The performance-based compensation package Tesla’s board recently proposed for Tesla CEO Elon Musk has drawn a variety of responses to date. After two of the most prominent proxy advisory firms out there came out against the proposal and urged shareholders to vote against it, Tesla’s fourth largest investor, the T. Rowe Price Group, seemingly came out in favor of the proposal.
At the same time, the California State Teachers’ Retirement System (CalSTRS) came out against the proposal.
The T. Rowe Price Group possesses a roughly 6% share in Tesla, while CalSTRS possesses a roughly 0.13% stake in Tesla. Tesla is currently value at ~$52.5 billion, so those percentages represent substantial amounts of money, it should be realized.
Reuters provides more: “Musk’s pay plan ‘is well aligned with shareholders’ long-term interests,’ a spokesman for T. Rowe Price Group, Tesla’s fourth-largest investor with about 6% of its shares, told Reuters on Wednesday, without saying which way the Baltimore fund firm would vote.
“Other top investors did not immediately comment on Wednesday. A smaller investor, the California State Teachers’ Retirement System (CalSTRS), said it will oppose the award. CalSTRS is one of the nation’s largest public pension plans but only the 59th largest investor in the car maker, with a 0.13% stake.”
A statement from CalSTRS’ Director of Corporate Governance, Anne Sheehan, read: “Given the size of the award, we believe the potential dilution to shareholders is just too great. In addition, we have concerns about the lack of focus on profitability for the company, and the one profitability metric that is used excludes the cost of stock-based compensation.”
An official statement from Tesla is coming later today, but CNBC has apparently scooped some news from the meeting, news that Tesla shareholders approved the proposal by a wide margin. Here’s more from CNBC’s summary coverage:
“The grant gives Musk $2.6 billion in stock options in 12 tranches that each vest as the company hits key performance milestones over 10 years.
“Musk needs to hit 12 market capitalization milestones and 16 revenue or earnings before interest, taxes, depreciation and amortization targets in order to vest the entire award. Tesla has to reach a market cap of $100 billion for the first tranche to vest, and then each of the remaining 11 tranches require an additional $50 billion in market value.
“In addition to that, there are 16 operational milestones: eight focused on increasing revenue from $20 billion up to $175 billion, and another eight targeting adjusted EBITDA milestones ranging from $1.5 billion to $14 billion.
“Each of the 12 tranches vests when Tesla hits a market cap milestone and one of the two kinds of operational milestones.
“Throughout all of this, Musk must remain either CEO or executive chairman and chief product officer.
“Ultimately, Musk could earn up to $55.8 billion in stock and awards, if Tesla’s market cap reaches $650 billion. It is currently around $52 billion. Musk will receive no other compensation for his work at Tesla outside this plan.”
So, that’s the story. It seems Elon Musk doesn’t need much personal incentive to strive for great heights with Tesla, and the fundamental mission of the company — to hasten the transition to a sustainable energy economy. However, he’s also a rather competitive fellow, and we here at CleanTechnica presume that aggressive targets like these will inspire him to put in even a bit more effort than he would otherwise. We doubt the financial gain is of much importance to him (except to the extent it might help him to fund or inspire other work), but the official targets and that they are indeed highly valued seem like the right levers to get the most out of Elon’s Tesla time.
Any more thoughts on the news?