00:00Wood's argument there, Drew, which you heard, is that if they continue and achieve the EBITDA goals that this proposed package is set from us by the board, then the outperformance of the stock will make it in the interest of shareholders.
00:14You don't agree with that. Why?
00:18Well, thanks, Ed. So, you know, we can't predict what the market's going to do.
00:22And we're evaluating pay packages. We look at them vis-a-vis other comparable companies.
00:28So let's say he does achieve all those goals, but say the market does as well, too.
00:34Are we really paying for alpha or, you know, is that a market beta?
00:38When we looked at the last eight years of returns, going back to when the original package was put into place, Tesla was one of our best performers.
00:48It wasn't our best, but it was in our top 10.
00:50And then when we compared, you know, the annualized pay of the $96 million they want to give him in the restricted stock award that vests in two years.
01:00And then we looked at median pay of these other high performers in our portfolio.
01:04And that piece of the package alone is 73 times the median of other high performing companies and CEOs in our portfolio.
01:12And we just thought that multiple gap was too high.
01:16Drew, the board is going to argue, they have argued on this program that Tesla is not comparable to other companies.
01:23Elon Musk is the only person on the planet who has the skill set, is what Robin Denholm told us.
01:29The real point of tension that you have with others is the concentration of voting power.
01:35You said at the time that you cast the vote or confirmed it, that it put too much concentration of power in a single shareholder.
01:43That's exactly the rationale that Elon Musk is proposing investors vote in favor of the package.
01:48He wants the voting power in order to achieve the goals that the board have set him.
01:55How do you reconcile that going forward?
01:58Well, we look back and at one point he owned 25 percent of the company and then sold off half of it.
02:03And they've achieved goals with him being a 12 or 13 percent shareholder.
02:07So I don't see diluting shareholders by another 12 or 13 percent changes the dynamic.
02:15He also is a person with a huge stake in this company.
02:18I don't see why he would want to do anything that would damage it.
02:22So I don't see why he needs any extra control over what he already has.
02:26I mean, he and the board together own about 16 percent of the company.
02:30And, you know, we don't think diluting ourselves by another potentially trillion dollars, you know, changes that dynamic.
02:39I suppose Elon's argument has been they're at this inflection point and it's moving not just from cars and they still want to have, what, 20 million cars on the roads.
02:48But it's going into the era of AI and into humanoid robots, the army of robots he's going to be producing.
02:53Would you want him to have the most say over an army of humanoid robots?
02:59Well, I think he already has tremendous say as the largest shareholder of the company.
03:04You know, as a, you know, governance person, do we want so much risk in one person?
03:11You know, maybe he is the visionary that the board thinks he is, but we don't know what could happen to anybody.
03:17And to have this much risk placed in one person and to dilute ourselves just to one person, there's tens of thousands of people working at Tesla creating value.
03:26And if it is, you know, so key on just one person, key person risk, you know, that's a worry for me as a shareholder.
03:37You are all about stewardship and of the pension fund holders that you report to ultimately.
03:43But you've done this job for a long time over at Morgan Stanley and other players.
03:46If Elon Musk was to walk, would that be in your role of stewardship?
03:52How do you manage to balance that out of what the risk is if indeed he did leave?
03:57Yeah, so we do think of ourselves as long term shareholders and a lot of our portfolio is indexed.
04:04And so we plan to hold this company for a long time.
04:07So we try not to worry too much about if, you know, one person leaves today or tomorrow.
04:12We're in it for the long haul.
04:14So if he left tomorrow, would that be a short term hit to the business?
04:18Possibly.
04:19But if we're going to hold this company for a long time and the board, you know, has to replace him and get somebody in, you know, terrific, maybe not as good as Elon, but pretty terrific.
04:29We still think we're going to benefit over the long term by holding this stock.
04:33Drew, we got many, many questions from our audience for you.
04:37One of them is what Caroline just asked.
04:39What happens if Elon leaves tomorrow?
04:41I think the other one is people would really appreciate an explanation of the criteria by which you cast your votes.
04:48You explained on the comparisons, historic patterns.
04:52But one one way that it was put to me is in the context of CalPERS is do you understand the company?
04:58Did you look at the the mandatory goals set by the board and say, OK, this could be to the benefit of our of our stakeholders in our pension plan?
05:09Yeah, and we evaluate every pay plan, you know, case by case.
05:13And so we did look at those things.
05:15And what we're trying to do when we're, you know, paying a CEO is what part of that return is is beta and then where is the actual skill?
05:24And so it's hard for us to predict what the beta is going to be 10 years from now at the end of this award period.
05:31And, you know, he might do very well.
05:34He might increase it by six times.
05:36The market could go up by six times.
05:38And that would be, you know, how would he be any better than anybody else?
05:42And so to give up that much control and delude ourselves that much for one person, we think, is a risk as well.
05:49There's a risk that he might never achieve these goals.
05:52And you've seen that with other similar pay packages echoed.
05:55We've seen that at Airbnb.
05:56We've seen that other players where they haven't managed to top the goals.
05:59Do you think a million robo taxes is achievable in the time frame?
06:02Do you think the FSD is?
06:04Do you think the cars are?
06:06Well, it's possible that all those things are.
06:09And I think this time, too, the competition is greater than when Tesla came to market with their first car in terms of EVs.
06:17You have Google working on robo taxes.
06:19You have the Chinese working on them.
06:20So it's going to be a more competitive marketplace.
06:23Certainly they are in a position to be one of the key players in this.
06:27But, you know, 10 years from now, we might be talking about, you know, three other companies that dominate robo taxes.
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