Let's dive into the details of Elon Musk's $46 billion compensation package from Tesla, the controversy surrounding it, and why it's more about stimulus than money.
Elon Musk's amazing payday
Tesla's astronomical $46 billion payday from Elon Musk has been the subject of much controversy. But according to Tesla CEO Robin Denholm, this huge sum doesn't just line Musk's already deep pockets. No, this payday is about keeping the mysterious CEO laser-focused on Tesla's future and its ambitious goals.
“When we made our commitment to Elon in 2018 — a commitment that was approved overwhelmingly by nearly 73% of disinterested shareholders — it had one simple purpose: to keep Elon focused on Tesla and motivated to realize the company's unrivaled ambitions,” Denholm books.
The genesis of the $46 billion package
In 2018, Tesla decided to put a big carrot in front of Musk to ensure he remained committed to steering the electric car giant into uncharted territories. Deal? An opportunity to buy up to 304 million shares at just $23.34 per share, provided Musk achieves a series of ambitious milestones. Moving forward to 2022, Musk has achieved enough of these milestones to benefit from the entire package. but, A Delaware judge tossed out the package earlier this year, leaving Musk without any compensation from Tesla for his latest efforts. According to Denholm, this is not only unfair, but it strips Musk of the motivation to continue pushing Tesla forward. Hmmmm…she might have a point.
“It's clearly not about the money.”
In her letter to shareholders, Denholm passionately defended the decision to re-certify Musk's 2018 compensation package. She stressed that the decision was overwhelmingly supported by shareholders at the time, and insisted that fairness and respect were at the core of the move. “Obviously it's not about the money,” Denholm said, highlighting Musk's towering net worth of $208.2 billion, making him the second-richest person in the world. “It takes something different to motivate someone like Elon.”
Thanks Cathy https://t.co/QIMFCkBdS8
– Elon Musk (@elonmusk) June 6, 2024
The struggle of critics and supporters
Of course, not everyone is on board with this massive pay package. Critics range from government funds in California and New York City to proxy advisors such as Glass Lewis and Institutional Shareholder Services. New York City Comptroller Brad Lander, whose funds own a large number of Tesla shares, said that while Musk's previous role was vital, there must be independent governance to ensure pay packages are reasonable. Lander stated, “This pay package is not reasonable.”
On the other hand, Musk's allies came out swinging in support of the compensation deal. Billionaire Ron Barron and his investment management firm, Barron Capital, are vocal supporters. Barron, a longtime Tesla bull, described Musk as the ultimate “main man” and credited him with Tesla's extraordinary success. Barron told how Musk equalized. He sleeps on the factory floor During Tesla's difficult times, demonstrating his relentless leadership.
Thanks Ron! https://t.co/wAW1v4DTIR
– Elon Musk (@elonmusk) June 5, 2024
Musk's fortune: More than just Tesla
A large portion of Musk's wealth stems from his shares in Tesla, but let's not forget his other ventures, such as SpaceX, his new artificial intelligence (AI) startup xAI, and Neuralink. During a recent interview with CNBC, Denholm noted that the world benefits from Musk's ecosystem, ensuring that his countless projects don't unfairly impact Tesla shareholders. Recently, Musk has faced criticism for allegedly diverting Nvidia's artificial intelligence chips, intended for Tesla, into his other projects. While he denied these allegations, they added fuel to the fire of those skeptical of his compensation.
Mobilization of troops
In the lead-up to Tesla's annual meeting on June 13, the company launched a full-scale campaign to drum up support for the re-certification of Musk's pay package. This includes advertising and a dedicated website that pushes the Board's recommendations. Musk himself has taken to X (formerly Twitter) to canvass, while Denholm has been on the phone with institutional investors.
Verdict: Fair or foul?
As the debate rages on, we have to acknowledge that Musk's $46 billion payday is more than just a matter of compensation. It's a referendum on how to motivate one of the world's most influential and unconventional CEOs. While some see it as an essential step to keep Musk's eyes on the prize, others see it as an exorbitant and unjustified reward. Regardless, one thing is for sure – when it comes to Elon Musk and Tesla, the risks are always very high.
However, $46 billion is a big piece of cheese, and there are very few in the world who wouldn't find that a motivating factor.
For more finance-related stories, and perhaps tips on how to renegotiate your salary package, visit our Trends section.
This article was written by Lewis Parkes at www.financemagnates.com.