Tesla’s chairperson, Robyn Denholm, urges shareholders to approve Elon Musk’s $56 billion compensation plan, warning that the billionaire CEO might leave if not sufficiently incentivized.
This critical vote, scheduled for June 13th, will determine the fate of Musk’s enormous pay package, which has been described as the largest ever approved for a CEO. This will be the second vote on the issue after a Delaware judge nullified the first vote earlier this year, citing significant flaws in the approval process. With the new vote approaching, Tesla is making a concerted effort to persuade shareholders to endorse the proposal again.
In a letter to shareholders filed with the Securities and Exchange Commission (SEC), Denholm highlights Musk’s unique role and the distinct nature of Tesla. “Elon is not a typical executive, and Tesla is not a typical company,” Denholm wrote.
She emphasized that traditional compensation strategies wouldn’t suffice for someone like Musk. She went on to add that motivating Musk requires something more than money, considering that he is the wealthiest man on the planet. Denholm’s letter implies that, without appropriate incentives, Musk might shift his focus to other ventures, emphasizing his limited time and numerous opportunities.
“What we recognized in 2018 and continue to recognize today is that one thing Elon most certainly does not have is unlimited time,” Denholm stated. “Nor does he face any shortage of ideas; in other places he can make an incredible difference in the world. We want those ideas, that energy, and that time to be at Tesla for the benefit of you, our owners. But that requires reciprocal respect.”
Tesla’s former audit committee chair and prominent clean technology venture investor, Steve Westly, has stated he won’t support Elon Musk’s $56 billion pay package. He also understands why other investors might vote against the CEO’s pay proposal next week.
“Elon has done an extraordinary job; he’s built one of the transformational companies of the age. But to ask for a $55 billion pay increase at precisely the time when you’ve missed quarterly numbers, growth is slowing down, and you’ve laid off 15 percent of the workforce is, I’d say, hubris, to say the least,” Westly said during an appearance on CNBC on Thursday.
Westly, who served on Tesla’s board from 2007 to 2010, is also California’s former controller and chief financial officer. He has also served on the boards of the state’s two most significant pension funds, CalSTRS and CalPERS, which manage over $500 billion in investments.
However, Denholm insists that the proposed pay package is “not about the money,” arguing that Musk’s existing wealth ensures he remains one of the wealthiest individuals globally, regardless of Tesla’s compensation decisions. “We all know Elon is one of the wealthiest people on the planet, and he would remain so even if Tesla were to renege on the commitment we made in 2018,” she said. According to Denholm, the real issue is ensuring Musk’s continued dedication to Tesla and its shareholders.
Musk’s extensive involvement in various projects—ffrom SpaceX and The Boring Company to Neuralink, X, and xAI—hhas raised concerns about his commitment to Tesla. These ventures have undoubtedly diverted some of his attention from Tesla, the primary source of his wealth and public profile. Denholm’s letter reflects the anxiety among investors about Musk’s future with the company if his compensation package isn’t approved.
Despite recommendations from several proxy firms against Musk’s pay proposal, early voting indicates strong shareholder support. A report by the trading platform eToro last month revealed that about 25 percent of Tesla’s shares had already voted, with over 80 percent in favour of Musk’s package, according to Reuters.
In addition to the proposed pay package, Musk is seeking a larger stake in Tesla—25 percent—to advance his goals in artificial intelligence and self-driving technology. He currently holds approximately 13 percent of the company, having sold billions of dollars worth of shares to fund his acquisition of Twitter. On his platform, X, Musk has even threatened to spin off Tesla’s AI work into a separate entity if his demands are not met.
Denholm’s letter is a strategic appeal to shareholders, laden with subtle warnings that Musk could potentially leave Tesla if the proposed compensation isn’t approved. “We all made a commitment to Elon,” she wrote. “Elon honoured his commitment and produced tremendous value for our stockholders. Honouring our commitment to Elon demonstrates that we support his vision for Tesla and recognize his extraordinary accomplishments—this is what will motivate him to continue to create value for stockholders.”
The upcoming vote on Musk’s compensation package underscores the delicate balance between retaining exceptional talent and safeguarding shareholder interests. As Tesla shareholders prepare to cast their votes, they hold the power to shape the future trajectory of the electric vehicle pioneer, weighing the potential risks and rewards of one of the most significant compensation packages in corporate history.
