The Tesla chief executive and his supporters—including investors and Chair Robyn Denholm—are in the final stretch of trying to persuade shareholders ahead of Thursday’s vote to reauthorize his controversial 2018 pay package with an argument that essentially boils down to: We had a deal!
It is a compelling defense—at least, rhetorically—but also the sort of argument that Musk has rejected in his own business dealings with others.
For years, Musk, among the world’s richest men, has been shadowed by claims his companies were unfairly reneging on paying people what they were owed. Musk and his companies have denied wrongdoing. Still, he is getting a taste of karma as he joins the ranks of those who feel similarly mistreated.
The status of his compensation is in question after a Delaware court rescinded it earlier this year, taking issue with how the package of stock options, currently valued at about $46 billion, was hashed out. In response, the Tesla board is hoping a second shareholder vote will clear things up, potentially avoiding a lengthy court battle.
“Fairness and respect require that we honor the collective commitment we made to Elon,” Denholm wrote this past week in a message to shareholders. She added, “We must stand by our deal.”
Billionaire investor Ron Baron went on CNBC this past week to make a similar case. “We said, as Tesla, as a company, ‘Elon, if you perform, this is what you’re gonna get,’” said Baron, who estimates his investments in the company have made billions of dollars. “How can you go back and renege on that, especially when all of the directors and all the shareholders approved it? It’s crazy.”
Investor Cathie Wood took to X with her own similar take: “How can shareholders renege on his pay package AFTER Elon and shareholders already have taken and overcome the risks associated with Tesla’s rise to producing the top selling car in the world? Unconscionably!”
After Marcie Frost, the head of Calpers, the powerful California Public Employees’ Retirement System, said the state’s pension manager planned to vote against the pay package because it isn’t “commensurate” with the company’s performance, Musk responded: “Calpers broke the deal. Shame on them, they have no honor.”
At the same time Musk is fighting for his payday, he is also fighting off others demanding theirs.
Many Twitter employees felt mistreated by Musk after he took over ownership of the social-media platform in 2022, which he has subsequently renamed X. It was a purchase that he infamously tried to get out of as it became clear that his $44 billion offer was too high amid a slowdown in social-media advertising.
Then-Twitter Chief Executive Parag Agrawal and his team successfully fought to force Musk to go through with the deal, which turned out to be exceptionally good for their shareholders—at Musk’s expense.
Soon after the acquisition closed, Musk fired those senior Twitter leaders, a move that deprived them of promised severance payments intended to keep them working through such a rocky transition. In biographer Walter Isaacson’s book “Elon Musk,” the billionaire is quoted as saying he cut them to save himself “a 200-million differential.”
In March, Agrawal and the team filed a lawsuit against Musk over the matter and rehashed other claims that his company isn’t paying its bills.
“Under Musk’s control,” the lawsuit began, “Twitter has become a scofflaw, stiffing employees, landlords, vendors, and others. Musk doesn’t pay his bills, believes the rules don’t apply to him, and uses his wealth and power to run roughshod over anyone who disagrees with him.”
Musk has denied wrongdoing, saying he fired them for cause.
His history on such matters is complicated. Earlier this year, Musk made a point of saying he wants Tesla to be dependable. His comments followed complaints by a Silicon Valley bakery that it had been stiffed by Tesla for an order of 4,000 pies that were canceled at the last minute.
“Just hearing about this. Will make things good with the bakery,” Musk tweeted. “People should always be able to count on Tesla trying its best.”
Since the early days of Tesla, Musk and the electric-vehicle maker have been dogged with questions about how the company has treated employees when it comes to the timing of their firings ahead of when their stock vested.
Tesla denied wrongdoing as it fought a lawsuit brought by more than 40 former employees over a decade ago. A California appeals court eventually overturned a lower-court ruling against Tesla in that case.
The O.G. of fights dates back to 2009, when Tesla co-founder Martin Eberhard sued after being pushed out in a messy spat that included him being denied stock options he was allegedly owed. Tesla denied wrongdoing, accusing Eberhard of violating a nondisparagement agreement. The parties eventually settled in an agreement that included cementing Musk’s claim to being called a co-founder of the automaker.
More recently, Tesla saw the departure of a key executive—Jerome Guillen—who helped shepherd the company through its darkest times, including the troubled production ramp up of the Model 3 sedan.
The eventual success of the Model 3 helped Musk achieve the goals of his 2018 pay package, which include milestones around revenue growth and market values that some outsiders thought unlikely.
Key executives—including Guillen, then a president—were given their own large rewards, albeit smaller in comparison to Musk’s, for their work.
In 2021, Guillen departed Tesla after he was offered a new role seen as a demotion and Musk asked him to forfeit some of his unvested shares valued at hundreds of millions of dollars, The Wall Street Journal reported. It was an unusual request that came amid a broader concern being voiced by Musk that some of his employees were making more money than he felt they deserved.
Now, it is Musk fighting those who say he wants to be paid more than he deserves.
“The total award value remains excessive, even given the company’s success,” Institutional Shareholder Services, an influential proxy advisory firm, told investors in recommending against the plan.
Tesla disagreed, of course, saying in a now familiar response: “A deal is a deal.”
Write to Tim Higgins at tim.higgins@wsj.com