Tesla (TSLA) will host its annual shareholder meeting on Thursday, with investors voting on whether to renew CEO Elon Musk’s $55.8 billion compensation package.
The pay plan was authorized by investors in 2018, but it was overturned by an equity court earlier this year, which agreed with one investor who sued Tesla, alleging Musk’s remuneration was exorbitant.
The choice might have an impact on Musk’s standing among the world’s wealthiest people, as well as Tesla’s stock price, with Jefferies and Piper Sandler analysts warning that rejecting the compensation package could cause Tesla shares to fall.
Proponents Say Elon Musk ‘Earned His Pay’
According to the plan agreed by investors in 2018, Musk’s $55.8 billion compensation package was reliant on Tesla’s market capitalization hitting $650 billion and meeting specific sales and profitability targets.2 Tesla said that the strategy motivated Musk “to deliver transformative and unprecedented growth.”3
“In under six years, Elon delivered a total shareholder return of nearly 1,100%,” Tesla said in a letter to shareholders last month, using FactSet statistics from March 21, 2018 to the end of 2023. “If Elon fails to meet exceptional growth expectations for Tesla, he will earn ZERO pay. “He didn’t fail.”
In an open letter to fellow Tesla investors ahead of the vote, Baron Capital founder and CEO Ron Baron said that Musk “earned his pay”.4
“Shareholders should ask themselves this question: is Tesla better off with or without Elon[?]” Baron added, “At Baron Capital, our response is plain, loud, and unequivocal: Tesla is better with Elon. “Tesla is Elon.”
Tesla also cited backing from significant corporations such as T. Rowe Price, Baird, and Egan-Jones, as well as well-known figures like as Warren Buffett and Jim Cramer.5
Proxy Advisors Recommend Against Reapproval.
Among those opposing Musk’s compensation package are Norway’s sovereign wealth fund, the world’s biggest sovereign wealth fund, and the California State Teachers’ Retirement System (CalSTRS), the second-largest pension system in the United States.6
CNBC. “California pension fund opposes ‘ridiculous’ Elon Musk pay package at Tesla.”
78 Proxy advisors, who might sway passive votes, have also advised voting against the pay package.
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