A key Tesla investor is expected to vote against CEO Elon Musk's $1 trillion pay package at the company's annual shareholder meeting on Nov. 6.
What's happening?
As detailed by Gizmodo, California's pension system believes handing $1 trillion to Musk isn't a great idea. As the nation's largest public pension fund, CalPERS ensures members receive their benefits by providing and administering various programs and services.
"The CEO pay package proposed by Tesla is larger than pay packages for CEOs in comparable companies by many orders of magnitude," CalPERS global equities investment director Drew Hambly said to Bloomberg. "It would also further concentrate power in a single shareholder."
This isn't the first time CalPERS has taken issue with a Musk pay package. In June 2024, CalPERS said it was voting against allowing Musk to purchase 304 million shares of Tesla stock at the 2018 value. The approximate value of these stocks at $46 billion (once valued at $56 billion) exceeded Tesla's net income of $33.8 billion from 2020 to 2023.
"This exorbitant compensation package is at odds with CalPERS' longstanding views on executive pay," CalPERS CEO Marcie Frost said at the time. "While we agree that Mr. Musk is entitled to be well compensated for his work, we also believe that a pay package should be commensurate to a company's performance with reasonable salary caps."
Why is this important?
Despite shareholders affirming the $56 billion package in a vote last year, Tesla is still wrapped up in court to restore Musk's multibillion-dollar payday.
A small investor filed a lawsuit alleging Tesla's directors violated their "fiduciary duties" when awarding the world's richest person a performance-based equity-compensation plan. The suit also claimed that shareholders voted without sufficient information or independence.
While MarketWatch reported that the latest massive payday should "sail through," this newest wrinkle adds further uncertainty for Tesla amid a volatile year of declining sales, fluctuating stocks, and a mass exodus of talent.
For his part, Musk has said he could leave Tesla if shareholders don't approve his $1 trillion payday, per MarketWatch. One Gizmodo commenter suggested that may be best, writing: "Musk is without question Tesla's biggest problem, full stop."
Tesla has experienced a fall from grace in the eyes of many consumers who view Musk's political involvement as inseparable from the popular electric vehicle brand.
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The government 🏛️ What does this mean for consumers?
Given Tesla's status as one of the world's largest EV manufacturers, per the Motley Fool, and the fact that its name has become synonymous with EVs, a CEO-level shakeup at Tesla could deter some drivers from making their next car an EV, slowing down the adoption of more environmentally friendly technology that is cheaper to own and operate.
However, while you may ultimately decide that one of Tesla's EVs is right for you, automakers such as Hyundai, Rivian, Kia, and Ford, among others, also sell EVs. Regardless of what happens with Musk's pay package, you'll have plenty of options to choose from.
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"I got a Volkswagen ID4 for environmental reasons. Turns out…they're really, really nice. Quiet, fun to drive. I can't imagine going back," one TCD community member shared.
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