Random Image Display on Page Reload

The $50 Billion Musk Referendum

Jun 12, 2024 5:30 AM

The $50 Billion Musk Referendum

Tesla shareholders will decide whether to back Elon Musk’s leadership—and unprecedented 11-figure bonus—in a pivotal moment for the carmaker.

Blue yellow and black photo collage of Elon Musk a Tesla car silhouette shape stock market graphs money and a torn paper...

Photo-illustration: WIRED Staff; Getty Images

Elon Musk is a man comfortable with risky bets. He pledged to send 1 million people to Mars (SpaceX), to fill factories with humanoid workers (Tesla Bot), and to create a network of highways deep underground (the Boring Company). All of these bets are yet to pay off. But six years ago, Musk took a leap of faith that would also affect him personally. He tied his own pay at Tesla to a series of financial targets over the next decade, including boosting the company’s market value from $59 billion to $650 billion. Such targets were decried by commentators at the time as “jaw-dropping” and “his most unlikely goal yet.” And Musk’s wage from the company if he didn’t pull them off? Nothing at all.

The board agreed to the plan in 2018. However, a heavy-metal drummer named Richard Tornetta, who owned just nine Tesla shares, did not. In June of that year, he decided to sue, claiming the pay package was unfair to investors like him. By the time the case reached court in Delaware in 2022, Musk had just one milestone left before the big payout. But the judge agreed with Tornetta in January, voiding what she called an unfathomably large pay package and describing the directors who negotiated it as beholden to Musk.

Musk succeeded in hitting those 12 jaw-dropping targets by the close of 2023, following Tesla’s brief spell as a trillion-dollar company. And now, despite what happened in Delaware, he’s demanding to be paid. At Tesla’s annual meeting on Thursday, shareholders are being asked to vote again on whether Musk should receive what has by now swollen to a nearly $50 billion pay package, the biggest in US corporate history. The $50 billion question for shareholders is: Is Musk worth it?

Posing the question of whether he deserves his pay packet at all marks a significant shift for the relationship between Musk and the electric automaker he has led since 2008. “The resistance shows that there is a ceiling to the influence that a single person has on the company,” says Mike Ramsey, an automotive analyst at the consultancy Gartner. “This is the the first time Tesla shareholders might be willing to say, ‘You can’t have unlimited power.’”

The vote comes at a difficult time for Tesla. For the first time in the company’s history, Tesla is facing intense competition in the electric car market—especially from cheaper Chinese competitors. Meanwhile, some observers have puzzled over Musk’s response and his pivot to robotaxis and artificial intelligence.

“The debate here really is about the future, not the past,” says John Colley, professor of practice in strategy and leadership at the UK’s Warwick Business School. “Tesla has become a mature business, and it’s got all the problems that mature carmakers have now.” Whether a visionary like Musk is the best man to lead a mature business is unclear, he adds.

The pay package is just one in a series of measures that shareholders have already been asked to vote on by proxy, ahead of Thursday’s meeting. Others include whether Tesla’s incorporation should move from Delaware to Texas, whether the company should soften its hardline stance on labor negotiations, and whether the company should preemptively impose a moratorium on using minerals mined from the seabed.

Yet none have been as divisive as Musk’s pay. Deep rifts among investors have been exposed in the lead-up to the vote. Tesla board chair Robyn Denholm has backed the pay package, as has billionaire investor Ron Baron. “Tesla is better with Elon,” Baron wrote in an open letter last week. “Tesla is Elon.” Yet the deal’s opponents include two influential proxy advisory groups, which guide institutional investors on votes, as well as shareholders from the Nordic countries, where Tesla has clashed with workers over labor rights.

Norway’s trillion-dollar sovereign wealth fund has said it will vote against the pay deal, as will the country’s largest pension fund, KLP. “While we acknowledge that the company has grown significantly and successfully during the performance period, we still note that the total award value remains excessive,” Kiran Aziz, KLP's head of responsible investments, told WIRED, adding the fund will vote in favor of the motion urging Tesla to engage in labor negotiations. “Recent [dispute] between Tesla and the company’s workers in Sweden as well as Tesla’s history of accusations of interference with workers’ rights is of great concern and shows that the company needs to do better work in the area.”

