With major shareholders divided over Elon Musk’s $56 billion pay package, Tesla is rallying support from its vast base of small retail investors ahead of its June 13 annual meeting. This meeting, set against the backdrop of a Delaware court ruling against the hefty compensation plan, is shaping up as a crucial referendum on Musk’s leadership.
Retail investors, who make up a significant portion of Tesla’s ownership, generally favor management but often do not vote. Tesla is keen to mobilize these shareholders through an extensive outreach campaign that includes a dedicated website, engagement with online influencers, and factory tours for those who vote.
Big institutional investors have shown mixed reactions. T. Rowe Price endorsed the pay package, citing strong alignment with investor interests, while the California Public Employees’ Retirement System and Norway’s sovereign wealth fund opposed it, arguing it was disproportionate to Tesla’s performance.
Elon Musk’s potential control of over 20% of Tesla hinges on this vote. A ‘no’ would not only be a rebuke but also carry uncertain consequences for the company’s future.
Tesla also proposes reincorporating in Texas and re-electing two directors, including Musk’s brother, Kimbal. However, the focus remains on the pay vote and the Texas move, with Tesla leveraging its small shareholder base through a strategic campaign.
“The man ends up 10x-ing my investment and he’s given nothing? It doesn’t seem right or fair,” said Andrew Theyken Bench, a lawyer in Allentown, Pennsylvania, who voted by proxy in favor of Musk’s pay package. Musk, via his social media platform X, claimed that 90% of retail shareholders who voted supported both resolutions.
Bruce Goldfarb, president of Okapi Partners, noted that while 90% support from retail investors is typical, their general apathy poses a challenge. Historically, only about 30% of retail shares are voted, compared to 80% for institutional shares.
Tesla’s campaign hinges on the theme of fairness to Musk. Chair Robyn Denholm framed the vote as essential for “fairness, respect, and the future of Tesla,” emphasizing Musk’s limited time and numerous interests. “We want those ideas, that energy and that time to be at Tesla, for the benefit of you, our owners,” she wrote in a June 5 letter.
Data from S&P Global Market Intelligence reveals that about 43% of Tesla’s stock is held by the “public and other” category, which includes retail investors. This is the highest among the 15 largest companies in the S&P 500. Musk’s own stake stands at around 13%, with Vanguard and BlackRock holding 7.2% and 5.9% respectively.
Despite the support from some online influencers, major proxy advisers Institutional Shareholder Services and Glass Lewis have recommended voting against the pay package. University of Utah finance professor Chong Shu noted that only 66% of “say on pay” resolutions pass when both proxy advisers oppose them, compared to 99% when both are supportive.
Influential online supporters like Omar Qazi (@WholeMarsBlog) and Alexandra Merz (@TeslaBoomerMama) continue to rally support. Their efforts have even prompted non-U.S. banks and brokerages, such as Sweden’s Nordnet, to enable Tesla investors to vote.
“I’ve been invested in other companies before and I’ve never seen the amount of effort by an informal community to get out the vote like there is on this one,” said Troy Dillon, a retired U.S. Air Force officer in Florida and Tesla shareholder.
As the vote approaches, the outcome remains uncertain. Shares at Tesla closed Friday at $177.48, significantly lower than their end-of-2023 value of $248.48, amid growing competition and concerns over new model plans. Regardless of the outcome, the debate over Musk’s compensation underscores the broader issues of executive pay and corporate governance in today’s high-stakes market environment.