Tesla Inc. (TSLA) shares surged over 5% to $459 as of writing, driven by concerns over Elon Musk's potential departure if shareholders reject his proposed $1 trillion performance-based compensation package at the annual meeting on November 6. Chair Robyn Denholm issued a warning in a letter to shareholders, emphasizing that Musk's leadership is crucial for Tesla's advancements in artificial intelligence, autonomous driving, and robotics, particularly the Optimus humanoid project.
The pay package comprises 12 tranches of stock options tied to ambitious targets, including achieving a market capitalization of $8.5 trillion and meeting specific AI and operational milestones. Denholm argued that this structure aligns Musk's incentives with long-term shareholder value, noting he would receive nothing if he fails to meet the goals. However, if successful, Musk's equity ownership could rise to 28.8%, raising governance concerns about dilution and board independence.
This proposal follows a Delaware court ruling that voided Musk's 2018 compensation deal due to flawed processes and lack of director independence. Denholm encouraged shareholders to re-elect three long-serving board members, but critics argue this perpetuates governance issues. Proxy advisors Institutional Shareholder Services (ISS) and Glass Lewis oppose the plan, citing excessive dilution and limited flexibility, while Egan-Jones Proxy Services supports it under its Wealth Focus Policy but notes potential risks to employee morale.
Musk slammed ISS and Glass Lewis as "corporate terrorists", accusing them of misunderstanding Tesla's strategy. Denholm urged shareholders to ignore their recommendations, stating, "If you prefer that Tesla turn into just another car company mired in the ways of the past, then you should follow ISS and Glass Lewis." Despite a 66.51% return over the past year, Tesla's year-to-date performance of 7.40% lags behind the S&P 500's 15.47%, reflecting investor caution amid leadership uncertainty.
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