Additional Coverage:
- Elon Musk’s pay package approval was a mistake and Tesla needs to keep him in check, some institutional shareholders say (businessinsider.com)
Elon Musk, the CEO of Tesla, was recently at the center of debate as Tesla shareholders cast their votes on his colossal pay package, ultimately showing their approval. However, this decision was met with skepticism from some of the company’s most significant institutional investors. According to a report by Business Insider, dissenters expressed concerns about Musk’s future at the helm of Tesla and his pay package’s compatibility with his performance.
In an investor meeting held on Thursday, approximately 72% of Tesla’s shareholders supported the $55 billion compensation package for Musk. This move comes after a Delaware court initially overturned the package in January. While the vote does not immediately restore Musk’s compensation, it provides Tesla’s legal team with new leverage in their ongoing deliberations in Delaware.
Among the institutional investors, Vanguard, Tesla’s largest with a 7% holding, backed the pay proposal. Despite this majority support, voices of concern emerged from within the investor community. They questioned whether the size of Musk’s stock option truly reflects his contributions to the company and raised alarms over Tesla’s leadership direction under his guidance.
One notable critic, Anders Schelde of the Danish pension fund AkademikerPension, shared with Business Insider, “Tesla is a great company with not so great governance… We remain invested, but governance is a red flag.”
Schelde and several other institutional shareholders had previously urged others to vote against Musk’s pay and the re-election of James Murdoch and Kimbal Musk, Elon’s brother, to Tesla’s board. Despite these efforts, both board members retained their positions.
In response to these criticisms, Musk addressed them at the shareholder meeting without naming individual investors. He highlighted the disconnection some investors might have with Tesla’s products due to their geographic locations and unfamiliarity with the company’s advancements in self-driving technology.
New York City Comptroller Brad Lander, another critic and co-signer of the May letter, reiterated the mistake of approving Musk’s pay package but emphasized the need for the company to focus on growth with Musk at the helm. Lander called for the board to assert more control, including oversight of how Tesla’s resources might be used for Musk’s other ventures and aligning with shareholder interests.
As of the end of April, the New York City Retirement System owned over 3.4 million shares in Tesla. Similarly, the California Public Employees’ Retirement System (CalPERS), holding around 9.2 million shares, criticized the pay package for being excessive and detrimental to shareholder value.
Despite the controversy, calls for a more balanced and shareholder-friendly approach to executive compensation at Tesla continue. Both Musk and Tesla have yet to comment on the recent discussions and vote outcomes.