Tesla shareholders urged to remove Elon Musk over 10-year comp plan, Twitter use

Pensions and Investment Research Consultants (Pirc), which hails as one of the largest pension representation and lobby groups in the UK, is urging Tesla (NASDAQ:TSLA) shareholders to remove Elon Musk over his 10-year CEO performance award and his Twitter behavior. According to Pirc, Musk’s compensation plan, which could net a record $55.8 billion payout, “unfairly riches the chief executive.”

In a recommendation on Tuesday, Pirc alleged that Tesla’s “Board, including CEO Elon Musk, awarded themselves excessive compensation packages over a three-year period that allegedly allowed directors to ‘enrich themselves at the company’s expense.’” The shareholder adviser also called on investors to vote against Musk’s re-election to Tesla’s board due to the deal, as it posed a “serious risk of reputational harm to the company and its shareholders.”

Apart from Musk’s 10-year performance award, Pirc also took issue with the CEO’s use of Twitter, which has resulted in conflicts with regulators in the past. The investor adviser stated that Musk’s antics in the social media platform had cost Tesla millions of dollars worth of settlements, thus representing an “unnecessary reputational risk to the company.” Pirc brought up Musk’s conflict with the SEC in 2018, which resulted in a total fine of $40 million from the CEO and Tesla. 

The investor adviser noted that the incident prompted “accusations of stock market abuse, with the SEC alleging that Musk had lied to investors.” Pirc also cited Musk’s controversial stance on the coronavirus, though the firm incorrectly stated that Tesla had urged employees to return to work “without sufficient precautions/protections and despite protests from workers.”

This, of course, is inaccurate, as Tesla has had experience with the pandemic in its Gigafactory Shanghai facility in China even before its Fremont plant was closed down. The company also followed an extensive Return to Work Playbook that outlined initiatives that would protect workers who are returning to work. Pirc further neglected to mention that Tesla’s reopening of the Fremont plant was supported by entities such as the Bay Area Council, the Mayor of Fremont, US Vice President Mike Pence, US President Donald Trump, and even House Speaker Nancy Pelosi. 

Apart from its grievances against Musk, Pirc is urging Tesla shareholders to vote against re-electing Robyn Denholm as the company’s Chair of the Board. Denholm succeeded Musk as Tesla’s Chair following the latter’s settlement with the SEC in 2018. 

Interestingly, Pirc also neglected to mention that Musk’s 10-year performance award is tied directly to Tesla’s performance and market cap. This means that unless the company is doing well, Musk receives nothing. Thus, Musk only nets his major payouts when Tesla investors also experience major gains due to the company’s performance. 

Elon Musk’s tenure as CEO of Tesla may be marked by several controversies, but there is no doubt that the electric car maker has flourished under his leadership. Since its IPO in 2010, and despite its trademark volatility and attacks from short sellers, TSLA stock has earned investors 5,677% since it debuted at $17 per share ten years ago. Overall, Tesla has earned its investors 45% per year on average, which is impressive for a company selling vehicles that were once thought of as glorified golf carts. 

Disclosure: I have no ownership in shares of TSLA and have no plans to initiate any positions within 72 hours.

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