Tesla Might Lose Elon Musk If His $56B Package Is Not Approved

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Key Takeaways

  • Tesla's board urges approval of Elon Musk's $56 billion pay package to keep him focused on the company.
  • Shareholders vote on June 13 after a previous vote was invalidated, with Denholm highlighting Musk's unique role.
  • Preliminary votes show strong support, with over 80% favoring the package, emphasizing Musk's importance to Tesla.

Tesla board chair Robyn Denholm urges shareholders to approve CEO Elon Musk’s substantial $56 billion pay package, warning that failing could lead Musk to pursue opportunities elsewhere.

On June 13, Tesla shareholders will vote on Musk’s compensation package, valued at up to $56 billion. This will be the second vote after a Delaware judge invalidated the first approval earlier this year, citing significant flaws in the process.

As a result, Tesla is now making concerted efforts to persuade shareholders to support the proposal again.

“Elon is not a typical executive, and Tesla is not a typical company,” Denholm stated in a letter to shareholders filed with the Securities and Exchange Commission.

She emphasized that conventional executive compensation strategies would not be effective for Tesla and that motivating Musk requires a unique approach.

Denholm implied that Musk might turn his attention to other ventures without proper motivation.

“What we recognized in 2018 and continue to recognize today is that one thing Elon most certainly does not have is unlimited time,” she wrote. “Nor does he face any shortage of ideas and 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.”

Denholm asserted that the vote is not primarily about the financial aspect, noting, “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.” Instead, she framed the approval of the pay package as essential to keeping Musk focused on Tesla and its mission.

Elon Musk and Other Projects

Musk’s involvement in multiple other projects, including SpaceX, The Boring Company, Neuralink, X, and xAI, has raised concerns among investors about his commitment to Tesla. Despite his wealth and success, Denholm argues that Musk requires significant incentives to prioritize Tesla.

Proxy advisory firms have recommended against approving Musk’s pay proposal. However, preliminary voting indicates strong support, with a report from eToro suggesting that about 25% of Tesla shares have already voted, with more than 80% in favor of the package.

Musk is also seeking more control over Tesla, aiming for a 25 percent stake to advance his goals in artificial intelligence and self-driving cars. Currently, he holds about 13 percent of the company, having sold a substantial portion of his shares to finance his acquisition of Twitter. Musk has hinted at potentially spinning off Tesla’s AI operations into a separate company on his social platform X if his demands are not met.

Denholm’s letter underscores the importance of fulfilling Musk’s commitment.

“Elon honored his commitment and produced tremendous value for our stockholders. Honoring 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,” she concluded.

Shareholders now face a crucial decision that will impact the future direction and leadership of Tesla.