CalPERS opposes Musk's USD 56 billion pay package

The California Public Employees' Retirement System (CalPERS), one of the largest pension funds in the United States and a significant shareholder in Tesla, has announced its intention to vote against CEO Elon Musk's USD 56 billion compensation package at the upcoming annual shareholder meeting. CalPERS, which holds 9.5 million Tesla shares and is among the top 30 investors in the electric vehicle manufacturer, previously voted against Musk's stock options package in 2018.

The decision by CalPERS comes at a critical time for Tesla, as the company faces the possibility of its first annual sales decline and a nearly 28% drop in its share price since the beginning of the year. The shareholder meeting on Thursday is expected to serve as a test of Musk's leadership, particularly as he shifts focus towards self-driving technology.

Marcie Frost, the CEO of CalPERS, expressed concerns about the concentration of such a large award on a single individual and the potential impact on other shareholders. "We also raise questions about concentrating a large award on a single individual and (the) way it would strengthen the shares of Mr. Musk at the expense of diluting the value of those belonging to other shareholders," Frost stated.

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In contrast to CalPERS, the Florida State Board of Administration, which holds 2.89 million Tesla shares and is the company's 80th largest investor, voted in support of Musk's USD 56 billion pay package. The Florida pension board cited the plan's "very high levels of pay-for-performance" as the reason for their support. However, the agency also voted against the re-election of Tesla director Kimbal Musk, citing independence concerns, and opposed Tesla's proposed re-domestication to Texas.

The divergent opinions among Tesla's shareholders highlight the ongoing debate surrounding Musk's compensation and leadership. In January, a Delaware judge rejected the record compensation package, calling it "an unfathomable sum" that was unfair to shareholders, despite their approval of the pay in 2018.

As Tesla faces increasing competition in the electric vehicle market and the challenges of expanding its self-driving technology, the outcome of the shareholder meeting and the vote on Musk's compensation package will be closely watched by investors and industry observers alike. The decision by CalPERS to oppose the pay package may influence other institutional investors and put additional pressure on Musk and the Tesla board to address shareholder concerns.

The shareholder meeting also comes at a time when Musk is facing increased scrutiny over his management of Twitter, which he acquired in a USD 44 billion deal last year. Some investors have questioned whether Musk's focus on Twitter has detracted from his responsibilities at Tesla, contributing to the company's recent stock price decline.

As the electric vehicle industry continues to evolve and competition intensifies, Tesla will need to navigate the challenges of maintaining its market leadership while addressing shareholder concerns and ensuring the company's long-term success. The outcome of the shareholder meeting and the vote on Musk's compensation package will provide important insights into the future direction of the company and the confidence of its investors in Musk's leadership.