Elon Musk could step down as CEO of Tesla if his proposed $1 trillion pay package is not approved, according to a recent warning from Tesla Board Chair Robyn Denholm.
The urgent appeal was sent in a letter to shareholders of the electric car giant on Monday, October 27, ahead of the November 6 annual meeting where investors are scheduled to vote on the massive, unprecedented pay proposal.
The warning comes as two major proxy advisory firms, Glass Lewis and Institutional Shareholder Services, have strongly urged shareholders to vote against the proposed compensation.
Proxy advisers hold significant sway, particularly with large institutional and passive fund investors who own substantial stakes in Tesla.
The controversial pay plan is designed to retain and motivate Musk, encouraging him to lead Tesla for at least another seven and a half years, Denholm stated in her letter. She emphasized that Musk’s leadership is “critical” to the company’s success, cautioning that without proper incentives,
Tesla risks losing his “time, talent and vision.” This is especially vital as Tesla seeks to become a global leader in artificial intelligence and autonomous technology.
The proposed package would grant Musk 12 tranches of stock options tied to extremely ambitious targets, including a staggering $\$8.5$ trillion market capitalisation and major milestones in robotics and autonomous driving.
Denholm argues the package is necessary to align Musk’s incentives with long-term shareholder value and growth.
Tesla’s board has faced continuous criticism for years, with governance experts questioning its independence and oversight of Musk’s influence.
The scrutiny intensified earlier this year when a Delaware court struck down Musk’s 2018 pay deal, finding it was improperly awarded and negotiated by directors deemed not fully independent.
Despite the boardroom drama and the looming vote, Tesla stock is on the rise. Shares were up $3.1$ percent in New York trading on Monday.
