Explore the reasons behind CalPERS' decision to oppose Elon Musk's $56 billion pay package and its implications for Tesla's shareholder meeting, despite the significant return on its investment in Tesla stock.
CalPERS' Position
CalPERS owns nearly 9.2 million shares of Tesla stock as of June 7 and has outlined several reasons for its opposition to Musk's pay package ratification:
- Value and Dilution: The pay package's value, after accounting for option exercise costs, is larger than Tesla's aggregate net income over the last four years, and it would be highly dilutive to existing shareholders.
- Concentration of Power: The award is concentrated in a single individual, potentially centralizing power and affecting the company's governance.
- Comparison with Peers: The pay opportunity远超 other high-performing CEOs' annual pay over the same period, standing at nearly 140 times the amount.
- Short-term vs. Long-term Growth: The payout is seen as rewarding short-term growth rather than promoting sustained profitability, especially considering Tesla's value has fallen by more than half from its peak in 2021.
CalPERS' Investment Director's Statement
Drew Hambly, CalPERS' Global Equities Investment Director, expressed concerns about the concentration of power in a single shareholder and the questionable independence of the board members who negotiated the deal. He emphasized the importance of sustained performance over short-term market exuberance.
CalPERS' CEO Perspective
Marcie Frost, CEO of CalPERS, reiterated the fund's stance on executive pay, stating that Musk's pay package is excessive compared to peer companies, highly dilutive, and not tied to Tesla's long-term profitability. Frost called for reasonable salary caps that align with a company's performance.
Musk's Response
Elon Musk expressed disappointment in CalPERS' decision, accusing the fund of breaking a deal and lacking honor.
CalPERS' Additional Action
In a related move, CalPERS filed an objection against the lawyers who represented the shareholder challenging Musk's pay package, opposing the requested $5.6 billion in fees in Tesla stock, which they deem exorbitant and detrimental to shareholders' interests.
Conclusion:
CalPERS' decision to vote against Musk's pay package reflects a broader debate on executive compensation, shareholder rights, and corporate governance. As Tesla's shareholder meeting approaches, the outcome of the vote could have far-reaching implications for the company's leadership, strategy, and shareholder relations.
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Frequently Asked Questions (FAQ):
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Why is CalPERS opposing Elon Musk's pay package? CalPERS opposes the pay package due to its size, potential dilution of existing shareholders' stakes, concentration in a single individual, and lack of connection to Tesla's long-term profitability.
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What concerns does CalPERS have regarding the pay package's impact on shareholders? CalPERS is concerned that the pay package would be highly dilutive to existing shareholders and does not believe it is commensurate with the company's performance.
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How has CalPERS' investment in Tesla performed since 2018? CalPERS has seen an 11x growth on its investment in Tesla since 2018.
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What additional action has CalPERS taken related to the pay package case? CalPERS has filed an objection against the lawyers representing the shareholder who first challenged Musk’s pay package, opposing their requested fees in Tesla stock.
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What is Elon Musk's response to CalPERS' decision? Musk expressed disappointment, accusing CalPERS of breaking the deal and lacking honor.
