From unenthusiastic yes to unequivocal no as Musk awaits vote on his salary

Tesla (TSLA) shareholders are answering a $56 billion question at their annual meeting today: Should Elon Musk’s record-breaking pay package be reinstated after a Delaware judge struck down a previous one?

“I vote yes without enthusiasm; I’m voting yes on principle,” early investor Ibrahim AlHusseini told Yahoo Finance. Personal feelings aside, he said Tesla should honor the 2018 package that was scrapped.

“That was the deal. Elon hit the milestones, so he should get his compensation.”

AlHusseini, founder of venture capital firm FullCycle, invested in the electric vehicle company in a Series C funding round in 2006. AlHusseini said he steadily sold most of his position over the next decade.

“We assembled the shares at a trillion-dollar valuation. A lot of wealth has been created and his compensation has been set by the board,” AlHusseini added, although he believes the majority of his peers will vote no this time.

But retail investors currently own about 40% of Tesla’s shares, and Musk says they support paying him. Last weekend, the billionaire posted on X, formerly known as Twitter, that “around 90% of retail shareholders who voted” voted in favor of the package, adding that “public sentiment is unequivocally in favor”.

“Watching Elon trying to drum up retail enthusiasm through Twitter, I personally think this is inappropriate for a half-trillion-dollar company,” said AlHusseini.

The compensation package, made up of options, was originally valued at up to $56 billion but is now worth about $46 billion due to a drop in Tesla’s market capitalization. Musk, who currently owns 12.9% of Tesla, will have a 22.4% stake if the package is restored.

Major institutional shareholders BlackRock (BLK), Vanguard, State Street (STT), Geode Capital and Capital Research, who collectively control 17% of the votes, have not publicly announced their decision.

However, Baron Capital, Altimeter and Ark Invest have said they will vote in favor.

On the other hand, Norges Bank Investment Management, Glass Lewis, Institutional Shareholder Services, California Public Employees’ Retirement System and California State Teachers’ Retirement System stated that the proposed amount qualifies as overcompensation.

Ross Gerber, co-founder of investment firm Gerber Kawasaki, voted yes in 2018, but this time he chose no.

“I think CEOs should have a lot more incentive-based compensation, based on the actual performance of the company rather than just the stock price,” Gerber told Yahoo Finance. Elon has every incentive to increase the share price, but now that performance has faltered, he has not suffered for it.”

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Gerber began investing in Tesla in 2014 and his company holds 332,000 shares as of March 31.

“For a legitimate business operation, I believe Tesla’s board of directors is the most conflicted, least independent and most incapable board of directors in the history of business,” Gerber said. “There is no board of directors that has done a greater disservice to a company. And this salary package is an example of that negligence.”

New York City Comptroller Brad Lander, whose office oversees the city’s public pension funds, is voting against the plan. Earlier this month, Lander wrote an open letter urging other shareholders to also reject the pay package.

“We have been raising concerns since 2018 and the situation has worsened. Two independent board members left the board because they were unable to fulfill their duties,” Lander told Yahoo Finance. “You just can’t let a distracted billionaire make up his own rules.”

The city’s pension fund owns 3.4 million Tesla shares.

In a letter sent to shareholders earlier this month, Tesla CEO Robyn Denholm implored investors to support the pay package because it will encourage Musk to continue focusing on the automaker. Musk also has stakes in X, SpaceX, Neuralink and the Boring Company.

“He is already dedicating more time to his side projects,” said AlHusseini. “Cybertrucks have failed. There are 50,000 cars sitting at Tesla unsold. The only reason the stock is still around $170 is because retail investors are hoping that some long-term robotic AI will save the company.”

The shareholders meeting will take place on Thursday afternoon. In 2018, Tesla’s board won approval for Musk’s salary package with 73% of the vote.

In a tweet overnight, Musk said the measure had the support it needed to pass.

“This is not how votes should be counted and made public,” Lander said. “Some shareholders are still voting before the meeting. It’s just further proof of the failure of corporate governance at Tesla.”

Tesla shares have fallen more than 30% this year amid falling margins and auto sales. The results of the vote from mid-sized and retail investors will reveal the strength of the Musk cult and what shareholders think of Tesla’s long-term prospects.

Yasmin Khorram is a senior reporter at Yahoo Finance. Follow Yasmin on Twitter/X @YasminKhorram and so on LinkedIn. Send interesting tips to Yasmin: yasmin.khorram@yahooinc.com

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