The Comptroller of New York City and seven financial firms are recommending Tesla shareholders give a thumbs down to the electric car maker’s ~$50 billion compensation package for CEO Elon Musk.
The suggestion was part of a letter signed by NYC Comptroller Brad Lander and the aforementioned companies, filed with the Securities and Exchange Commission (SEC). The letter is prefaced by saying that it was submitted on behalf of several pension and pension funds for government employees, such as teachers and police officers.
Signatories also include Amalgamated Bank, AkademikerPension, Nordea Asset Management, SHARE, SOC Investment Group, UNISON and United Church Funds.
The pay package, worth about $50 billion in stock, was originally approved in 2018 on the condition that Musk meet several targets related to the company’s finances and stock price, which he did. However, a Delaware court ruled in February that the pay package was unlawful due to the Tesla board’s close ties to Musk, prompting the board to propose a new vote last month. The vote will take place on June 13.
While it may seem strange that the Big Apple’s comptroller would get involved, this isn’t Lander’s first rodeo. In November, he publicly criticized Musk’s alleged anti-Semitism and said he was distracted by his other companies in April 2023, which hurt his performance as Tesla CEO. As for why Lander is weighing in on this latest issue, NYC’s pension funds include nearly a billion dollars in Tesla stock, and as comptroller he is the administrative head of the state’s pension system.
Lander and co cited a litany of reasons why Musk wouldn’t get the billions of dollars. One of their main criticisms is that the process for restarting voting has been highly questionable due to the Tesla board’s Special Committee, which was created in February for the express purpose of restarting the Texas electric car maker to take. This was in direct response to Delaware refusing the pay package in the same month.
But as the letter states, the Special Committee soon requested additional powers to reauthorize the original terms of the pay package. The board granted this request on March 5, which the shareholder bloc said was a mistake.
“The Special Committee did not ‘substantially re-evaluate’ the terms or amount of the 2018 award or engage compensation consultants,” the letter said.
The signatories also object to the fact that both of the original members of the Special Committee, who also sit on the board, have deep ties to Musk. Joseph Gebbia admits to a personal relationship with the tech mogul, while Kathleen Wilson-Thompson has made $50 million from her Tesla shares and is apparently set to make about $200 million more thanks to unused stock options.
There’s also the oddity that the Special Committee is now a one-man show, as Gebbia resigned from it almost immediately over his friendship with Musk, leaving Wilson-Thompson alone. According to the letter, even she thought this was a strange arrangement and asked for Gebbia to be replaced; it was decided that with the 2024 annual meeting approaching, there just wasn’t enough time.
“The Board of Directors’ decision to use a special committee to ratify Musk’s 2018 pay package is an attempt to undermine shareholder interests using unpredictable legal maneuvers,” the shareholder letter claims. “Using the Special Committee process, Tesla is attempting to wipe the board’s slate clean by suggesting that the original 2018 pay package was reviewed by impartial, uninfluenced and independent directors, a major criticism of the Tornetta [Delaware court case] decision. In our view, a committee of one is no committee at all.”
Also vote out Kimbal Musk and James Murdoch, please
The letter spills even more ink over Tesla governance reform, which it claims was picked up by the company’s CEO and is now ineffective. Although major changes are not possible in the upcoming shareholder vote, it does advise shareholders to reject the proposal to re-elect Elon Musk’s brother Kimbal Musk and James Murdoch, the son of media mogul Rupert Murdoch, to the board.
As Elon Musk’s brother, the shareholder bloc claims that Kimbal Musk is too biased to sit on the board. As for Murdoch, he has apparently been friends with the CEO for years, going with him on family vacations and attending Kimbal Musk’s wedding.
The signatories of the letter also claim that other board members have been compromised in some way. Three of them (including Gebbia of the Special Committee) are accused of being far too close to Musk, inside and outside Tesla, and other board members are said to have been influenced by financial gain from the car company’s shares, especially the Wilson-Thompson name and chairman of the board. Robyn Denholm.
“There is ample evidence that the Board of Directors has too many obligations to CEO Musk,” the document claims. “Indeed, Chancellor McCormick of Delaware concluded that ‘Musk is operating as if free from Council oversight.’ In fact, the Board of Directors has not intervened when the CEO has made decisions that are personally beneficial but not aligned with the interests of Tesla shareholders.”
The letter also details their grievances with Musk himself, which likely also played a role in the recommendation to vote against the pay package. The signatories accuse the CEO of not spending enough time running the company, which he cannot do because he is also CEO or leading figure at a handful of other companies, such as SpaceX, mainstream X and Neuralink.
“The lack of oversight from the Board of Directors has effectively allowed Musk to use Tesla as a treasury for himself and his other business endeavors, even if these actions come at Tesla’s expense,” the stock-owning bloc argues. In 2022, Musk admitted that he had used Tesla engineers to work on problems at Twitter (now known as for his other companies.”
“Recently, Musk has begun poaching top engineers from Tesla’s AI and autonomy team for his new company, xAI, including Ethan Knight, head of computer vision at Tesla,” the letter alleges.
The CEO’s public statements about X and elsewhere are also a sticking point, the letter says, and the signatories say that Musk has caused damage to the car brand.
And of course, the recent performance of Tesla stock has also made the shareholder group very unhappy. To date, Tesla remains the worst stock in the S&P 500, down 28 percent at the time of writing since the beginning of the year, even worse than Boeing, which fell 27 percent.
The seriousness of the upcoming shareholder vote can be seen lately in Tesla’s own SEC filings, which almost exclusively document the efforts the electric car company and its CEO are taking to convince voters to approve the proposals. One of these documents contains information about a pro-Musk video and a series of xeets that Musk created, revised or responded to. ®