Tesla shareholders will decide whether to give CEO Elon Musk a stock award that could be worth up to $1 trillion. But another proposal is up for a vote to refill Tesla’s employee stock option pool, and it’s only necessary because that pool was drained to give Musk a payday larger than any other CEO in the history of the world.
(This article is largely excerpted from my previous post, Elon Musk’s $1 trillion pay day gets more ridiculous the more you look into it. For more detail on the various absurdities of the award, click through to read more).
One of the questions being asked on Thursday is whether or not to refill Tesla’s “general share reserve” of shares set aside to be granted to employees as compensation. This is known as “Proposal 3” – the $1 trillion award is Proposal 4.
Proposal 3 not only fills the general share reserve with 60 million shares as compensation for Tesla’s current and future employees (of which the company currently numbers ~120,000 strong), but also fills a “special share reserve” with nearly 208 million shares for one single part-time employee, Elon Musk, who mostly focuses on companies other than Tesla (and whose interests can be directly opposed to Tesla’s).
The board would be able to give these shares, currently worth around $97 billion, to Musk at their discretion, with no strings attached. This could happen without further shareholder approval and is not attached to any milestones, unlike the widely-reported $1 trillion award.
Tesla has used shares as an important part of its compensation packages for employees throughout its history, so if it is unable to pay employees in shares, it will have a harder time attracting talent. But it can’t do so anymore, because the reserve has been drained.
This is one of many issues brought up by several pension funds who named their concerns with the shareholder proposals. Normally, it would seem reasonable to split up the “general” and “special” share reserve votes, but Tesla has seen it fit to combine the two – such that if you want Tesla to be able to compensate employees with shares, you must also accept that Musk will have 3.5x as many shares set aside for him personally as will be set aside for every other employee at the company combined.
It must feel incredibly insulting for the engineers who actually design the cars, the manufacturing associates who build them, the software team that continues to improve the best software out there, the best-in-the-biz charging team, et cetera, to see a guy who spends most of his time working for other companies (or pretending to be good at video games on his private jet) and be told that he’s worth hundreds of thousands of times more than you are.
Even worse, the reason this vote is necessary is because the share reserve was only drained… to pay Elon Musk.
When Musk’s friends on the Tesla board decided to hand him an “Interim Award” of $26 billion without a shareholder vote, the process through which they did this was to simply award shares to Musk that had previously been set aside in Tesla’s share reserve.
Those shares had been intended to be available for years to come, as compensation for employees, to help Tesla attract and compensate talent (as the heartstring-tugging videos above suggest). But instead, almost the entire reserve was drained to give to Musk, with only one stipulation: that he continue working at Tesla for two years.
But that’s only part of the shares that Musk would get if these shareholder votes pass, because those 208 million shares aren’t even associated with the separate $1 trillion award in Proposal 4, which would include over 423 million shares. So now we’re up to 630+ million shares for Musk (~276B at current TSLA valuation), and only 60 million for every other employee at Tesla combined, being voted on at this shareholder meeting.
And even if proposal 4 is voted down, if proposal 3 passes, the board could still give Musk $97 billion worth of stock, and it’s holding employees’ compensation hostage to ensure that it be able to do so.
Electrek’s Take
I wanted to split this off as its own article because I consider this to be the most egregious portion of the various ridiculous proposals in front of Tesla shareholders this week. That last article was long, so I understand why some might not have gotten through it – so above is what I consider one of the juiciest parts.
There are plenty of other ridiculous things that will be voted on – whether to retain board members who are completely captured and working in Musk’s favor rather than the company’s, whether or not Tesla shareholders should bail out Musk’s private AI company which he started to compete with his own public AI company and has continually stolen resources from it for, and of course the absurd trillion-dollar award that Musk wants so he can control a robot army.
But this, I think, is exceptional. Not only does the vote value a bad, part-time employee as worth 3.5x as much as every other employee combined; not only does it hold those employees’ compensation hostage against the compensation of said bad employee; but it’s only necessary because of that bad employee was given more money than any other employee in the history of employment, by an order of magnitude, and the source of that money was a pool of shares that had been set aside for Tesla’s actual employees, who aren’t currently on a mission to destroy Tesla’s brand in every way possible.
And somehow, Tesla, Elon, and his friends, have the gall to put in so much effort into marketing this proposal, and suggesting that this is the best path forward for the company, and even for the world, and to suggest that anyone who correctly points out the absurdity of this idea is a “terrorist.”
Kafka couldn’t write this.
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