Shareholders Face Choice: Approve Elon Musk's $56 Billion Pay or Risk CEO Exit

Tesla board chair Robyn Denholm has issued a stern warning to shareholders: approve Elon Musk's $56 billion pay package, or risk losing the CEO to other ventures. On June 13th, Tesla shareholders will vote on Musk's compensation package, a decision that has already faced significant legal hurdles. Earlier this year, a Delaware judge voided the initial vote, citing a deeply flawed approval process. Now, Tesla is urging shareholders to approve the proposal in a second vote.

"Elon is not a typical executive, and Tesla is not a typical company," Denholm writes in aletter 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."

Elon Musk's Value to Tesla

Denholm emphasizes that this vote is "not about the money." She acknowledges that Musk is already one of the wealthiest individuals in the world and would remain so even without this pay package. Instead, the concern is about keeping Musk motivated and dedicated to Tesla amidst his numerous other ventures, including SpaceX, The Boring Company, Neuralink, and his AI endeavours.

Denholm highlights the unique position Musk holds in the company. "What we recognized in 2018 and continue to recognize today is that one thing Elon most certainly does not have is unlimited time," she notes. The implication is clear: without proper motivation, Musk might direct his focus elsewhere, potentially to the detriment of Tesla.

"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 Stakes of the Vote

If approved, the $56 billion compensation package would make Musk the highest-paid CEO in modern history. Despite this, several proxy firms have recommended against the proposal. However, early voting trends suggest strong support for Musk's pay package. A report by trading platform eToro indicates that approximately 25% of Tesla's shares have already been voted, with over 80% in favor of the package.

Elon Musk's Future at Tesla

Musk's extensive involvement in various projects has led to concerns about his commitment to Tesla. While Tesla remains his primary source of wealth and influence, his divided attention is a point of contention for many investors. Denholm's letter subtly hints at the possibility of Musk leaving Tesla if the pay package is not approved, a prospect that raises significant alarm among shareholders.

Moreover, Musk is seeking more control over Tesla, aiming for a 25% stake in the company to further his goals in AI and self-driving car development. Currently, he holds about 13% of Tesla, having sold billions of dollars' worth of shares to fund his acquisition of Twitter. Musk has even suggested the possibility of spinning out Tesla's AI work into a separate company if his demands are not met.

Shareholder Decision

In light of these developments, shareholders are faced with a critical decision. The vote on June 13th is not just about approving a substantial pay package but about securing the future leadership and direction of Tesla. Denholm's letter serves as a stark reminder of the potential consequences of not meeting Musk's demands.

As the vote approaches, the stakes for Tesla and its shareholders couldn't be higher. The outcome will determine whether Musk continues to lead Tesla towards its ambitious goals or shifts his focus to his other ventures, potentially leaving Tesla without its visionary leader.

“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.” With Inputs from The Verge