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Elon Musk’s $56B Tesla pay package in the balance as shareholders hold meeting

Tesla Shareholders The company is set to decide whether to reinstate CEO Elon Musk’s $56 billion compensation package at the electric car maker’s annual shareholder meeting on Thursday.

Musk’s compensation packageTesla’s CEO appointment, believed to be the largest of any publicly traded U.S. CEO, was voided by a Delaware judge after finding that the company’s board of directors had not properly disclosed its members’ ties to Musk and that Tesla was on track to meet most of the benchmarks of its performance-related compensation program.

Following the ruling, Tesla asked shareholders to approve or reject the possible reinstatement of Musk’s compensation package ahead of a shareholder meeting on Thursday. Shareholders will also likely consider changing Tesla’s state of incorporation from Delaware to Texas, a move Musk has been pushing for following the state court ruling.

Musk and Tesla are encouraging shareholders to vote on proposals by offering them the chance to win a personal tour of Tesla’s Gigafactory in Austin, Texas, with Musk giving them a tour, but the company is not requiring applicants to vote for or against specific issues facing shareholders in order to be eligible to participate.

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Tesla shareholders are set to decide on Thursday whether to reinstate Elon Musk’s compensation package. (Chesnot/Getty Images)

Tesla praised Musk’s achievements, EV giant The company said on its website that since Musk’s compensation package was first approved by shareholders in 2018, he has delivered a total return of approximately 1,100% to shareholders since then, adding that “if we fail to achieve Tesla’s unprecedented growth targets, our compensation will be zero. We have not failed.”

Mask Salary Package The company doesn’t pay salaries or cash bonuses, but offers compensation in the form of stock options that will be awarded if Tesla’s market capitalization grows to up to $650 billion over the 10 years after 2018. The company’s market capitalization was about $555 billion as of Wednesday’s market close.

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Tesla Car Showroom

Tesla’s chairman argued that Musk’s compensation package was necessary to keep him interested and motivated in Tesla’s performance. (Joe Raedl/Getty Images)

A range of stakeholders and proxy advisory firms have voiced support and opposition to Musk’s proposal ahead of Thursday’s vote.

Supporter

“If Tesla wants to maintain Elon’s interest and incentivize him to continue to devote his time, energy, ambition and vision to delivering comparable results in the future, we must honour our agreement,” Tesla Chairman of the Board Robin Denholm said in a letter to investors.

“It takes something different to motivate someone like Elon,” she added. “That’s one of the main reasons why the award requires Elon to hold the shares he receives from exercising his stock options for five years after the option is exercised. This only serves to motivate him to continue to deliver value to Tesla and its shareholders.”

Tesla shareholders urged to reject Elon Musk’s $56 billion compensation package

TSLA CEO Elon Musk

Musk’s compensation was struck down by a Delaware judge earlier this year. (David Paul Morris/Bloomberg via Getty Images)

The Florida pension board announced it had voted to reinstate Musk’s compensation plan, saying it “demonstrates an extremely high level of performance pay.” The pension fund holds 2.89 million shares, making it Tesla’s 80th-largest investor.

Ron Baron, the prominent investor and founder of Baron Capital, published an open letter last week saying he supported the compensation plan. “Elon is the ultimate ‘key man’ in key man risk,” he said, adding, “Without his indomitable spirit and uncompromising standards, Tesla would not exist.”

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Opponent

Proxy Voting Advisory Firm Glass Lewis wrote in late May that it opposed Musk’s compensation package, citing its “excessive size” as well as the impact of Musk’s exercise of stock options and concentrated ownership of the company.

Glass Lewis also cited Musk’s “set of extremely time-consuming projects” that grew after the company bought Twitter (now known as X) and the billionaire’s other businesses. Institutional Shareholder Services, another proxy advisory firm, also voiced its opposition to the compensation plan.

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Tesla Factory

Several institutional investors and proxy advisory firms have called on shareholders to oppose Musk’s compensation package. (Reuters/Allie Song/File)

California Public Employees Retirement System CalPERS CEO Marcy Frost said the pension fund opposed Musk’s compensation package, writing, “The exorbitant compensation is contrary to California Public Employees’ Retirement System’s long-held views on executive compensation.” “It is excessive relative to executives at industry peers, creates significant shareholder dilution and is not linked to Tesla’s long-term profitability.”

“We agree that Musk is entitled to be adequately compensated for his work, but we also believe the compensation package must be commensurate with the company’s performance and the salary cap must be reasonable. Those elements are missing from the contract,” Frost added.

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New York City Brad Lander, the city’s public pension regulator, said in a post on X that he opposed the compensation plan. “I fear that Elon Musk and co. could lead the company in a bad direction,” he wrote.

Norway: $1.7 trillion Sovereign Wealth Fund The world’s largest owner of Tesla shares, 0.98%, said last week it would vote against reinstating the compensation package.

Reuters contributed to this report.

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