Lewis
Though recommendations from major proxy advisory firms undoubtedly focus on specific issues at annual meetings, their precise impact on shareholder votes remains a subject of debate and criticism.
In a scathing report earlier this month, proxy advisor Glass Lewis urged Tesla shareholders to reject Musk's record-breaking $56 billion pay package. They criticised the plan for its excessive size, potential dilution of shareholder ownership, and the increased concentration of power it would grant Musk.
The report further flagged concerns about Musk's divided attention due to his involvement in a "portfolio of highly demanding projects," including the prized acquisition of X (formerly Twitter).
3) Norway Wealth Fund
Norway's massive sovereign wealth fund, managed by Norges Bank Investment Management, will vote against Musk's $56 billion pay package at Tesla's upcoming shareholder meeting. According to Reuters, Norway's sovereign wealth fund holds a massive $1.7 trillion in assets and is the world's eighth-largest shareholder in Tesla.
While acknowledging the value Musk's leadership has brought since the 2018 grant, Norges Bank Investment Management, in a recent statement, expressed concerns about the overall size of the award, its performance-based structure, potential dilution of shareholder ownership, and the absence of measures to mitigate key person risk.
4) Tesla Shareholders
The number of Tesla investors contesting Musk's multi-billion dollar compensation package continues to rise. Citing Zachary Shahan of CleanTechnica, Leo Koguan, the third-largest individual shareholder of Tesla stock, has joined the opposition. Koguan holds about $5 billion worth of Tesla stock.
With Tesla's annual meeting just days away, another major shareholder has emerged in public opposition to Musk's multibillion-dollar pay package, which investors will vote on on Thursday.
The California State Teachers' Retirement System (CalSTRS) announced its opposition to Musk's compensation package, with chief investment officer Christopher Ailman confirming the vote on CNBC Monday.
"We need to have a serious salary," Ailman said. "We'll pay him 140 times the average worker pay. How about that deal? I think that's more than fair. "
Ailman slammed Musk's record-breaking compensation package as "outrageous" and "untenable." CalSTRS, which advocates for over a million public school educators in the state, is a long-time investor in Tesla, but this hefty pay proposal appears to have crossed a line for them.
In January, Elon Musk faced similar criticism from legendary short-seller Jim Chanos, who opposed Musk's attempt to gain more control of Tesla and accused him of jeopardising the company's progress unless his voting rights were doubled.
With major Tesla shareholders like the California State Teachers' Retirement System opposing Musk's record-breaking $56 billion pay package, comprised primarily of stock options tied to future performance targets, the company is seeking support from its unusually high number of retail investors, according to Reuters.
While small investors often favour management, experts warn that many might not participate in the vote. This could significantly impact the outcome, potentially affecting Tesla's stock price and Musk's continued leadership.
It should also be noted that small investors' participation are often low. This could sway the outcome, potentially impacting Tesla's stock price and Musk's leadership. All will be revealed on June 13 when Tesla shareholders vote on the controversial pay package.
