Key Points:
- Investor Pushback: Pension funds urge rejection of Musk’s $1T pay plan.
- Governance Issues: Critics cite weak board oversight.
- Financial Risk: Potential equity dilution and executive pay concerns.
An investor group representing several large Tesla Pension Funds has urged Tesla shareholders to vote against a proposed $1 trillion compensation package for CEO Elon Musk, while also calling for the replacement of several board members.
The letter, signed by SOC Investment Group and supported by organizations including Friends Fiduciary Corporation, SHARE, multiple U.S. state treasurers, and the New York City Comptroller, raised concerns about Tesla’s corporate governance, board independence, and long-term shareholder value.
Concerns Over Corporate Governance
The group representing Tesla Pension Funds highlighted that Tesla’s board has deep personal and financial ties to Musk, making it less independent than governance standards typically recommend. Two directors are current or former Tesla executives, several are long-term associates of Musk, and four have served on the board for more than a decade.
According to the letter, independent boards often deliver stronger shareholder returns, but Tesla’s current structure risks concentrating control in Musk’s hands. The letter also criticized the high compensation levels of Tesla’s board members compared to peers in the S&P 500, raising concerns about impartial oversight.
Investor Criticism of Pay Proposal
Tesla’s proposed $1 trillion stock award would be the largest CEO compensation package in corporate history, contingent on meeting performance targets. The investor group argues that these targets are vague, undemanding, and leave room for board discretion in evaluation.
The group further warned that awarding Musk such a large volume of shares could dilute the holdings of existing shareholders. They also raised concerns about volatility in Tesla’s stock price, which could result in large payouts without reflecting consistent, stable value creation.
The group specifically recommended shareholders vote against Proposals 3 and 4, which address stock pools and Musk’s incentive plan. They noted that Proposal 3 combines employee stock allocations with Musk’s award, preventing shareholders from approving employee incentives separately.
Performance and Market Position
Beyond pay concerns, the letter noted Tesla’s slowing growth in recent years, citing falling sales, declining profits, and growing competition in the electric vehicle sector. While Tesla has positioned itself as a leader in robotics and autonomous driving, the letter stated that the company has yet to demonstrate clear market dominance in those areas compared to competitors.
The investor group emphasized that Musk’s leadership attention is divided across multiple ventures, raising questions about his ability to focus on Tesla’s long-term performance.
Shareholder Decisions Ahead
Three Tesla board members — Ira Ehrenpreis, Joe Gebbia, and Kathleen Wilson-Thompson — are up for re-election. The letter recommends shareholders vote against their reappointment, citing concerns over conflicts of interest, share sales, and ties to Musk.
The group concluded by urging shareholders to consider the long-term governance of Tesla, noting that as Musk’s ownership stake has declined, outside investors now have greater influence over the company’s direction.
If approved, Musk’s $1 trillion compensation package would set an unprecedented benchmark in executive pay. The shareholder vote, closely watched by global markets, entrepreneurs, and business leaders, will also reflect how much value Tesla Pension Funds and other investors place on governance, accountability, and CEO performance in high-growth industries.
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