A group of Tesla shareholders is urging investors to reject a compensation package worth over $40 billion for CEO Elon Musk, arguing that it does not align with the best interests of the electric vehicle manufacturer.
Tesla is currently facing numerous challenges, including declining global sales, a slowdown in demand for electric vehicles, an aging lineup of models, and a significant drop in its stock price, which has decreased by 30% this year.
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The group of shareholders, which comprises New York City Comptroller Brad Lander, SOC Investment Group, and Amalgamated Bank, expressed their concerns in a letter to shareholders. They argue that approving Musk’s pay package would not contribute to the long-term growth and stability of Tesla.
According to the letter, there are also concerns about the approval of the pay package, as it could potentially result in lawsuits claiming corporate waste. Furthermore, Musk is seen as a part-time CEO at Tesla, as he is dedicating more of his time to other business commitments.
The group expressed their opinion that shareholders should not view this award as having any kind of incentivizing effect, as it does not. Instead, they believe that the award suffers from a problem of excessiveness, which has been evident since the beginning.
If shareholders approve the compensation package, there is a possibility of introducing another plan in the following year.
The group stated that, considering Tesla’s track record of receiving increasingly larger awards, it is highly likely that Musk will request another award.
Investors are also being urged by the group to vote against the reelection of board members Kimbal Musk, who is Elon’s brother, and James Murdoch, a former executive at media company Twenty-First Century Fox.
Last month, Tesla requested shareholders to reinstate Musk’s compensation package, which had a value of $56 billion at the time. However, a Delaware judge rejected this proposal earlier this year. In addition, Tesla also expressed its intention to relocate its corporate headquarters to Texas.
Stockholders will vote on the changes during the annual meeting on June 13.
In 2023, Tesla achieved a milestone by delivering over 1.8 million electric vehicles globally. However, despite this impressive feat, the value of Tesla’s shares has declined rapidly this year due to a slowdown in electric vehicle sales.
Tesla reported a decline in vehicle deliveries for the first quarter of the year, with a drop of nearly 9% compared to the same period last year. This raises concerns about the company’s future growth prospects, especially in an increasingly competitive global market. In such a challenging environment, convincing shareholders to support a generous compensation package could prove to be a difficult task.
Tesla began reducing prices on some models last year, resulting in price cuts of up to $20,000. As a consequence, the value of used electric vehicles declined and Tesla’s profit margins were affected.
In April, Tesla announced that it would be laying off approximately 10% of its workforce, affecting around 14,000 employees.
