Here’s How Elon Musk’s Pay Package Vote Could Affect Tesla Stock
Written by
Nicholas Morine
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Angela Corry
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After a few weeks of headlines debating whether or not Tesla CEO Elon Musk would see shareholders successful endorse a proposed pay package — one potentially worth $1 trillion, should all milestones be met — the answer was made plain on Nov. 6 following the automaker’s annual shareholder meeting in Austin, Texas.
The result: A strong endorsement of the pay package, with an estimated 75% of shareholders answering in the affirmative. Following the announcement of the voting results, Tesla shares ticked upward by about 3%, as Business Insider noted.
According to NPR, among other targets, Musk must raise Tesla’s market cap from ~$1.5 trillion at the current time to above $8.5 trillion to unlock the $1 trillion in Tesla stock for himself — a lofty goal.
Tesla Superfans Cheer Vote, Show Enthusiasm Over Musk’s Prospects to Earn $1 Trillion Package
Following the results of the vote, Musk fans in attendance were enthusiastic in their praise of the decision, and some analysts also sided with a positive interpretation of the outcome.
Jesse Fried, a professor of law at Harvard Law School, noted that the decision made by shareholders was logical due to the “huge upside to keeping Musk hyper-focused on Tesla.”
“It was approved by unaffiliated shareholders, who are the parties most affected by the arrangement,” said Fried, as a separate Business Insider report detailed. “I don’t believe any other public company has ever voluntarily put CEO pay to a shareholder vote.”
Ian Keas, managing director of Gallagher’s executive compensation consultancy team, told the outlet that while such a “moon-shoot” incentive was highly unusual coming from U.S. publicly traded companies, shareholders were likely safe to keep their money in Tesla — particularly as Musk’s rewards are “tightly linked” to “clear and rigorous” performance outcomes.
“When there’s an award that’s been designed by a board of directors and approved by a shareholder vote, that kind of contract is binding,” Keas told the outlet. “If the future of the company is successful through proper incentives for a CEO that result in shareholder value appreciation over time, then I don’t think shareholders have too much to worry about.”
Musk’s Tesla Pay Package Attracts Criticism, Both Before and After Shareholder Vote
Not everyone was as pleased with the plan. Prior to the vote, proxy-advisory firm Glass Lewis & Co. advised shareholders to vote against the proposal, saying it represented an “unprecedented” payout which warranted “significant shareholder concern” as it could prove “excessively dilutive” to shareholders if fully enacted.
Musk retorted to Glass Lewis and fellow proxy advisory firm ISS, which was also against Musk’s proposed pay package, calling the firms “corporate terrorists.”
Others were concerned that safety-related issues could crop up, potentially increasing dangers to drivers, pedestrians, and Tesla’s bottom line.
“This pay plan creates a dangerous financial incentive to rush partially-autonomous vehicles and robotaxis onto public roads before they’re proven safe,” said Shua Sanchez, national campaign director at Safe Autonomous Vehicles Everywhere.
Since opening at ~$434 on Nov. 7, Tesla stock slid to ~$412 as of midday Nov. 17.
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