Tesla Investor Slams Elon Musk’s $56bn Pay Deal, Amid Another Lawsuit

The upcoming Tesla shareholder vote on Thursday on whether to reinstate Elon Musk’s $56 billion pay package, continues to draw debate and interventions.

CNBC reported that Chris Ailman, chief of one of the largest pension funds in the US (the California State Teachers’ Retirement System or CalSTRS), said he will vote against Elon Musk’s “ridiculous” pay deal, even as Tesla campaigns for its reinstatement.

Meanwhile it was separately revealed that an institutional investor in Tesla (the Employees’ Retirement System of Rhode Island or ERSRI) on Tuesday has filed a lawsuit in Delaware against Musk and his brother Kimbal, alleging they improperly sold $30bn (£23.5bn) in shares.

Shareholder vote

Tesla shareholders are to vote on Thursday 13 June on Elon Musk’s compensation package, that is estimated to be worth as much as $56 billion.

The vote to reinstate Musk’s huge financial compensation package comes after the EV car giant recently opted to axe thousands of staff.

Tesla shareholders had approved the deal in 2018, but in January a Delaware chancery judge struck it down citing Musk’s “extensive ties” with board members, as well as other concerns with the approval process.

The pay package that Tesla had granted Musk was the largest compensation plan in public corporate history, the judge noted.

Musk hit out at the judge’s ruling, saying, “Never incorporate your company in the state of Delaware.”

He then began the process of reincorporating both Tesla and SpaceX in Texas.

Waning support?

Tesla has repeatedly urged shareholders to accept it.

But support for Musk has waned amid criticism of his handling of the Twitter acquisition, his support for conspiracy theories, and his lack of support for content moderation online.

Criticism within Tesla shareholders has also focused on how much time Musk can devote to the EV maker, alongside SpaceX, X (formerly Twiter), Neuralink, AIx etc.

Recently a proxy advisory firm advised Tesla investors to vote against re-approval of Musk’s record-breaking pay package, citing the package’s “excessive size” and Musk’s “slate of extraordinarily time-consuming projects”.

Last week Tesla’s chair Robyn Denholm warned that Elon Musk could focus his attention elsewhere from Tesla if not granted the pay package. Denholm also claimed this approval was “obviously not about the money.”

CalSTRS opposition

Now CNBC reported CalSTRS Chief Investment Officer Chris Ailman has said that the fund opposed Musk’s pay package previously, and will do so again.

“We’ll pay him 140-times the average worker pay. How about that deal? I think that’s more than fair. This pay package is ridiculous,” Ailman said on CNBC’s “Squawk on the Street.”

CalSTRS held just under 4.7 million shares of Tesla as of 30 June 2023, and the fund has owned a stake in Tesla since before it went public.

Ailman said he does not want to see Musk completely walk away from Tesla, but added that Musk should let some professional managers handle more day-to-day operations at the electric car company.

“He needs to focus in on, either on cars, either on X or on going to Mars. And I think his heart really is in going to Mars,” Ailman said.

CalSTRS is not the only major shareholder opposed to the proposal. Norway’s sovereign wealth fund (Tesla’s eighth-largest shareholder) has also come out in opposition to the pay deal.

Musk meanwhile retweeted a message from the company urging shareholders to vote in favour of his pay deal. “Please take a moment to vote,” he said.

Investor lawsuit

In another development, it was separately revealed on Tuesday that Musk was facing another lawsuit in Delaware brought by an institutional investor in Tesla.

Reuters reported that the Employees’ Retirement System of Rhode Island (ERSRI) claimed that Musk and his brother Kimbal, who is a director of the electric car firm, made billions of dollars by selling Tesla stock using insider information.

The lawsuit alleges Musk and his brother sold a combined $30bn (£23.5bn)in shares between late 2021 and the end of 2022.

The lawsuit alleges the brothers cashed in ahead of developments that would have caused stock to fall in value became public.

Musk allegedly sold Tesla stock when he knew that deliveries of Tesla cars had fallen far below public projections, the lawsuit claims.

The Employees’ Retirement System of Rhode Island holds about 140,000 shares of Tesla.

Tesla shareholder Michael Perry reportedly filed a similar action last month alleging insider dealing by Musk.