Just next Thursday, Musk will reenact "Payday Chronicles"

Tesla shareholders' meetings have never lacked "highlights", and this time Musk will once again stage a "pay dispute".

Next Thursday in Eastern Time (Friday, June 14th at 4:30 am Beijing time), Tesla held its 2024 shareholders' meeting, with a highly anticipated vote on CEO Musk's $56 billion compensation package.

As the CEO of the world's largest electric vehicle manufacturer, Musk does not receive a traditional fixed salary, and all his compensation is tied to the company's market value and performance.

In 2018, Tesla's board granted Musk a $56 billion incentive stock option as future compensation for the coming years, contingent on Musk achieving a series of growth and profit targets.

However, earlier this year in 2024, due to a Delaware judge ruling that there was insufficient disclosure to investors at the time, the previous vote was deemed invalid, hence the need for a re-vote.

After six years, Tesla's market value has expanded by about nine times, and other companies founded by Musk such as the AI company xAI and the social platform X are also growing, raising concerns about his divided attention to other businesses. At the same time, competition in the electric vehicle sector has intensified, leading to a decline in Tesla's growth and profit margins.

Will Musk's sky-high compensation package pass this time?

Will Tesla shareholders approve Musk's compensation plan?

Tesla shareholders are still divided on this plan, with Tesla investors like the CEO of California's Gaber Kawasaki supporting Musk's compensation plan, while third-party shareholder advisory firm Glass Lewis publicly opposes it.

This Saturday, the Norwegian Sovereign Wealth Fund stated that it will vote against the compensation plan. According to LSEG data, the fund is Tesla's eighth largest shareholder, holding 0.98% of Tesla's shares, with a value of approximately $7.7 billion.

The fund stated that while they appreciate the value created by Tesla under Musk's leadership, they have concerns about the total size of the compensation plan, performance trigger structure, equity dilution, and lack of key person risk mitigation measures. The fund also voted against this compensation plan in 2018.

It is worth noting that Musk's compensation is the highest among CEOs in the U.S. corporate sector, and last year the fund voted against more than half of the CEO compensation plans exceeding $20 million, warning that these plans did not align with creating long-term value for shareholders.

Despite the differences, most analysts expect this compensation plan to pass.

Early voting seems to indicate a high probability of the plan passing, with a report from trading platform eToro last month showing that about 25% of shareholders have already voted, with over 80% in favor of the plan.

Morgan Stanley analyst Adam Jones stated that based on his client survey, more than half of respondents expect the vote to be "in favor". While the results may already be partially reflected in the current stock price, **it is expected that after the voting results are announced, Tesla's stock price may have more downside potential in the short term than upside potential If the plan is approved, it will benefit the stock price by eliminating uncertainty, but it also means that the hidden dangers of Musk's continued investment in AI and other areas remain. Analysis believes that Tesla needs Musk's drive, but in the long run, how Musk will balance his investment in Tesla and other businesses is still a question that needs continuous attention.

If the wage negotiation fails, Musk may resign?

This week, Tesla Chairman Robyn Denholm called on shareholders to approve Musk's compensation plan and warned that if Musk's compensation is not approved, he may leave Tesla.

She stated:

It's obviously not about the money, it's all about keeping Elon's attention, motivating him to focus on achieving amazing growth for our company. Elon has delivered on his promises, creating tremendous value for our shareholders. We should also show our support for his vision for Tesla and acknowledge his extraordinary achievements, which will motivate him to continue creating value for shareholders.

In a letter to shareholders submitted to the U.S. SEC, Denholm wrote:

Elon is not a typical executive, and Tesla is not a typical company. Therefore, the typical ways companies compensate key executives cannot bring performance to Tesla. Motivating individuals like Elon requires something different.

Denholm emphasized that Musk needs to have "incentive" to stay at Tesla, that is, he needs to receive the largest CEO compensation package in history. Musk may "escape" to "elsewhere" without motivation, as he is not short of ideas and can make amazing changes elsewhere in the world.

Although Tesla is the main source of Musk's wealth and fame, he now leads multiple companies such as SpaceX, The Boring Company, Neuralink, X, and xAI, responsible for many different projects, which may divert his attention away from Tesla.

It is worth mentioning that Musk is still seeking more control over Tesla, namely 25% of the shares, while he currently holds about 13% of the shares. In January this year, Musk publicly expressed dissatisfaction with his current holdings, stating that if he does not have about 25% of the voting control, he would feel uneasy and would prefer to develop products outside of Tesla