On Thursday, Tesla shareholders will vote on whether or to not approve Musk’s uniquely structured all-or-nothing compensation package. The compensation proposal, originally approved in 2018, was praised by Tesla’s board and shareholders since it was seen as a moon landing and required Musk to almost inconceivable goals before he was even paid. But six years later, after those goals were met, a judge voided the pay and Tesla’s board was accused of mismanagement.
The size of the pay package, combined with Musk’s own status as a superstar entrepreneur and outstanding CEO, has turned an otherwise fairly humdrum aspect of company management into a world headline story. Musk’s harshest critics see the record compensation as an indication of an executive with outsized influence on Tesla’s board, which incorporates his brother and friends. Supporters, nonetheless, credit Musk for constructing the corporate from the bottom up and say objections to his salary are only being raised now because he has successfully achieved all of the incentives to which he’s entitled.
It appears that the fate of Musk’s compensation package remains to be uncertain. Prominent supporters, including Baron Capital and Cathie Wood, CEO of ARK Invest and long-time supporter of Musk, have spoken out in favor. The Norwegian sovereign wealth fund Norges Bank Investment Management, managers of pension funds in New York and California and the investment firm Gerber Kawasaki wish to vote no. The large asset managers equivalent to Vanguard Group, BlackRock and State Street Corp. are holding back. not publicly declared how they may vote, but as a consequence of their size this could possibly be the deciding factor. Another problem is the various Private investors who together own 43% of Tesla’s common stock. On Saturday, Musk said said on X that 90% of the small shareholders who had already voted supported the compensation plan.
Some management experts disagree. The promise of superhuman pay contributed to Musk’s erratic behavior, says J. Bradford DeLong, professor of economic history on the University of California, Berkeley. “I believe this pay package contributed to his descent from visionary business leader to bizarre huckster,” says DeLong. wrote in an opinion piece for the New York Times. “And these incentives and responses should not be recognized.”
Is high pay good management?
Musk’s salary package was originally approved in 2018, when 73% of shareholders voted for the plan. At one point, the plan was price $56 billion, but its value has since plummeted to its current value of $45 billion as Tesla’s stock fell. After Musk met his goals, a gaggle of disgruntled shareholders sued in a Delaware court to dam the move. Kathleen McCormick, the judge within the case, ruled to reverse the compensation plan, arguing that the board had not been independent enough.
Some shareholders agreed with this view. Tesla’s board “behaves like a family business, even though it is a publicly traded company,” said New York City Comptroller Brad Lander. told ^ “CNBC News”.
Ross Gerber, CEO of Gerber Kawasaki, who has called Musk an “absent CEO” and Tesla a “real CEO,” said Elon deserves compensation but sharply criticized the board for its poor behavior. “Frankly, the board sucks,” Gerber told CNBC. “They just stink. I’ve never seen a board as bad as this. People will be writing in business schools for years to come about what a terrible board Tesla has.”
Tesla CEO Robyn Denholm said it was “absolute nonsense” that she was not independent of Musk, as McCormick had suggested.
Other shareholders criticized Musk himself. A continuing sore spot for institutional inventors, each those that praise Musk as a visionary and people who detest his personal politics, is his perceived lack of focus. Musk is usually criticized for dividing his attention between his various other corporations, including X, SpaceX and the Boring Company. In an interview with Assets last month. Lander said the board has allowed Musk to give attention to his other businesses. “Any other large public company that has a truly independent board — and many of them that aren’t so independent of a board — expect their CEO to be the full-time CEO of their company,” Lander said.
Chris Ailman, chief investment officer of California-based pension fund CalSTRS, said Musk is juggling “a million balls in the air” and may give attention to just a few. Musk’s biggest preference, Ailman said, is space travel, which is currently being researched at SpaceX.
“He wants to go to Mars, let him fly away,” Ailman said half-jokingly.
