By Ross Kerber
(Reuters) – Tesla critics hope to block the stratospheric compensation proposed for CEO Elon Musk but face an uphill fight.
Investors in the electric vehicle maker will decide on November 6 whether to approve the pay package that is potentially worth $1 trillion – likely the largest-ever CEO compensation agreement. Tesla’s board is pushing for shareholders to approve the plan, with Chair Robyn Denholm warning on Monday that Musk could leave if the deal is rejected.
Meanwhile, longtime skeptics of the company’s corporate governance, including Democratic U.S. state leaders and union officials, have launched a campaign to vote down the offer. Several have tried and failed to block earlier record payouts to Musk, including his $56 billion compensation plan for 2018 that investors reapproved last year amid legal challenges that remain.
The critics hope the results this time will be different, and also aim to reject all three Tesla directors who are up for reelection.
“The idea that another massive equity award will somehow refocus a man who is distracted is both illogical and contrary to the evidence,” Democratic New York State Comptroller Thomas DiNapoli, a frequent doubter of Musk, said on Monday. DiNapoli controls the vote of 3.3 million shares in Tesla through the state’s pension retirement system, or 0.1% of the company. “This is not pay for performance. It is pay for unchecked power,” he said.
He and others also worry that the deal would consolidate Musk’s control of the automaker and revive what New York City Comptroller Brad Lander called “the era of robber barons.” Lander spoke with DiNapoli on a webinar about Tesla’s shareholder meeting on Monday. New York City’s retirement plans held around 5 million Tesla shares as of April.
“Tesla is basically asking shareholders to relinquish having a meaningful voice in the company,” said Tejal Patel, executive director of the union-affiliated SOC Investment Group. It advises union pension plans that it said together hold fewer than 1% of the EV maker.
Although top proxy advisers recommend voting against the pay, even Tesla skeptics say they face a tough battle as U.S. Republican politicians shift power from investors to corporate leaders.
Ann Lipton, a University of Colorado law professor, said that many investors also will want to keep Musk happy. “Asset managers that believe they may have opportunities to invest in his other ventures – like xAI or SpaceX – may also want to stay in his good graces,” she said.
A Tesla representative declined to comment for this article.
POLITICAL DIVIDE OVER MUSK PAY ISSUE
Two of Tesla’s three largest outside investors, BlackRock and State Street, both declined to comment through their press teams. A Vanguard representative did not respond to questions. Musk’s new pay plan, Item 4 on the ballot, must win a majority of shares entitled to vote on the proposal, including his own, in order to be approved.
A relatively high percentage of Tesla shares are held by retail investors, who tend to back management but often do not vote. Musk has the backing of legions of fans on his social media platform X, like Alexandra Merz, a self-described “Fangirl of Elon” and “Fierce Tesla retail shareholder advocate” who posts as @TeslaBoomerMama to her 209,000 followers.
Merz said via text message that she supports Musk’s pay package, which she said “challenges Elon to grow Tesla’s capitalization by nearly $7.5 trillion and achieve ambitious operational milestones” such as delivering robotaxis and AI robots, “ensuring that his compensation is tied to transformative value creation.”
To some extent, arguments about Musk’s pay have divided along political lines. Democrats DiNapoli, Lander, Massachusetts Treasurer Deb Goldberg and others have come out swinging against the compensation while pension plans in Florida and Texas, which are run by Republicans, have said they will support the plan.
A spokesperson for the Texas Teacher Retirement System, the largest pension fund in the state, declined to comment about the support for Musk’s pay it recently disclosed.
Asked about its vote, an official for the Florida State Board of Administration cited a recent securities filing that states Musk’s new award aligns pay with “ambitious, measurable milestones that benefit all shareowners” and contains governance safeguards.
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(Reporting by Ross Kerber in Boston; Editing by Dawn Kopecki and Matthew Lewis)
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