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With Tesla's institutional investors appearing increasingly disconcerted with Elon Musk's $56 billion pay package, and the EV giant's CEO threatening to quit the company should he fail to win the requisite shareholder approval for his preferred remuneration, the stakes could not be any higher for Tesla's upcoming Annual General Meeting (AGM).
The Brouhaha Around Elon Musk's Gigantic Pay Package
Back in 2018, Tesla awarded Elon Musk one of the biggest compensation packages in American corporate history, to the tune of $56 billion. The package played a pivotal role in allowing Elon Musk to clinch the title of the world's richest person.
Tesla underwent a trial in 2022, where some shareholders asserted that the Delaware Court of Chancery should void Elon Musk's 2018 compensation plan as it was a result of sham negotiations between a beholden board and an increasingly powerful and assertive CEO.
Delaware Chancery Court Chief Judge Kathaleen St. J. McCormick ultimately agreed with the plaintiffs and voided Elon Musk's $56 billion compensation plan. The punitive action also voided Elon Musk's 304 million unexercised stock options, which had entitled the EV giant's CEO to around 9 percent of Tesla's 3.2 billion outstanding common shares. Bear in mind that Musk currently owns roughly 13 percent of Tesla, corresponding to around 412 million shares.
Elon Musk responded by recommending to the board to shift Tesla's state of incorporation to Texas. Bear in mind that Musk had already declared before the Delaware court's ruling that he was uncomfortable working at Tesla with his current voting power, complaining that his control was just enough to allow him to be "influential" but not sufficient to prevent being "overturned" on occasion. He had then demanded voting power within Tesla's board that exceeded the 25 percent threshold, threatening to "build products outside of Tesla" should the EV giant's board not acquiesce to his demands.
The AGM's Two Main Proposals: Elon Musk's Pay Package And The Adoption Of Texas As Tesla's State Of Incorporation
Tesla is slated to hold its annual general meeting (AGM) of the shareholders on the 13th of June, where the company's investors are expected to mull two weighty proposals: to restore Elon Musk's $56 billion remuneration package and to approve Texas as Tesla's state of incorporation.
Over the weekend, Glass Lewis one of the two major proxy solicitation firms (other is ISS) recommended that $TSLA shareholders reject a proposal to reinstate CEO Elon Musk's pay package worth some $56 billion when it was awarded in 2018. Both ISS and Glass Lewis recommended… pic.twitter.com/TOjQczWM69
— Gary Black (@garyblack00) May 28, 2024
It is the question of Musk's remuneration that is proving to be particularly divisive, however. At the end of May, Glass Lewis and ISS - the two major proxy solicitation firms advising Tesla's shareholders - recommended that investors vote against Elon Musk's mammoth pay package.
NEWS: Norway's $1.7 trillion sovereign wealth fund said today it will vote against ratifying @elonmusk's pay package. The fund owns ~1% of all Tesla shares. They voted against the package in 2018 as well. The fund said: “We appreciate the significant value generated under Mr.… pic.twitter.com/sIxl6HDPGj
— Sawyer Merritt (@SawyerMerritt) June 8, 2024
Now, Norway's $1.67 trillion sovereign wealth fund, called the Government Pension Fund Global, has also come out against approving Musk's pay package. The fund owns a 0.98 percent stake in Tesla.
Ron Baron on Elon Musk: “On 12k hires Tesla had 6M applicants. The reason they have it is not because of the name Tesla, not because of cars, it’s because of him. Think about his ability to attract these great people; And you want to renege on a contract & deal you made with him? pic.twitter.com/hvVbPkPAQj
— Sawyer Merritt (@SawyerMerritt) June 5, 2024
Of course, at the other end of the spectrum, proponents argue that Elon Musk is Tesla's star attraction and that his departure would gut the EV giant's prospects. For instance, Ron Barron, the Chairman, CEO, and Portfolio Manager of Baron Funds, has argued that Tesla recently received around 6 million applications for 12,000 positions, with each applicant presumably vying to make a difference in the world under Musk's steerage.
About the author: Writing is my one incontrovertible passion. Over the past six years, he has authored over 2,200 distinct articles on financial and tech-related topics, spanning nearly 1 million words. And he has been a member of Wcctech mobile team since 2025. As an alumnus of the University of Toronto, Rotman Commerce Program, I bring nuance, in-depth knowledge, and a unique perspective to every topic that I cover. When I'm not writing, I'm traveling the world, exploring hidden confectionaries and restaurants as an aspiring food connoisseur.
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