Behind the scenes of the vote, lobbying has been intense. Tesla has paid for ads on Google and X, which is owned by Musk, telling investors to “protect your investment” and support the proposal, according to a company filing with the Securities and Exchange Commission. In April, Tesla also launched a website urging shareholders to vote against the Delaware court decision and support the pay package. “The Court’s decision, if implemented, means that Elon would not receive any compensation for the tremendous accomplishments that have generated significant stockholder returns in less than six years,” the website reads.

“This is the most advertising I can remember from any proxy solicitation,” says Robert Anderson, a professor at the University of Arkansas School of Law. He believes the Musk effect—the CEO’s ability to attract endless publicity—has contributed to this situation. But the pay package and the proposed Texas move are both unprecedented in the business world, he adds. “Either [of] those things by themselves would be pretty significant, even if he were not a public figure.”

The vote will be decided by a mix of institutional investors as well as an unusually large cohort of retail investors, who control around 44 percent of the business. Among shareholders, there are concerns that if Musk does not win his compensation, “his attention might drift to some of his other ventures a little bit more,” says Anderson. Musk managed to juggle multiple ventures for years, but he has been more publicly distracted since acquiring the social media service Twitter and renaming it X. There, his visible turn to right-wing politics has garnered new fans and left some old ones behind.

Whatever happens this week, Tesla and Musk may emerge looking a bit less superhuman. For years, the two have insisted that Tesla is a tech company, with a Silicon Valley–style startup scrappiness. “We should be thought of as an AI or robotics company,” Musk told investors—or voters—in April. “If you value Tesla as just an auto company … fundamentally, it’s just the wrong framework.”

Morgan Meaker is a senior writer at WIRED, covering Europe and European business from London. She won the top prize at the BSME Awards in 2023 and was part of the team that worked on WIRED’s award-winning investigation series “Inside the Suspicion Machine.” Before she joined WIRED in 2021, her… Read more
Senior Writer

Aarian Marshall is a staff writer covering transportation and cities. Before joining WIRED, she wrote for The Atlantic’s CityLab. Marshall is based in Seattle, where she’s learning to love rain.
Staff Writer

Read More

The Daylight Tablet Returns Computing to Its Hippie Ideals

Anjan Katta thinks computers and the tech industry became too corporate and straitlaced—so he invented a tablet with a zippy monochrome screen that’s usable outdoors.

Steven Levy

The Big-Tech Clean Energy Crunch Is Here

Companies like Amazon and Microsoft are racing to set up new data centers in Europe, but behind the scenes there's concern about how to provide them enough power to meet AI's demands.

Morgan Meaker

Don’t Let Mistrust of Tech Companies Blind You to the Power of AI

It’s OK to be doubtful of tech leaders’ grandiose visions of our AI future—but that doesn’t mean the technology won’t have a huge impact.

Steven Levy

What ScarJo v. ChatGPT Could Look Like in Court

If Scarlett Johansson pursues legal action against OpenAI for giving ChatGPT a voice she calls “eerily similar to mine,” she might claim the company breached her right to publicity.

Kate Knibbs

OpenAI-Backed Nonprofits Have Gone Back on Their Transparency Pledges

Two organizations that handed out unconditional cash grants told WIRED that they will no longer disclose their financial statements and internal policies. Their stance follows a similar denial by OpenAI.

Paresh Dave

Marc Andreessen Once Called Online Safety Teams an Enemy. He Still Wants Walled Gardens for Kids

Investor Marc Andreessen called tech ethics and safety teams “the enemy” in his “Techno-Optimist Manifesto” last year. Today he clarified he’s in favor of online guardrails for his 9-year-old son.

Paresh Dave

The EU Is Taking on Big Tech. It May Be Outmatched

From the Digital Services Act to the AI Act, in five years Europe has created a lot of rules for the digital world. Implementing them, however, isn’t always easy.

Luca Zorloni

Orkut’s Founder Is Still Dreaming of a Social Media Utopia

In the mid-2000s, Google engineer Orkut Büyükkökten’s self-titled social network briefly took the world by storm before disappearing. Now he’s back, with a plan for a happier social media.

Kyle MacNeill

Credit belongs to : www.wired.com

Check Also

Orka desktop: Mac virtualization software

It wasn’t too long ago when I wrote about UTM that provides virtualization and emulation …