Tesla shareholders have voted once again to approve an absurd, biggest-in-history pay package for Tesla’s part-time CEO, Elon Musk. In doing so, they’ve voted to relinquish any control they could have had over the company, and instead to put it deeper into the hands of its largest saboteur.
(this is a developing story, we’re adding more as we look into the results of the vote)
Tesla’s shareholder meeting is happening today, with several consequential proposals which shareholders have been voting on in the last several weeks. In that time, Tesla has been campaigning hard and spending money to get out the vote and convince shareholders to give absurd amounts of money (in the form of shares) to Musk.
One problem, though, is that, well… all the proposals are dumb ideas. So rather than just making their recommendations and moving on like most corporate boards would, Tesla saw it necessary to push extra hard to get these proposals passed. The company went as far as to personally call shareholders who own only a single share, out of the ~3.5 billion shares outstanding, trying to get them to vote along with board recommendations.
It’s common for company boards to make recommendations on proposals, and usually those recommendations are in line with shareholder interests, and proposals typically skate through along the lines of said recommendations.
In this case, however, the board recommended positions that would dilute shareholders’ voting rights and share value significantly, while benefitting exactly one shareholder: Elon Musk, who currently happens to be the one person doing the most damage to Tesla’s business. And that required a huge, disinformational marketing effort to try to pull the wool over shareholders’ eyes, as Tesla has done before.
The effort was quite extensive, and you can read more about it here: Elon Musk’s $1 trillion pay day gets more ridiculous the more you look into it
The headline proposal is one which would give a stock award worth up to $1 trillion to Musk, which is the highest compensation ever given to any employee in history by multiple orders of magnitude – despite the damage he’s recently done to Tesla’s business. It would also lock Tesla into retaining Musk as a CEO for the next decade.
Musk threatened to leave the company if he didn’t get the award (and get to control a massive robot army… yes, he said that). He was probably bluffing… but we struggle to see how his departure would be bad for company performance, considering how poor his direction has been recently.
Many entities announced their votes, including disinterested analysis from advisory firms Glass Lewis and ISS, several pension funds and Norway’s sovereign wealth fund, and of course Elon Musk and his friends. You can guess which groups might have had the professionalism to advocate for the good idea, and which ones relied on their friendships and personal pocketbooks in advocating for the bad idea.
And now, after all this back and forth, the votes are finally in. Online voting finished last night at 11:59pm Eastern time, with the last few votes being cast at today’s meeting in person, which is underway now. And unlike last time when Musk announced the result of Tesla’s last shareholder vote early, we had to wait for the meeting to hear the results this time.
Results of Tesla’s shareholder vote: almost all proposals voted along with board recommendations
Tesla announced at its shareholder meeting that shareholders went along with the board recommendations on almost all proposals. These results include (among other things):
- Re-electing three Tesla directors, Ira Ehrenpreis, Joe Gebbia, and Kathleen-Wilson Thompson.
- Giving Musk 208 million shares with no strings attached, after he drained the employee stock reserve then held employee compensation hostage.
- Giving Musk a share award worth potentially up to $1 trillion, dependent on reaching certain milestones. The first milestones can be reached with below-average performance and yet still result in a larger payday than any person in history, and will dilute shareholders’ voting rights.
- Voting down proposed sustainability and child labor audit requirements.
- Voting down a proposal to elect each Tesla boardmember annually.
- Continuing to limit shareholders’ ability to hold Tesla accountable for breach of fiduciary duty unless the shareholder owns over ~$44 billion in stock (at current valuation). A couple of shareholders in the room embarrassingly shouted “boo” at the presentation of this proposal, signaling their active desire to deprive themselves and all shareholders of their voting rights.
Shareholders went against board recommendation in only one significant way:
- Voting to re-elect all boardmembers annually.
