Elon Musk’s $47 billion pay plan ripped by NYC comptroller

New York Metropolis Comptroller Brad Lander, who oversees 5 public pension funds with $242 billion in property, has a message for the Tesla board and CEO Elon Musk: the EV maker is publicly traded, so it ought to cease behaving like a family-owned enterprise with Musk on the head of the desk.

“I don’t know what genuinely unbiased board would have a CEO who can be CEO of two different giant firms,” Lander instructed Fortune. “Each different main publicly traded firm with a genuinely unbiased board—and lots of of them with not that unbiased of a board—count on their CEO to be a full-time CEO for his or her firm.”

Lander and a coalition of seven different buyers are urging Tesla shareholders to vote down Musk’s $47 billion stock-option package deal on the firm’s June 13 shareholder assembly. (His pay plan was initially valued at $55.8 billion but it surely has fluctuated with the corporate’s inventory value efficiency.) The buyers filed a discover this week spelling out a sequence of considerations about governance on the firm, and what Lander known as Musk’s “stratospheric” compensation.

Considered one of them is that Musk doesn’t work at Tesla full-time, mentioned Lander, including that there’s little doubt Musk is distracted by his different firms, which embrace SpaceX, The Boring Firm, xAI, X, and Neuralink. He was additionally incredulous that the Tesla board, after being served up a rebuke about its independence by a Delaware Chancery Court docket choose, would once more ask buyers to approve a compensation plan that can pay Musk billions. Delaware choose Kathaleen McCormick in January rescinded Musk’s pay and dominated that the board, which incorporates Musk’s brother Kimbal and others with shut private and monetary ties to Elon Musk, lacked independence in approving the comp plan and that Musk managed the method and dictated the phrases.

“It takes rather a lot to get the Chancery Court docket to say that,” mentioned Lander. “For the board to then flip round and say, ‘We’re ignoring the court docket and we’re shifting ahead with this stratospheric pay package deal and we’re not going to do something about these distractions’” is past the pale.

“I’ve by no means seen a board simply wantonly ignore a court docket on this approach,” he added.

Tesla didn’t instantly reply to Fortune’s request for remark. Tesla Chair Robyn Denholm has pushed again towards the court docket’s ruling and mentioned that it was “BS” that she was too near Musk to be thought-about unbiased.

In Lander’s view, what Tesla does may have implications that spill throughout different firms and founders who would quite hold shut management of their firms whereas nonetheless getting access to the capital markets. “This isn’t shareholder governance as envisioned by shareholder capitalism,” he mentioned.

Individuals have been lucky to have flourishing capital markets for generations due to the mannequin of unbiased governance by which shareholders can make investments and imagine that board members will act as their unbiased representatives in relation to firm administration groups, he mentioned.

However he warned that isn’t occurring at Tesla: “There’s not often been as egregious a flaunting of unbiased shareholder governance as this.”

And whereas Lander and the opposite buyers aren’t lobbying to switch Musk, the Tesla CEO is “completely” replaceable, mentioned Lander. Nonetheless, he would quite see the board negotiate an “acceptable compensation package deal” with Musk and for Musk to offer the extent of consideration and give attention to Tesla that the job requires.

“He’s little doubt certified to be the Tesla CEO, however CEO succession at publicly traded firms of this scale occurs on a regular basis,” mentioned Lander. “There are different CEOs who may do it if this CEO isn’t going to present it his full-time consideration and undertake a profitable however at the least vaguely cheap compensation package deal.”

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