Tesla CEO Elon Musk could leave if $56 billion pay package not approved, shareholders warned

2024-06-06 14:41

Tech


Photo collage of Elon Musk.
Illustration by Cath Virginia / The Verge | Photo by Grzegorz Wajda, Getty Images

Tesla board chair Robyn Denholm is calling on the company’s shareholders to approve Elon Musk’s massive $56 billion pay package or risk driving the billionaire CEO to greener pastures.

On June 13th, Tesla shareholders will decide the fate of Musk’s compensation package, which is estimated to be worth as much as $56 billion. It will be the second time that shareholders will vote on the CEO’s pay, after a Delaware judge voided the first one earlier this year on the grounds that the approval process was “deeply flawed.” And now the company is engaged in a full-court press to convince shareholders to approve the proposal a second time.

“Elon is not a typical executive, and Tesla is not a typical company,” Denholm writes in a letter to shareholders filed with the Securities and Exchange Commission. “So, the typical way in which companies compensate key executives is not going to drive results for Tesla. Motivating someone like Elon requires something different.”

Later, she implies that Musk could decamp to “other places” without proper motivation. “What we recognized in 2018 and continue to recognize today is that one thing Elon most certainly does not have is unlimited time,” Denholm says. “Nor does he face any shortage of ideas and other places he can make an incredible difference in the world. We want those ideas, that energy and that time to be at Tesla, for the benefit of you, our owners. But that requires reciprocal respect.”

The vote to approve the $56 billion pay package, which would make Musk the most highly compensated chief executive in modern history, is “not about the money,” Denholm insists. “We all know Elon is one of the wealthiest people on the planet, and he would remain so even if Tesla were to renege on the commitment we made in 2018.”

Denholm implying that Musk needs “motivation” in the form of the largest pay package ever approved for a CEO in order to stay at Tesla speaks to the fear many investors feel about his future at the company. Musk’s many different projects — heading companies like SpaceX, The Boring Company, Neuralink, X, and xAI — have taken his attention away from Tesla, which is the primary source of his wealth and popularity.

Several proxy firms have recommended against approving Musk’s pay proposal. But early voting seems to suggest that he could end up getting what he wants. A report by trading platform eToro from last month showed that about 25 percent of Tesla’s shares have already voted, Reuters said. Of those, more than 80 percent were in favor of Musk’s package.

Still, Musk is seeking more control over Tesla, in the form of a 25 percent stake, in order to achieve his goals of developing artificial intelligence and self-driving cars. (He currently holds about 13 percent of the company after selling billions of dollars of shares to acquire Twitter.) On X, he has threatened to spin out Tesla’s AI work into a separate company if his demands aren’t met.

And now shareholders are being warned — in a letter heavy with innuendo — that he could just leave Tesla if his pay isn’t approved.

“We all made a commitment to Elon,” Denholm writes. “Elon honored his commitment and produced tremendous value for our stockholders. Honoring our commitment to Elon demonstrates that we support his vision for Tesla and recognize his extraordinary accomplishments — this is what will motivate him to continue to create value for stockholders.”


Source: https://www.theverge.com/2024/6/6/24173064/tesla-board-chair-warn-elon-musk-leave-pay-shareholders