Tesla Stock Dips Amid Investor Backlash to Musk's $1T Pay Plan
A coalition of influential investors is urging shareholders to reject the CEO's new compensation package, citing major governance concerns.
Shares of Tesla (TSLA) fell 1.42% as a powerful coalition of shareholders announced its opposition to CEO Elon Musk's proposed $1 trillion, decade-long compensation package. The group, which includes the SOC Investment Group and officials from several states, is urging investors to vote against the plan at the upcoming November meeting, citing significant governance failures and the unprecedented scale of the award.
The opposition comes amidst a contentious history of executive compensation at the electric vehicle maker. This new proposal follows a lengthy legal battle over Musk's 2018 pay package, which was earlier this year. The court found that the original approval process was 'deeply flawed' and that the board lacked independence, a criticism that has resurfaced with the new plan.
In a letter to fellow shareholders, the investor group argued that the new package fails to address these underlying governance issues. They pointed to what they describe as a lack of rigorous performance metrics and the board's inability to secure guarantees of Musk's focused attention on Tesla, given his leadership roles at SpaceX, X (formerly Twitter), and Neuralink. '[The board has failed] to secure in exchange a commitment from Mr. Musk to devote a specific or substantial amount of his time to Tesla,' the letter stated.
Tesla's board has defended the proposal, arguing it is essential to incentivize Musk and align his interests with long-term shareholder value. The performance-based plan requires hitting monumental milestones, including increasing Tesla's market capitalization to $8.5 trillion and mass-producing its Optimus humanoid robot. According to , the company believes the package could generate trillions in investor returns if the ambitious targets are met.
However, the dissent from prominent institutional investors signals a growing willingness to challenge the board's decisions. The ongoing controversy has cast a spotlight on the unique governance structure at Tesla and the board's relationship with its visionary but divisive CEO. With watching closely, the outcome of the November vote will be a critical test of shareholder confidence in the company's leadership and strategic direction, and it could set the stage for further legal challenges regardless of the result.