CalSTRS Opposes Elon Musk's $2.6 Billion Package: Will Others Follow?
Today Tesla shareholders are meeting to decide one thing: is Elon Musk worth a $2.6 billion compensation package?
The Tesla board will seek shareholder approval to approve the Musk comp package — the largest-ever of its kind — underscoring the company’s outsize ambitions and how intimately connected its future success is to Musk. And as Bloomberg notes, "if the plan's accepted and he turns Tesla into both a mass-market automaker and one of the world’s largest companies, he'll become perhaps the richest man on the planet."
Or perhaps not, as one major shareholder has already said no.
According to Reuters, CalSTRS is opposing the Musk compensation package, with Anne Sheehan, Director of Corporate Governance, sayind that "given the size of the award, we believe the potential dilution to shareholders is just too great." adding that "we have concerns about the lack of focus on profitability for the company, and the one profitability metric that is used excludes the cost of stock-based compensation."
The question is will others follow?
Votes on the compensation plan will be cast at a special shareholder meeting in Fremont, California, at 9 a.m. local time (noon ET). As Bloomberg adds, the board needs support from investors holding a majority of the shares—not counting those owned by Musk and his brother Kimbal, who’s a Tesla director—to make the award.
Not surprisingly, CalSTRS is not alone: proxy advisory firms Institutional Shareholder Services Inc. and Glass Lewis & Co. have urged investors to vote against the package. Meanwhile, large shareholders Baillie Gifford & Co. and T. Rowe Price Group Inc. have signaled they're likely to support it.
Under the proposed terms, Musk would earn one-12th of the options every time Tesla hits a pair of goals: one tied to its market value and the other linked to either revenue or earnings excluding certain charges. For Musk to get all the options, Tesla would have to become worth $650 billion—more than Facebook Inc.—and produce more revenue than Procter & Gamble Co.
Below Bloomberg lists some of the main pros and cons shareholders will be mulling as they cast their ballots: