TLDR
- Tesla shareholders vote Thursday on Elon Musk’s new compensation package that could reach $1 trillion if all targets are met
- Norway’s $1.9 trillion sovereign wealth fund and major pension fund Calpers oppose the package, citing excessive size and board independence concerns
- The package requires Musk to meet aggressive targets including delivering 20 million vehicles over 10 years and producing one million robots
- Three Tesla board members face reelection after returning $919 million earlier this year in a settlement over excessive director compensation
- Shareholders also vote on whether Tesla should invest in Musk’s AI company xAI, raising concerns about potential self-dealing
Tesla holds its annual shareholder meeting Thursday in Austin, Texas. The main event is a vote on CEO Elon Musk’s compensation package.
The package could net Musk up to $1 trillion if he meets all targets. It would give him around 25% ownership of Tesla, up from his current 13% stake.
Musk hasn’t received traditional compensation in years. His 2018 pay package remains tied up in Delaware courts after a judge ruled shareholders lacked proper information to approve it.
The new proposal includes 12 tranches of stock options. Each tranche vests only if Musk hits specific operational and financial milestones.
To earn the full package, Musk must deliver 20 million vehicles over 10 years. That’s more than double what Tesla has produced in its entire history.
He also needs to increase the company’s market value and operating profits by specific amounts. Plus, he must produce one million humanoid robots from the current zero.
Even partial success pays well. Musk gets $50 billion in additional shares if he increases market value by 80%, doubles vehicle sales, and triples operating earnings.
Norway’s $1.9 trillion sovereign wealth fund announced it will vote against the package. The fund holds a 1.2% stake in Tesla.
“While we appreciate the value created under Mr. Musk’s visionary role, we are concerned about the total size of the award, dilution, and lack of mitigation of key person risk,” the fund stated.
Calpers, the largest U.S. public pension fund, also opposes the package. Proxy advisers Glass Lewis and ISS recommend voting against it.
Board Members Face Reelection
Three Tesla directors face reelection Thursday. All serve on committees that designed Musk’s pay package.
Ira Ehrenpreis sits on the compensation committee and the nominating and governance committee. Kathleen Wilson-Thompson serves on both those committees plus the disclosure committee.
Airbnb co-founder Joe Gebbia serves on the audit committee. Glass Lewis recommends approving Gebbia but not the other two directors.
Earlier this year, Tesla directors returned $919 million in a settlement. Shareholders alleged director compensation from 2017 to 2020 was excessive.
Tesla chair Robyn Denholm sent a letter to shareholders last week. She warned that rejecting the package risks losing Musk entirely.
The xAI Question
Shareholders also vote on whether Tesla should invest in xAI. That’s Musk’s AI startup that includes X.com and has raised substantial capital.
SpaceX already invested in xAI. The startup’s Grok chatbot now comes in newer Tesla vehicles.
Musk said a merger isn’t on the table but an investment might work. “It would be great, but subject to board and shareholder approval,” he wrote on X.com.
Glass Lewis advised voting against this proposal. The firm argues investment decisions should come from the board, not shareholders.
Critics see potential self-dealing. Musk is asking investors in one company to fund another venture he controls.
Musk has broken several promises this year. He vowed to deliver driverless taxis in multiple cities but they still have human safety monitors.
He predicted sales would rise 20% to 30%. Instead, Tesla sales dropped 50% in Germany last month alone.
The stock still trades around $452, giving the company a $1.5 trillion market value. The shareholder vote takes place Thursday at the annual meeting in Austin.
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