Two large Tesla shareholders prepare to vote in favor of massive compensation package to keep Elon around.
Two of Tesla's largest shareholders want to keep Elon Musk around for the foreseeable future, and they're willing to put up $2.6 billion in stock options to do it. Baillie Gifford & Co. and T. Rowe Price Group Inc. own a combined 14 percent of Tesla stock. Both have indicated they'll vote in favor of the compensation package at special meeting on March 21. Other shareholders, understandably, aren't enthusiastic about the package and have urged other investors to reject the plan.
Tesla CEO Elon Musk's compensation is directly tied to a number of performance metrics the company must meet in order for him to qualify for the payout. Musk's compensation, in the form of stock options, will only be fully realized if the company achieves a market capitalization of $650 billion. “For vesting to occur when the milestones are met, Elon must remain as Tesla’s CEO or serve as both Executive Chairman and Chief Product Officer, in each case with all leadership ultimately reporting to him,” Tesla announced in an earlier press release. Proponents of the massive award believe it is justified.
“We believe the final plan is well aligned with shareholders’ long-term interests,” T. Rowe Price said in a statement emailed to Bloomberg. “The package was designed to retain him, and we are on board with the intention,” said Joel Grant, an automotive and industrial analyst at T. Rowe Price, in a phone interview with Bloomberg. “We want to make sure that Elon stays and uses Tesla as a vehicle for a lot of growth.” Meanwhile, Glass Lewis & Co. has recommended investors reject the plan, deeming it too costly.
Musk, who owns 20 percent of Tesla's stock, and his brother, Kimbal Musk, a company director, won’t vote on the compensation package.