Tesla Shareholders to Vote on Elon Musk Pay Package

Bloomberg

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00:00$1 trillion or Musk walks, is that really what's on the line this evening?

00:05No, frankly. The structure of the proposed package is complicated. It is a 10-year proposal

00:13split into tranches. And all told, the total compensation would be $1 trillion in dollar

00:21value, right? But actually, what it is set against is a series of both operational and

00:28financial milestones. The operational ones are easy to understand. Musk has to deliver

00:3320 million vehicles to customers, build a million robots, scale a robo-taxi service to

00:381 million cars. And on the financial target side, it's kind of classic stuff. Adjusted EBIT

00:43targets, market cap targets. The thing that's the sticking point for a lot of investors here

00:49and for Musk himself is voting power, which is just as the pay corresponds proportionally

00:56to each tranche as each milestone is unlocked.

01:00And how have those targets changed, though? Because I feel like the reporting over the

01:04last few months and years has kind of been moving of the goalposts, if you will.

01:09Yeah, look, the targets are set and codified in the proxy, which I think was September the

01:1610th or maybe September the 4th or 5th. I'm misremembering, but early September. The thing

01:22about the total package is that it's an all or nothing. They are mandatory goals, both

01:31operational and financial. And so the issue really in the first instance here for both

01:36Elon Musk himself, the board and investors that vote either way, is that for the board,

01:42this has been about keeping Elon Musk, because to their mind, irrespective of the goals that

01:48are set for him, he's the only person on planet Earth that can do it. They've literally said

01:52that time and time again. So it's a really bizarre situation where Musk is basically saying,

01:57I don't really care about the compensation. I just want the power to be able to do the

02:02things that the board has tasked me with. And it's that power that those particularly

02:07institutional investors, but also the advisory services recommending a no vote have taken issue

02:12with. So is this a battle between the board and essentially long-term shareholders duking

02:17it out here? A little bit. I mean, what we've tried to get out of Robin Denholm, who's the chair

02:23of Tesla's board on multiple occasions, is what's the plan B? What happens if Elon Musk decides to walk

02:31away? If there is a no vote and he's not happy about it or, and this is a horrible example, but what

02:37if something sinister happens to Elon Musk? You know, he gets hit by a bus hypothetically. And the

02:43problem is, is that the board's answer is it can only be Elon Musk. Now, in particular, if you look

02:50at, for example, Norway's sovereign wealth fund, which is Tesla's ninth largest shareholder, or

02:55CalPERS, which is the US biggest public pension fund, both of them have voted no on this package,

03:01identifying key man risk as one of the core issues for them. They're saying that there is too much faith,

03:07being put in just one person here, hence key man risk. The board is saying it can only be Elon Musk.

03:13And those are two incongruous and competing ideas. Well, how has that changed over time? Because

03:18when I think of Tesla, I think of Elon Musk. When we were earlier this year, when he was working so

03:22closely within the White House administration, the question was, is he focused on Tesla or is he

03:27focused on XAI or SpaceX or Doge? Has that actually shifted at all? In some sense, it goes back to your

03:34earlier question, mate, which is, well, how is the package change or the goals change overall?

03:39One of the mandatory requirements, which is set against the later tranches of stock award is that

03:46Musk participates in a succession plan. So as it's written in the proxy, Musk has to both draw up the

03:53succession plan, participate in it, and then have a success in finding a successor by year 10. So that is

04:02one of the fundamental differences this time around relative to, I guess, 2018's pay package.

04:07However, the difficulty in the communication the company is having with its investor base is they

04:12keep saying there isn't anyone on planet Earth who can possibly get anywhere near to what Elon Musk

04:16can do. So that's been the hard bit to pass. Like, hold on, you're saying Elon Musk has to help

04:22choose his successor, but you're also telling us that there just isn't anyone internally or externally

04:28who can do what he can do. I just want to touch on a redhead hitting the screen right now for

04:35considering scrapping its electric version of the F-150 truck. That is, according to the Wall Street

04:40Journal, though, Ford hasn't made a financial or final decision on the electric F-150. Ford

04:47shares not really moving. And sticking with car makers, sticking with Tesla, one question for you

04:52with about 30 seconds left. The vote around investing in XAI, the intertwining of X, XAI,

04:59Tesla, SpaceX. What's on the docket today?

05:01This is a shareholder-initiated proposal. It's non-binding. And even in the event that shareholders

05:08vote in favor of it, the board has its discretion to decide what to do. But the idea is that, on the

05:14one hand, Tesla engineers already work very closely with XAI engineers and talent. That's a common

05:19thing across all of Elon Musk companies. On the other, the concern is, does Tesla end up footing

05:25the bill for a company that burns through cash? Frontier model labs like XAI have a lot of questions

05:31to answer about their business model and the capital expenditures needed to scale their data center

05:36infrastructure. Does Tesla and its shareholders want to foot the bill for that is what this vote

05:41comes down to for many who are participating in it?

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