Hey everybody, welcome back to the Elon Musk podcast. This is a show where we discuss the critical crossroads, the shape, SpaceX, Tesla X, the Boring Company and Neuralink. I'm your host will Walden, Tesla CEO Elon Musk's $46 billion stock options package faces a critical vote at the company's
annual shareholder meeting. Investors are deeply divided, with some arguing that the compensation is excessive and indicative of poor governance, while others, particularly small retail shareholders, have already expressed their support for Musk. Now, at a recent meeting of Tesla investors, including New York City Comptroller Brad Lander, arguments were made against ratifying Musk's 2018
pay package again. Lander, whose office manages $271 billion in assets across five New York City retirement funds, criticized the Tesla board for failing to provide independent governments for shareholders now. Lander noted that the NYC retirement funds hold 3.4 billion Tesla shares valued at approximately $672 million. He declared that the funds would vote against Musk's pay and the
re election of board members. Kimball Musk, who's Elon Musk's brother, and James Murdoch, citing conflicts of interest. Now, this vote is not a referendum on Elon Musk as CEO. He is a visionary whose role in Tesla has been critical. But independent shareholder governance must ensure reasonable pay package. This pay package is not reasonable, they said now. Tesla did not immediately respond to requests for comments.
The company's compensation package for Musk was nullified in January by a Delaware Chancery Court judge, who cited the lack of independence in the board's process and improper negotiation of the deal. Now, following the ruling, Musk announced plans to relocate Tesla's headquarters from Delaware to Texas, aiming for more favorable judicial
treatment. The Tesla board is now asking investors to reapprove Musk's pay and the move to Texas, and shareholder advisory firms Glass Lewis and Institutional Shareholder Services have recommended voting against the pay package. Lander argued that Tesla lacks a full time CEO focused solely on the EV makers growth. He criticized Musk for being distracted by ventures like social media and other companies including XXAI, SpaceX, Neuralink and the Boring Company.
Ivan Frischberg, chief sustainability officer of Amalgamated Bank, echoed these concerns, noting Musk's distractions and significant challenges for Tesla, including global competition, development delays and labor disputes. Frischberg mentioned that 2 corporate directors resigned, citing board reference to Elon Musk at Frisburg's bank, whose clients hold 600,000. Tesla shares plans to vote against the re election of Kimball, Musk and Murdoch due to
the lack of board independence. Lander warned that Musk's pay issues could have broader impacts on capital markets. Emphasizing the need for independent oversight, Lander said when billionaires are allowed to flout the rules, normal people suffer. The billionaire can't have his brother and friends decide on governance rules.
Lander expressed frustration at not being able to get a response from the Tesla board, describing Musk's pay package as outrageously large and insufficiently governed. Now, Maryland Comptroller Brooke Lierman added her concerns about Tesla's workforce management and the board's inattention to human capital, presenting these as risks for shareholders to
consider them voting. She said to succeed, Tesla needs a management team that is on the ball, urging for an effective board that can stand up to the CEO when necessary. Contrastingly, major investor Ron Baron, founder of Baron Capital, supports Musk's pay package, emphasizes Musk critical role in Tesla's success over the years. Baron highlighted Musk's relentless Dr. and commitment, including sleeping on the factory floor during difficult
production periods. In 2018, Tesla's compensation package granted Musk the option to purchase 304,000,000 shares at $23.34 each, contingent on meeting challenging milestones. Nearly 75% of shareholders initially approved this package. Despite achieving all of the milestones, the Delaware court invalidated the package due to the flawed approval process. Tesla is now seeking a re ratification of the package and approval for moving its incorporation to Texas ahead of
the annual meeting on June 13th. Now the proposed compensation, potentially the largest for AUS executive, was worth $56 billion at its peak and is currently valued at $46 billion. And several funds represented by Lander will vote against it, along with the re election of Kimble, Musk and Murdoch, of course. And Musk has been lobbying shareholders through social media, factory tours and by attacking critics of his pay package.
Proxy firms like Glass Lewis and Institutional Shareholder Services have recommended voting against it, citing the excessive size and dilution of shareholder value. Now miss Musk's aggressive push for the compensation package. Tesla faces declining sales, increased competition and internal challenges, including layoffs and aging vehicle
models. Musk argues he needs a significant stake to drive Tesla's future in AI and robotics, and his demands for greater control, coupled with threats to spin out Tesla's AI work if his demands aren't met, have heightened the stakes. And despite shareholder concerns, Musk's influence remains strong, particularly among retail investors. The stock is heavily held by retail investors, comprising 44% of his total shares, the highest among the top ten S&P 500 companies.
This demographic has shown strong support for Musk, influenced by his public appeals and promises of continued value creation. Now, Tesla is rallying support through its website, votetesla.com, urging shareholders to recognize the value that Musk has created and vote in favor of the compensation package. Early voting indicates significant support for Musk among retail shareholders. However, regardless of the June 13th vote outcome, the compensation issue is far from
over. Shareholders will vote, but any decision will likely serve as evidence in ongoing legal proceedings, which could extend for months now. Tesla reassured a Delaware judge that despite the proposed move to Texas, the company will continue to litigate the compensation case in Delaware. Meanwhile, shareholder lawsuits alleging insider trading and fiduciary breaches by Musk and
the board are emerging. And as Tesla's annual meeting approaches, the debate over Musk's compensation package and corporate governance continues. Shareholders face crucial decisions that will impact the company's direction and governance structure, and the upcoming vote will reveal the extent of shareholder support for Musk's leadership and compensation. While some advocate for tighter governance in a full time CEO, others believe Musk's unique drive and vision are irreplaceable now.
The contentious issue underscores the broader challenges facing Tesla right now, from internal management to external competition. And as the vote draws near, the company's future hinges on the balance between governance and Elon Musk's visionary leadership. Hey, thank you so much for listening today. I really do appreciate your support.
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