Most shareholder meetings are typically uneventful, but for Tesla Inc. (NASDAQ:TSLA), the upcoming meeting is set to be dramatic. On Thursday afternoon, Tesla will announce the results of shareholder votes on several key issues, with the primary focus on CEO Elon Musk’s compensation package. Wall Street anticipates that Musk will secure his pay package, though not without contention.
Musk’s all-stock pay package, awarded in 2018, has been controversial. A Delaware court invalidated the $56 billion award earlier this year, ruling that Tesla’s board did not act “in the best interests” of shareholders. Since then, Musk and Tesla’s board, led by chair Robyn Denholm, have been pushing for shareholder approval of a newly submitted compensation package similar to the 2018 one.
Denholm recently urged shareholders to approve Musk’s compensation in an open letter. “Fairness and respect require that we honor the commitment we made to Elon,” Denholm wrote. She emphasized that the package is crucial for retaining Musk’s attention and motivating him to drive Tesla’s growth.
Economist and CEO pay expert Dean Baker critiqued this approach, stating, “While top management often shows great interest in keeping down other costs for the company, it has no interest in keeping down its own pay.”
Musk has previously hinted that his attention could be divided among his ventures, including SpaceX, X.com, and the Boring Company. Recently, reports surfaced that Musk diverted Nvidia (NASDAQ:NVDA) AI chips meant for Tesla to X.com, a move he defended by claiming Tesla lacked the space to use the chips at the time.
Denholm acknowledged the risk of Musk focusing elsewhere, stating, “Elon does not have unlimited time and faces no shortage of ideas and other places where he can make a significant impact.”
Supporters argue that Musk’s presence is vital for Tesla’s future. Billionaire investor Ron Baron called Musk the “ultimate ‘key man’ of key man risk,” while ARK Invest founder and CEO Cathie Wood highlighted Musk’s unique alignment with shareholder interests.
Conversely, proxy adviser firms Glass Lewis and ISS recommended voting against Musk’s compensation, citing concerns about the award’s size and its dilutive effect on shareholders. Norway’s $1.7 trillion sovereign wealth fund, a significant Tesla shareholder, also opposed the package, pointing to issues with the award’s structure and performance triggers.
Despite the opposition, shareholders are expected to approve the package. Wedbush analyst Dan Ives predicted overwhelming reapproval, emphasizing that Tesla needs Musk’s commitment to AI initiatives. Ives maintained his Outperform rating and $275 price target for Tesla.
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