‘Tesla Is Not A Family Business’: New York Official Blasts Musk’s Pay Package
The drama at Tesla appears to be unending. Following a disappointing first quarter of sales, mass layoffs, a major safety recall of the Cybertruck and concerns over the company’s apparent pivot to robotaxis, another big flashpoint has been lingering for the Austin-headquartered company: CEO Elon Musk’s $56 billion payday.
In January, the Delaware Court of Chancery revoked a pay package for Musk originally approved in 2018. “The approval of Musk’s compensation plan was deeply flawed,” the post-trial opinion read. Tesla’s board is now requesting investors to vote again in favor of Musk at the annual general meeting on June 13, along with several other proposals.
Elon Musk seeks larger control over Tesla.
He wants to control 25% of Tesla, up from the 20.5% stake that he currently has. This, he says, would help the company solve autonomy and pivot towards artificial intelligence and robotaxis, eventually leading to “transformative growth.” Some shareholders aren’t buying this narrative. They want Tesla’s board to be more independent, and the brand to continue focusing on EVs.
Musk has said that if he does not get a package that comes with a large amount of corporate voting power, he may undertake AI and robotics projects “outside of Tesla”—a move many longtime $TSLA shareholders fear could tank the share price.
However, some shareholders are fiercely opposing this compensation plan, arguing that Tesla’s board of directors lacks sufficient independence and that Musk is not fully focused on the company.
The coalition opposing Musk’s pay package includes the Comptroller of the City of New York, several NYC pension funds, and seven investment firms. New York City’s Comptroller Brad Lander, an independently elected official who oversees the city’s public pension funds and their investments in companies including Tesla, wrote an official letter urging his peers to vote against Musk’s pay package.
He also called upon shareholders to vote against the reelection of Musk’s younger brother Kimbal Musk and former 21st Century Fox CEO James Murdoch, on the board of directors.
“We’re not saying [Musk] doesn’t deserve anything. He deserves a fair pay package, but it needs to be negotiated by a meaningfully independent board,” Lander told InsideEVs in an interview this week.
The Delaware court said that the plan was the largest pay package ever for the CEO of a public company, some 250 times larger than the average and over 33 times larger than the plan’s closest comparison, which was Musk’s prior compensation plan.
“The board is not providing independent governance on behalf of the shareholders, simply reflecting the point of view of the CEO and his family members,” Lander said. “If you want to have a family business, have a family business, and don’t do an IPO. If you want to be publicly traded, then the rules apply here,” he added.
It’s key to note that Lander’s opinion, while shared by many Tesla shareholders and even critics, is far from the prevailing one. Many retail investors have indicated they will vote for Musk’s compensation plan. Meanwhile, the company has “pulled out all the stops” to get the package approved, including advertisements, statements from its board chair and online drives.
In recent months, Musk has veered Tesla away from things like vehicle product development and new consumer models to focus more on advancing and proliferating its Full Self-Driving system.
He believes that for the company to achieve transformative growth, it needs to solve self-driving while pivoting towards artificial intelligence and robotaxis. But this group of shareholders isn’t swayed by this approach.
“We need Tesla to succeed as an EV car company,” Lander said. “That is an important part of the energy transition that we need both from an economic point of view and a climate point of view.”
There’s little to contest the fact that Tesla is already successful. The Model Y was the world’s best-selling car in 2023, eclipsing the Toyota Corolla, a historical bestseller. Tesla’s market valuation, hovering around some $544 billion at the time of publication, is viewed more as a technology company rather than a car company.
But its stock has been volatile, sales are tumbling and Musk frequently engages in political and culture wars online. Combine all of this with a lack of succession plans and an executive bench that’s now far less deep than it was at the end of last year, and there’s a big question mark over the company’s future.
“When that same CEO is distracted by work at many other companies and other communications and political activities that bring discord, even amongst your own customer base, that’s not a good recipe for the long-term thriving of the company,” Lander said.
Lander’s letter correctly points out that one of the reasons for approving such a substantial pay package in 2018 was to retain Musk and ensure his focus on Tesla’s success for a ten-year term. However, this has not been the case, as his other business commitments have only expanded during that time.
Meanwhile, Tesla is going all guns blazing to persuade investors to approve Musk’s massive pay package. Apart from aggressive ads and social media campaigns, it has even hired a “strategic advisor” to help with the task at hand.
All said, the outcome of the June 13 shareholder vote will be pivotal. Whether investors will prioritize Musk’s vision for AI and robotics or heed the call for stronger governance and a return to core EV manufacturing remains to be seen. But one thing is certain: the stakes for Tesla’s future have never been higher.
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