A coalition of Tesla Inc. shareholders is calling on fellow investors to reject the $56 billion pay package awarded to CEO Elon Musk at the company’s annual meeting on June 13. The group, which includes Amalgamated Bank, SOC Investment Group, and six other signatories holding a small portion of Tesla stock, contends that Musk’s numerous commitments to other ventures are distracting him from his responsibilities at Tesla, thereby undermining the best interests of the electric-vehicle manufacturer.
The coalition’s main concerns center around Musk’s divided attention among the six companies he controls. The group has also advised shareholders to vote against the reelection of directors Kimbal Musk, Elon’s brother, and James Murdoch, citing a significant governance failure at Tesla that needs immediate rectification.
The contentious pay package, initially approved by shareholders in 2018, provided Musk with equity awards as Tesla’s market capitalization grew and the company met specific operational targets. Although Musk fulfilled all the required conditions, a Delaware judge annulled the compensation agreement earlier this year, raising questions about whether it truly served shareholders’ best interests.
In response, Tesla’s board is resubmitting the pay package for a second vote, aiming to reaffirm investor support for the deal. The board has been actively encouraging shareholders to ratify Musk’s compensation, even hiring a strategic adviser to boost participation from retail investors.
The shareholder coalition had previously sent an open letter to Tesla’s board over a year ago, highlighting concerns about Musk’s extensive commitments and requesting a meeting with board chair Robyn Denholm, who did not respond. The shareholders’ discontent has been exacerbated by Musk’s acquisition of Twitter, now rebranded as X, which they claim has significantly contributed to Tesla’s recent underperformance.
In their latest letter, the coalition expressed further dissatisfaction with Tesla’s declining sales and the disappointing results of the first quarter. They argue that despite Tesla’s struggling performance, the board has failed to secure a full-time CEO who is dedicated to ensuring the long-term sustainable success of the company.
The shareholders’ letter underscores a critical governance issue within Tesla, urging immediate attention and action. They emphasize that Tesla’s current trajectory under Musk’s distracted leadership is unsustainable and detrimental to the company’s future.
The upcoming vote on Musk’s pay package represents a crucial moment for Tesla, as it not only questions the appropriateness of Musk’s compensation but also the broader governance practices at one of the world’s leading electric vehicle manufacturers. The outcome could significantly influence Tesla’s leadership structure and strategic direction moving forward.
As the annual meeting approaches, it remains to be seen whether the coalition’s efforts will sway enough shareholders to reject the pay package, potentially reshaping the governance landscape at Tesla. Regardless of the outcome, this challenge highlights the growing scrutiny and demands for accountability in executive compensation and corporate governance in the rapidly evolving electric vehicle industry.
