Hey everybody, welcome back to the Elon Musk podcast.
This is a show where we discuss the critical crossroads, the
shape, SpaceX, Tesla X, the Boring Company and Neuralink.
I'm your host will Walden, Tesla CEO Elon Musk's $46 billion
stock options package faces a critical vote at the company's
annual shareholder meeting. Investors are deeply divided,
with some arguing that the compensation is excessive and
indicative of poor governance, while others, particularly small
retail shareholders, have already expressed their support
for Musk. Now, at a recent meeting of
Tesla investors, including New York City Comptroller Brad
Lander, arguments were made against ratifying Musk's 2018
pay package again. Lander, whose office manages
$271 billion in assets across five New York City retirement
funds, criticized the Tesla board for failing to provide
independent governments for shareholders now.
Lander noted that the NYC retirement funds hold 3.4
billion Tesla shares valued at approximately $672 million.
He declared that the funds would vote against Musk's pay and the
re election of board members. Kimball Musk, who's Elon Musk's
brother, and James Murdoch, citing conflicts of interest.
Now, this vote is not a referendum on Elon Musk as CEO.
He is a visionary whose role in Tesla has been critical.
But independent shareholder governance must ensure
reasonable pay package. This pay package is not
reasonable, they said now. Tesla did not immediately
respond to requests for comments.
The company's compensation package for Musk was nullified
in January by a Delaware Chancery Court judge, who cited
the lack of independence in the board's process and improper
negotiation of the deal. Now, following the ruling, Musk
announced plans to relocate Tesla's headquarters from
Delaware to Texas, aiming for more favorable judicial
treatment. The Tesla board is now asking
investors to reapprove Musk's pay and the move to Texas, and
shareholder advisory firms Glass Lewis and Institutional
Shareholder Services have recommended voting against the
pay package. Lander argued that Tesla lacks a
full time CEO focused solely on the EV makers growth.
He criticized Musk for being distracted by ventures like
social media and other companies including XXAI, SpaceX,
Neuralink and the Boring Company.
Ivan Frischberg, chief sustainability officer of
Amalgamated Bank, echoed these concerns, noting Musk's
distractions and significant challenges for Tesla, including
global competition, development delays and labor disputes.
Frischberg mentioned that 2 corporate directors resigned,
citing board reference to Elon Musk at Frisburg's bank, whose
clients hold 600,000. Tesla shares plans to vote
against the re election of Kimball, Musk and Murdoch due to
the lack of board independence. Lander warned that Musk's pay
issues could have broader impacts on capital markets.
Emphasizing the need for independent oversight, Lander
said when billionaires are allowed to flout the rules,
normal people suffer. The billionaire can't have his
brother and friends decide on governance rules.
Lander expressed frustration at not being able to get a response
from the Tesla board, describing Musk's pay package as
outrageously large and insufficiently governed.
Now, Maryland Comptroller Brooke Lierman added her concerns about
Tesla's workforce management and the board's inattention to human
capital, presenting these as risks for shareholders to
consider them voting. She said to succeed, Tesla needs
a management team that is on the ball, urging for an effective
board that can stand up to the CEO when necessary.
Contrastingly, major investor Ron Baron, founder of Baron
Capital, supports Musk's pay package, emphasizes Musk
critical role in Tesla's success over the years.
Baron highlighted Musk's relentless Dr. and commitment,
including sleeping on the factory floor during difficult
production periods. In 2018, Tesla's compensation
package granted Musk the option to purchase 304,000,000 shares
at $23.34 each, contingent on meeting challenging milestones.
Nearly 75% of shareholders initially approved this package.
Despite achieving all of the milestones, the Delaware court
invalidated the package due to the flawed approval process.
Tesla is now seeking a re ratification of the package and
approval for moving its incorporation to Texas ahead of
the annual meeting on June 13th. Now the proposed compensation,
potentially the largest for AUS executive, was worth $56 billion
at its peak and is currently valued at $46 billion.
And several funds represented by Lander will vote against it,
along with the re election of Kimble, Musk and Murdoch, of
course. And Musk has been lobbying
shareholders through social media, factory tours and by
attacking critics of his pay package.
Proxy firms like Glass Lewis and Institutional Shareholder
Services have recommended voting against it, citing the excessive
size and dilution of shareholder value.
Now miss Musk's aggressive push for the compensation package.
Tesla faces declining sales, increased competition and
internal challenges, including layoffs and aging vehicle
models. Musk argues he needs a
significant stake to drive Tesla's future in AI and
robotics, and his demands for greater control, coupled with
threats to spin out Tesla's AI work if his demands aren't met,
have heightened the stakes. And despite shareholder
concerns, Musk's influence remains strong, particularly
among retail investors. The stock is heavily held by
retail investors, comprising 44% of his total shares, the highest
among the top ten S&P 500 companies.
This demographic has shown strong support for Musk,
influenced by his public appeals and promises of continued value
creation. Now, Tesla is rallying support
through its website, votetesla.com, urging
shareholders to recognize the value that Musk has created and
vote in favor of the compensation package.
Early voting indicates significant support for Musk
among retail shareholders. However, regardless of the June
13th vote outcome, the compensation issue is far from
over. Shareholders will vote, but any
decision will likely serve as evidence in ongoing legal
proceedings, which could extend for months now.
Tesla reassured a Delaware judge that despite the proposed move
to Texas, the company will continue to litigate the
compensation case in Delaware. Meanwhile, shareholder lawsuits
alleging insider trading and fiduciary breaches by Musk and
the board are emerging. And as Tesla's annual meeting
approaches, the debate over Musk's compensation package and
corporate governance continues. Shareholders face crucial
decisions that will impact the company's direction and
governance structure, and the upcoming vote will reveal the
extent of shareholder support for Musk's leadership and
compensation. While some advocate for tighter
governance in a full time CEO, others believe Musk's unique
drive and vision are irreplaceable now.
The contentious issue underscores the broader
challenges facing Tesla right now, from internal management to
external competition. And as the vote draws near, the
company's future hinges on the balance between governance and
Elon Musk's visionary leadership.
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