CalSTRS and NBIM Will Vote Against Musk's Absurd Tesla Pay Package
The chief of a major pension fund said Monday he will vote against Elon Musk’s pay package later this week.
California State Teachers’ Retirement System (CalSTRS) Chief Investment Officer Christopher Ailman said in a CNBC interview that the fund will oppose Musk’s pay package, describing it as “ridiculous.”
CalSTRS holds nearly 4.7 million shares of Tesla Inc. as of June 2023, according to its website.
“We’ll pay him 140 times the average worker pay. How about that deal? I think that’s more than fair,” Ailman said on CNBC’s “Squawk on the Street.”
He also noted that CalSTRS voted against a previous pay package for Musk that a judge ruled the tech billionaire was not entitled to earlier this year. The vote, slated to be held this week, would reinstate the 2018 pay package struck down by the judge.
At least two shareholder advisory firms have recommended voting against the package, according to The Associated Press.
The AP noted that the package was recently valued by the company at about $44.9 billion.
In his interview Monday, Ailman urged Musk to focus on just one of his numerous endeavors. Musk owns the social platform X and aerospace company SpaceX in addition to Tesla.
“This is a company that has not grown in the last two years, is barely making money per car itself,” Ailman said. “He needs to focus in either on cars either on X or on going to Mars. And I think his heart really is in going to Mars and getting off the planet.”
He added that he would “hate” to see Musk walk away from Tesla.
“He’s brilliant. I admire him. I’ve listened to him recently at the Milken conference. Amazing speaker,” he said. “But let’s run this company. It’s an auto manufacturer; let’s go back to making cars and doing it well. He can run SpaceX and run his other efforts and see how they do. He’s focused on Starlink.”
“He’s got a million balls in the air. Focus on a few,” he added.
The Associated Press also reports the Norwegian wealth fund to vote against Elon Musk's Tesla pay package:
Norway's sovereign wealth fund operated by Norges Bank Investment Management said Saturday it will vote against Elon Musk's hefty CEO compensation package during Tesla's annual meeting on Thursday.
It's the latest pushback over the size of the pay package, which was recently valued by the company at $44.9 billion, but in January had a value of about $56 billion. In May, two big shareholder advisory firms, ISS and Glass Lewis, recommended voting against the package.
“While we appreciate the significant value generated under Mr. Musk’s leadership since the grant date in 2018, we remain concerned about the total size of the award, the structure given performance triggers, dilution, and lack of mitigation of key person risk,” Norges Bank Investment Management said in a statement on its website. “We will continue to seek constructive dialogue with Tesla on this and other topics.”
The fund, called the Government Pension Fund Global, which has a .98% stake in Tesla worth $7.72 billion, voted against the package initially in 2018.
The fund invests proceeds from the country’s oil and gas industry to secure pensions for future generations in Norway. It is worth 17.80 trillion Norwegian Krone ($1.67 trillion). Because of its sheer size, the fund does not reinvest all its money in Norway, or it would overheat the economy. It invests in 72 countries worldwide.
The fund also plans to vote for several shareholder policies that management has recommended shareholders vote against, including a proposal to adopt a noninterference policy respecting freedom of association and collective bargaining; adopting a simple majority vote; declassifying the board of directors; and publishing reports on harassment and discrimination prevention efforts.
I'm hardly surprised and think all pension funds will vote against Elon Musk's Tesla pay package.
Whether his pay package is $44.9 billion or $56 billion is immaterial; in both cases it's beyond ridiculous no matter what Musk and his disciples claim.
And yes, I'm aware that Ron Baron, longtime Tesla bull and shareholder, recently wrote an open letter in support of CEO Elon Musk’s controversial $56 billion pay package.
The Baron Capital chairman and CEO said Musk’s compensation contract in 2018 included “aggressive” performance metrics that few believed could be achieved. Musk would have earned nothing if these ambitious goals had not been met, he said.
“Elon is the ultimate ‘key man’ of key man risk,” Baron said in the letter. “Without his relentless drive and uncompromising standards, there would be no Tesla. Especially considering how he slept on the floor of Tesla’s Fremont factory when the company was going through what he called ‘production hell!’The pay package, proposed by Tesla’s board of directors, has repeatedly come under fire, including criticism that the board is too closely tied to Musk to be entirely independent. The package has no salary or cash bonus and sets rewards based on Tesla’s market value rising to as much as $650 billion over 10 years from 2018.
If passed, it would be the largest pay package for a CEO in corporate America. Tesla’s shareholder meeting is scheduled for June 13.
“I’m voting for the pay package,” Baron said Wednesday on CNBC’s “Squawk Box.”
In January, Judge Kathaleen McCormick of Delaware’s Court of Chancery voided the original pay package. Musk then sought to move Tesla’s state of incorporation to Texas from Delaware.
Baron previously revealed that his firm has made about 20 times its investment in Tesla since he first bought the stock in 2014. Tesla is the biggest holding in Baron’s oldest and largest fund, Baron Partners Fund (BPTIX), accounting for nearly 30% of the portfolio.
“At Baron Capital, our answer is clear, loud, and unequivocal: Tesla is better with Elon. Tesla is Elon,” he said in the letter.
Well, I agree with Ron Barron that Tesla is Elon (for better or for worse) but that still doesn't justify a ridiculous pay package.
Look at the stock over the last five years after the 2020-21 bubble burst:
Hardly anything to write home about.
And we are going to pay him $50 billion or more for his stellar performance?
Give me a break, even if the stock was flying high like Nvidia, pension funds and other sane shareholders would vote against this absurd pay package.
This is the inherent problem in capitalism, there's always someone who tests the limits of pay packages.
Elon just happens to be one of the wealthiest people on earth so he thinks he deserves it and he might get it, but if he does, it will just fuel more hatred and cynicism towards billionaires and their insatiable appetite for wealth.
By the way, if you ask my true opinion, Tesla is not where he should be focusing his attention.
If I were Musk, I'd focus all my attention on SpaceX and get off Twitter for good.
I know, he has a cult following and even I retweet some of his posts and comments but it's a distraction and irrelevant (he will never sell X formerly Twitter for more than what he bought it for).
Anyway, I hope all pension funds and large investors vote against this absurd pay package and send the right message.
Those who want to protect capitalism over the long run need to use some common sense and vote against absurd pay packages, whether it's Musk or any other CEO who clearly doesn't deserve it.
Below, Chris Ailman, California State Teachers Retirement Systems CIO, joins 'Squawk on the Street' to discuss Ailman's opposition to Elon Musk's $56 billion pay package, Tesla's business model, and much more.
And Baron Capital chairman and CEO Ron Baron joins 'Squawk Box' to discuss his thoughts on Elon Musk's Tesla compensation, why he's in support of Musk's pay package, Elon Musk's ecosystem, and more.
Third, Ann Lipton, Tulane University associate professor in business law and entrepreneurship, joins 'Squawk Box' to discuss this week's Tesla shareholder vote on Elon Musk's pay package, whether the vote can undo the judge's prior ruling, and more.
Lastly, a month ago, Charles Elson, founding director of the Weinberg Center at University of Delaware, joins 'Squawk Box' to discuss news of Tesla holding a second shareholder vote over Elon Musk's $56 billion pay package.
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