And on some proposals, the board made no recommendation, and shareholders voted thusly:
- Shareholders voted to continue to require a 2/3 supermajority vote for any shareholder proposal, thus making it more difficult for shareholders to have their voices heard (especially given that shareholders diluted themselves to give Musk more shares, making a 2/3 majority nigh-impossible without a full revolt of every shareholder against Musk).
- Shareholders did not authorize the board to bail out Musk’s private AI company, xAI, which he started (probably illegally) in order to compete with his public AI company, Tesla, and has consistently funneled company resources from Tesla to his own pockets. While more voted in favor than against, there were significant abstentions and as it was an advisory vote, the board will take that into consideration going forward.
We don’t yet have full results for each proposal, but it should be interesting to see what percentage of shares voted for each one – especially considering that this time around, Musk’s shares were not recused from voting on his own payday, whereas they had been on the previous pay package votes. (update: 75% voted in favor of the $1 trillion award)
Why did shareholders vote to reduce their power?
One may (rightly) look at these votes and wonder why any rational person would vote to give themselves less power. Well, the votes were likely influenced by a recent exodus by reasonable people from holding TSLA shares.
In recent years, the behavior of the company’s CEO has only gotten worse, with him showing distraction from and outright hostility to the company’s business. Tesla’s boardmembers, too, have failed to keep the CEO on task, and have been working mostly to enrich themselves (which was subject to a billion-dollar settlement) and their personal friend (and drug buddy) Elon Musk.
As board and CEO behavior have deteriorated, and as the company’s sales and earnings have dropped while Musk has done all he can to harm Tesla’s business and industry as a whole, and to ruin Tesla’s formerly-shining brand, many of those who have any actual interest in Tesla’s mission to accelerate sustainable transport have moved their money elsewhere.
Meanwhile, many remaining shareholders seem to get all of their information about the company from the echo chamber called twitter, which Musk purchased in order to better spread disinformation which he is using in this case to support his payday.
So, those under the influence of Musk propaganda have increased their holdings, while those able to escape it have been sorted out. That seems to have worked in his favor in this instance, with shareholders voting to benefit him, rather than themselves.
The story floating around on the echo chamber is that this can only benefit Tesla shareholders, because if the stock goes up enough for Musk to get his full award, everyone benefits. But this story ignores the fact that Musk can get well over 200 million shares for doing nothing at all, and in addition that some milestones of the $1T share award can be achieved with subpar company performance going forward.
Another problem with that line of thought is that there are other options for Tesla to achieve the result of giving Musk more stock and more control without needing to dilute every other shareholder – such as stock buybacks. But stock buybacks require a company to have high earnings, rather than the declining earnings that Musk has currently led it to.
Which brings up the simple point that it also misses the simple fact that this plan comically values Musk higher than any person ever before on the planet, despite that he is currently Tesla’s biggest saboteur.
What happens next?
But this may not be the end of this whole conversation. The last two times that Tesla tried to give Musk an absurd pay package, both were blocked by a judge, thus saving shareholders more money than the company has generated in profits over its entire lifetime.
These efforts were blocked due to the misleading nature of Tesla’s campaign for the pay package, and Tesla engaged in many of the same misleading tactics this time around.
However, for the previous two votes, Tesla was incorporated in Delaware, a famously pro-corporate state with established rules on corporate governance. After Musk got mad about being denied his absurd pay package, he knee-jerk declared he’d move the company to Texas, and got shareholders to agree to incorporate there.
Texas has much less established corporate law, so Musk figured that he could benefit from government corruption and get the state to pass laws to benefit him, which he did. As a result, Tesla shareholders have fewer rights than before the company was moved.
So there may be fewer avenues to correct for the misleading nature of Tesla’s campaign this time around, and shareholders might be stuck with their (even dumber) vote this time.
Nevertheless, we are certain that this won’t be the end of this nonsensical situation, one way or another (not least of which because if there’s one thing Musk likes more than anything in the world, it’s playing the victim on twitter no matter how many unearned things come his way). So, stay tuned, we guess.
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