Tesla (TSLA) Stock: Musk’s Trillion-Dollar Payday Hangs in Balance Thursday

TLDR

• Tesla holds annual shareholder meeting Thursday with vote on Musk’s compensation package worth up to $1 trillion
• Norway’s sovereign wealth fund and CalPERS oppose the pay plan due to excessive size and shareholder dilution concerns
• Musk holds 15% voting stake under Texas law and could determine the outcome himself
• Board members facing reelection previously returned $919 million in excessive compensation settlements
• Shareholders decide whether Tesla should invest in Musk’s separate AI venture xAI

Tesla holds its annual shareholder meeting Thursday in Austin, Texas. CEO Elon Musk’s compensation package tops the agenda.

The proposed package could reach $1 trillion in value if all performance targets are met. This would make it the largest executive pay plan in corporate history.

Tesla, Inc., TSLA

Norway’s $1.9 trillion sovereign wealth fund plans to vote against it. The fund owns 1.2% of Tesla shares.

Musk currently owns 13% of Tesla after various share sales. His previous 2018 pay package remains stuck in Delaware courts.

A Delaware judge called that earlier package an “unfathomable sum” from conflicted board negotiations. Tesla is appealing the ruling.

Performance Targets and Control

The new compensation includes 12 stock option tranches vesting over 7.5 years. Each tranche unlocks when Musk hits specific performance milestones.

Approval would give Musk approximately 25% ownership of Tesla. He says this control level is essential for staying with the company.

The targets require Tesla to reach an $8.5 trillion market value within ten years. The company currently has a $1.5 trillion market cap.

Some investors support paying Musk whatever it takes. Nancy Tengler of Laffer Tengler Investments backs the package.

Critics say no CEO deserves this much compensation. Brian Dunn from Cornell University’s Institute for Compensation Studies called it unreasonable.

Proxy advisers Glass Lewis and ISS recommend rejection. They cite excessive dilution and board conflicts of interest.

Glass Lewis noted the board can approve stock grants even if Elon Musk misses performance targets.

Board Elections and xAI Decision

Three directors seek reelection Thursday. Ira Ehrenpreis and Kathleen Wilson-Thompson both sit on the compensation committee.

Joe Gebbia from Airbnb serves on the audit committee. Glass Lewis supports only Gebbia’s reelection.

These directors returned $919 million earlier this year. The settlement resolved claims of excessive compensation from 2017 to 2020.

Shareholders also vote on investing in Musk’s AI company xAI. The startup’s Grok chatbot now appears in new Tesla vehicles.

Glass Lewis opposes it, saying shareholders shouldn’t make operational decisions.

Musk can vote his 15% stake under Texas corporate law. Tesla moved there from Delaware after the 2018 pay ruling.

This voting power could prove decisive. Board chair Denholm warned that rejecting the package risks losing Musk entirely.

The meeting starts at 4 p.m. ET with results expected shortly after voting concludes.

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