Prominent investor Ron Baron has come out in support of Tesla (NASDAQ:) CEO Elon Musk's $56 billion pay package, which will be voted on by shareholders next week, according to an open letter from the Baron Capital founder on Tuesday.
Why is it important
Musk's massive pay, which was approved in 2018 but was struck down by a Delaware judge earlier this year, remains controversial.
Musk and Tesla's board of directors have argued that compensation, primarily in stock awards tied to Tesla hitting specific milestones, links executive incentives to growth at Tesla.
However, some shareholders see the package as excessive. Proxy advisory firms Institutional Shareholder Services (ISS) and Glass Lewis have urged shareholders to vote against it in its current form.
Main quote
“Elon is the absolute 'key man' on the key risk list,” Barron said. “Without his relentless leadership and uncompromising standards, there would be no Tesla.”
Context
Tesla filings show that the billionaire does not receive a salary and is compensated through stock awards.
Some shareholders argued for the 2018 award, the largest for a CEO in corporate America, citing Musk's track record of making Tesla the world's most valuable auto company with a market capitalization more than 10 times that of General Motors (NYSE:).
However, the automaker is facing pressure as electric vehicle sales slow due to rising interest rates and increased competition. It recently cut more than 10% of its workforce and reduced the prices of some of its vehicles.
What then
Tesla shareholders are scheduled to vote on Musk's pay at their annual meeting scheduled for June 13.