Tesla Shareholders Urged to Vote Against CEO’s Record-Breaking Compensation Package
Shareholders of electric carmaker Tesla have been urged to vote against plans to pay its chief executive Elon Musk up to $56bn (£44bn) in compensation. The proposed payout, which would be the largest ever for a chief executive in the US, has been deemed “excessive” by proxy advisory firm Institutional Shareholder Services (ISS). They argue that the amount would not benefit the company and could potentially distract Musk from focusing on Tesla.
ISS’s warning comes amid concerns that Musk, a controversial billionaire known for his other business ventures such as SpaceX and X (formerly Twitter), has become distracted from running Tesla. The company has also faced challenges in recent months, including falling revenue, product recalls, and job cuts. Shareholders will vote on the proposed compensation package at Tesla’s annual general meeting on June 13th, as well as on whether to reincorporate the company in Texas.
Other advisory proxies have also recommended that shareholders reject the pay amount, calling the vote a referendum on Musk’s leadership of the company. The proposed compensation package is contingent on Tesla’s market value reaching up to $650bn (£510bn) over the next 10 years, which would be a significant increase from its current valuation of nearly $570bn (£445bn).
In its report, ISS acknowledged that the compensation package reflects Tesla’s financial growth but also stated that it “remains excessive, even given the company’s success.” They also expressed concerns about the lack of clarity surrounding the board’s plan for Musk’s future pay and the failure to align his financial interests with those of Tesla’s shareholders.
Tesla has defended the proposed compensation package, arguing that Musk’s personal stake in the company’s success serves as motivation for creating value for shareholders. In response to criticism, the company stated that Musk has helped them achieve “performance targets that were regarded by many as extremely difficult or impossible.” They also emphasized that shareholders should be concerned about value creation, rather than Musk’s perceived focus on other business endeavors.
This news comes after Tesla reported a drop in quarterly revenue in April, the first decline in almost four years. The company has faced challenges from competition in China and a slowdown in demand for electric vehicles, in addition to controversies surrounding Musk.
In a separate development, Tesla announced a recall of over 125,000 vehicles in the US to address issues with the seat belt warning system. The National Highway Traffic Safety Administration stated that the alerts were not functioning as expected and did not comply with safety regulations, potentially increasing the risk of injury in a crash. The recall includes certain Model S, Model X, Model 3, and Model Y vehicles from 2012 to 2024.
