Tesla's $56 Billion CEO Pay Package: A Shareholder Showdown

Tesla shareholders are poised to approve a $56 billion pay package for CEO Elon Musk, which is the largest CEO package in U.S. corporate history. This decision could reduce investor concerns about Musk's future with Tesla, despite criticisms regarding corporate governance and the ethics of such a large compensation deal.

Tesla shareholders look set to approve a $56 billion pay package for its CEO Elon Musk by wide margins, the billionaire said on social media on Wednesday.

Shareholder approval of the largest CEO package in U.S. corporate history could allay investor concerns about Musk's future at the company and give the electric-car maker ammunition in its fight to reverse a court decision to void the pay package. Here are what some people are saying about it:

IVAN FRISHBERG, CHIEF SUSTAINABILITY OFFICER, AMALGAMATED BANK "Elon Musk and Chair (Robyn) Denholm have made this about CEO loyalty and presented the votes as a decision about whether the company can keep Musk. That is a lot of pressure but it doesn't change the fact that good governance is good for the bottom line of a company, and the Tesla board is consistently and clearly deficient on that front."

MARCIE FROST, CALPERS CEO, VOTED AGAINST PAY PACKAGE Frost said some people appeared to vote for the pay package to remain consistent with their 2018 vote. "I think people would be concerned about hindsight bias. You get an outcome, you don't like the outcome so you vote against it."

GARRETT NELSON, VICE PRESIDENT AND SENIOR EQUITY ANALYST AT CFRA RESEARCH "We consider this good news for TSLA investors and attribute the success of the proposals to the overwhelming support of TSLA's large retail investor base, who collectively own ~40% of the shares, combined with a portion of its fragmented institutional investor base where support was more divided."

"If approved later today, we think it would lift a major near-term overhang on the stock, as investors send a strong message of 'staying the course.' In our view, Musk has delivered for shareholders over the past 5-6 years, meeting the lofty thresholds of his entirely incentive-based compensation plan and there's little reason to doubt this won't continue." CHRISTOPHER TSAI, PRESIDENT AND CHIEF INVESTMENT OFFICER OF TSAI CAPITAL, A NEW YORK-BASED INVESTMENT MANAGER

"People are invested in Tesla because they believe in Elon and they believe in the company, and nothing has changed since the previous vote. Pay the guy and let's move on, that's what the shareholders have concluded." DAN COATSWORTH, INVESTMENT ANALYST AT AJ BELL

"The prospect of Tesla investors approving a gargantuan pay deal for Elon Musk is in itself perplexing given the $56 billion amount, but for it to drive up the share price might also leave some people scratching their heads. The logical explanation is that it means Musk is no longer a flight risk, should the deal be approved. Pay him well and he'll stay to oversee Tesla's ongoing efforts to be crowned king of the electric vehicle sector." NEW YORK CITY COMPTROLLER BRAD LANDER, WHO OVERSEES CITY WORKERS' RETIREMENT ASSETS

"Elon's tweet is more evidence of the failure of corporate governance at Tesla - this is not how or when shareholder votes are supposed to be made public." "As long-term investors in Tesla, we expect genuine board oversight and a CEO who is deeply committed to the company's growth rather than other business ventures. We would like the board to ensure that its approval is required for any attempts to leverage Tesla's intellectual property or resources for his other ventures so shareholders can trust that their interests are aligned with the company's goals."

"Additionally, instead of continuing to try to defend it in court, the board should hire a compensation consultant, and renegotiate Musk's incentive plan so that it is appropriate and not dilutive to shareholders." JASON SCHLOETZER, A BUSINESS PROFESSOR AT GEORGETOWN UNIVERSITY WITH EXPERTISE IN CORPORATE GOVERNANCE

The approval suggests shareholders "think he's the only person with the best strategy to implement going forward. They are brushing aside essentially key man risks, where Tesla has become even more dependent on Musk going forward." DAN IVES, ANALYST, WEDBUSH SECURITIES

"Based on all of our discussions over the past month large shareholders at the end of the day knew that voting no would risk Musk potentially eventually leaving as CEO and the risk far overweighed the reward in voting no on this proposal despite some obvious frustration with Musk." ALEXANDER POTTER, SENIOR RESEARCH ANALYST, PIPER SANDLER & CO

"This doesn't fully settle the matter; the compensation package can still be deemed illegal. But a Delaware judge previously struck down the package citing limited shareholder disclosure, and given enhanced disclosures preceding this vote, it's unclear why anyone would take issue with this newly-ratified deal. We expect the stock to respond favorably to this news, though the upside is perhaps unlikely to be as violent as the downside would have been, had shareholders rejected the deal." SANDEEP RAO, SENIOR RESEARCHER AT LEVERAGE SHARES WHICH OWNS TESLA SHARES

"This vindicates Musk and allays some investor concerns around his waning interest in Tesla, but major institutional shareholders who are opposing the pay package might seek value elsewhere due to their concerns around the size of package, especially given Tesla's recent disappointing performance and rising competition." GREG ABBOTT, TEXAS GOVERNOR

"Congrats Elon on getting the pay you were promised and on your new incorporation in Texas." "Welcome to a state that has neither a personal nor a corporate income tax."

ADAM BADAWI, LAW PROFESSOR AT UC BERKELEY "Even if the shareholders do approve the old package, it is not clear that the Delaware court will allow that vote to be effective."