A significant debate is brewing among Tesla Inc. (TSLA) shareholders over CEO Elon Musk's monumental $46 billion stock-option compensation plan.
Leading the charge against the package is a coalition of investors, including the New York City pension funds, who argue that Musk’s divided attention among his various ventures leaves Tesla without a dedicated full-time CEO.
The Call to Reject
On Monday, New York City Comptroller Brad Lander, representing the city’s funds with $260 billion in assets, filed a notice urging shareholders to vote against Musk’s pay package at Tesla’s upcoming June 13 meeting. The investors contend that Tesla’s board is excessively deferential to Musk, failing to address his commitment issues as he juggles multiple roles at companies like SpaceX, Neuralink, and X (formerly Twitter).
The letter highlighted that Musk’s attention is often fragmented, with him dedicating specific days to different companies. This dispersion of focus, they argue, has led to Musk poaching top talent from Tesla for his other ventures, notably engineers from Tesla's AI and autonomy team for his new company, xAI.
On Monday, New York City Comptroller Brad Lander, representing the city’s funds with $260 billion in assets, filed a notice urging shareholders to vote against Musk’s pay package at Tesla’s upcoming June 13 meeting. The investors contend that Tesla’s board is excessively deferential to Musk, failing to address his commitment issues as he juggles multiple roles at companies like SpaceX, Neuralink, and X (formerly Twitter).
The Retail Investor Divide
The clash sets the stage for a showdown between institutional investors and retail investors who staunchly support Musk. Retail investors view Musk as a visionary whose leadership is crucial for Tesla's future. Since April 29, Tesla has been actively campaigning for Musk’s pay package, sending 11 updates to shareholders about Musk’s tweets and updates on their dedicated voting website, “Protecting Your Investment and Tesla’s Future.”
The clash sets the stage for a showdown between institutional investors and retail investors who staunchly support Musk. Retail investors view Musk as a visionary whose leadership is crucial for Tesla's future. Since April 29, Tesla has been actively campaigning for Musk’s pay package, sending 11 updates to shareholders about Musk’s tweets and updates on their dedicated voting website, “Protecting Your Investment and Tesla’s Future.”
Concerns Over Financial Risks
The dissenting investors also raised concerns about Musk’s financial practices, noting that he has pledged a portion of his 20% Tesla stake as collateral for loans. They warn that if Musk were forced to sell this pledged stock, it could trigger a significant drop in Tesla’s stock price, harming shareholders.
Additionally, the investors criticize the Tesla board for allowing Musk to use Tesla resources for his other businesses. Musk has previously acknowledged using Tesla engineers for X-related tasks, claiming no board member had objected.
Board's Defense
The Tesla board, however, stands by Musk’s compensation plan. In a video on Tesla's shareholder voting website, independent board chair Robyn Denholm defended the package, noting that it was designed with extraordinarily ambitious targets that Musk has successfully met. Denholm pointed out that Musk’s achievements have dramatically increased Tesla’s revenues and profitability.
Financial Performance and Future Plans
Despite the internal turmoil, Tesla’s stock performance reflects investor optimism, rising 6.7% to $186.60 recently, buoyed by positive updates on its electric semitruck program. At the Advanced Clean Transportation Expo, Tesla executive Dan Priestley announced that the Tesla Semi would begin production-spec deliveries by 2026. The truck, currently in pilot testing with PepsiCo’s Frito-Lay division, promises impressive capabilities, including a range of up to 500 miles and the ability to travel over 1,000 miles in 24 hours thanks to rapid charging technology.
Despite the internal turmoil, Tesla’s stock performance reflects investor optimism, rising 6.7% to $186.60 recently, buoyed by positive updates on its electric semitruck program. At the Advanced Clean Transportation Expo, Tesla executive Dan Priestley announced that the Tesla Semi would begin production-spec deliveries by 2026. The truck, currently in pilot testing with PepsiCo’s Frito-Lay division, promises impressive capabilities, including a range of up to 500 miles and the ability to travel over 1,000 miles in 24 hours thanks to rapid charging technology.
Broader Market Context
Tesla's stock movement is also influenced by broader market dynamics, including developments in China’s electric vehicle market. Positive earnings from Chinese EV maker XPeng (XPEV) have provided a lift to Tesla shares, contrasting with the recent struggles of competitor Li Auto (LI), which reported disappointing earnings and guidance.
Tesla's stock movement is also influenced by broader market dynamics, including developments in China’s electric vehicle market. Positive earnings from Chinese EV maker XPeng (XPEV) have provided a lift to Tesla shares, contrasting with the recent struggles of competitor Li Auto (LI), which reported disappointing earnings and guidance.
Upcoming Shareholder Vote
As the June 13 shareholder meeting approaches, the outcome of the vote on Musk’s pay package remains uncertain. The dissident investors are also seeking to withhold support from Musk’s brother, Kimbal Musk, and former 21st Century Fox CEO James Murdoch, both of whom are deemed insufficiently independent by the opposition.
This contentious vote will not only decide the future of Musk's compensation but also signal the degree of investor confidence in Tesla’s governance and strategic direction amidst Musk’s multifaceted commitments.
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