For Tesla (TSLA, Financial) and its shareholders, excitement never seems to wane. The leading EV maker and its CEO, Elon Musk, are in the spotlight again as the company hosts its annual shareholder meeting. On Thursday, June 13, Tesla will announce the voting results on several items, including whether Elon Musk's compensation package is approved.
- As developments unfold, shaping investor and analyst predictions, TSLA shares could experience volatility. Over the weekend, Reuters reported that Norway's $1.7 trillion wealth fund will vote against Musk's $56 billion compensation package due to its size and structure.
- Although the fund holds less than 1% of TSLA shares, its vote could influence other institutional investors. Similarly, the California Public Employees Retirement System (CalPERS) also plans to vote against Musk's pay package.
- If shareholders reject the compensation package, there is concern that Musk's attention could drift further from TSLA at a critical time. The company faces challenges such as rising competition in China, shrinking margins due to price cuts, and plans to launch a new affordable mass-market vehicle next year.
- A distracted CEO focusing more on SpaceX or X.com could exacerbate these issues. Some argue that Musk, with a net worth over $200 billion, shouldn't need a $56 billion pay package to perform his CEO duties effectively.
- Despite potential opposition from institutional shareholders, the compensation package might still get approved. In 2018, over 70% of shareholders supported a similar award, largely due to strong retail investor backing. However, a Delaware judge nullified that vote, deeming the amount egregious and unfair. With added disclosures and transparency, Tesla's Board of Directors has put the package up for another vote.
As with many things involving Musk, the outcome of this vote is unpredictable, and there could be surprises in the coming days. Given that the pay package secured significant support in 2018, it seems likely it will be approved again, potentially removing an uncertainty affecting the stock.
