In a bid to secure shareholder endorsement for a contentious pay package, Tesla chair Robyn Denholm has intensified her efforts, emphasizing the irreplaceable nature of CEO Elon Musk. As the automotive giant prepares for a pivotal vote on November 6, Denholm and other board members are actively engaging with major institutional investors, including Vanguard, BlackRock, and State Street, to garner support for a compensation plan that could reach a staggering $1 trillion over the next decade.
Elon Musk has reportedly threatened to resign if the shareholders reject this new package, which has been a point of contention in discussions both publicly and within the boardroom. Denholm confirmed that his impassioned warnings have been privately relayed to the board, although she was reticent to divulge any contingency strategies in the event that shareholders do not approve the pay structure. She has publicly cautioned that the outcome of this vote is critical for Tesla’s future, stating, “There’s just not anybody, either inside or outside the organisation, that is Elon today.”
Musk’s compensation has sparked years of debate and legal challenges. Shareholders previously supported a $56 billion pay plan, initially awarded in 2018, but it faced legal hurdles leading to its blockage by a Delaware court. The newly proposed compensation package is likely to encounter robust opposition, bolstered by advisories from firms like Glass Lewis and ISS, which have recommended that shareholders turn it down. Additionally, significant pension funds have expressed their dissent through an open letter criticizing the board’s relentless efforts to retain Musk, asserting that this pursuit has tarnished Tesla’s reputation and resulted in excessive compensation for its CEO.
Musk’s defense came on his chosen platform, X, where he countered the accusations, asserting, “Tesla is worth more than all other automotive companies combined. Which of those CEOs would you like to run Tesla? It won’t be me.” His wealth is intricately linked to the performance of Tesla’s shares, which have surged, elevating the company’s market capitalization to $1.4 trillion.
Denholm addressed the potential fallout if the vote does not go the board’s way, stating that while she does not want to speculate, the board is well aware that losing Musk’s leadership would be unfavorable for shareholders. She expressed confidence that Musk would not take drastic actions if the vote does not favor the pay deal.
Musk’s financial maneuvers often utilize his Tesla shares as collateral to fund other ventures, including his acquisition of Twitter and the establishment of his AI startup, xAI. He currently holds a 15% stake in Tesla, allowing him to vote in favor of the proposed compensation package. Tesla has underscored the importance of Musk’s leadership in steering the company towards new technological frontiers, including artificial intelligence initiatives like autonomous driving and the development of “Optimus” robots.
The proposal for Musk’s compensation comprises 12 tranches of restricted stock, each linked to ambitious targets related to the company’s share price and operational performance. Success in meeting these high benchmarks could potentially make Musk the world’s first trillionaire. Alongside the pay package, shareholders will also vote on various other governance proposals, including the reappointment of three directors and whether Tesla can allocate resources to invest in xAI, underscoring the interconnected nature of these decisions as the company navigates a turbulent period.
