Most Significant Votes - Tesla AGM special edition

By Paul Lee

Welcome back to Most Significant Votes! This is a one-off focusing only on the Tesla AGM vote, to fulfil our promise to come back on that once the full results were out.

We said last time that we’d revert to the votes at Tesla (AGM 6th November) as only the headline results were in the public domain when we published last week. There’s a lot to unpack in that meeting, so we’re producing a special issue solely looking at it.

We’ll start with the almost incomprehensible $1 trillion incentive scheme for founder Elon Musk. This passed with 23% opposition, or 33% if Musk’s existing near-20% shareholding, and that of his brother Kimbal (we’ll assume he can still vote those shares even though he has pledged every single one to guarantee borrowing), are set to one side. Remember that in Tesla’s prior existence as a Delaware corporation the Musks were barred from voting on such proposals, but that last year the company redomiciled to Texas, where there are fewer constraints. One key argument that the company makes to justify the scale of the $1 trillion (this is not a typo) award is that the Tesla market capitalisation would need to reach $8.5 trillion for that full award to be made. Some might argue that the fact Musk’s existing shareholding would be worth around $1.5 trillion more were that extraordinary performance to happen might be sufficient recompense.

Other remuneration votes also saw sizeable opposition: the annual vote on executive pay faced 22% (31% excluding Musks), and a proposal that among other things would make $24 billion (this is not a typo) of shares available to employees other than Musk 21% (30%).

Pay was probably also the main reason for the 22% (31%) opposition to the election of Kathleen Wilson-Thompson, given that she was instrumental in the board’s work on this CEO pay deal and also the prior one that was set aside by Delaware courts under the ‘entire fairness’ doctrine.

Fellow board member Ira Ehrenpreis faced a 35% (50%) vote against, probably as corporate governance committee chair bearing the blame for the so-called classified board structure which means only a third of directors stand for re-election each year. A shareholder proposal to remove this structure and so ensure all directors are elected annually passed with 55% (77%) support.

A second shareholder proposal also nearly passed. This one argued against any board move to make future shareholder resolutions harder to bring – 49% backed this, or 50% if we take this blog’s normal approach of also including abstentions in the headline number (70%). Perhaps oddly, a second proposal seeking something similar, but which would have been binding on the company, fared very much worse, garnering 17% (24%) support. A proposal that sustainability metrics (with a particular focus on human rights) be built into executive pay was backed by 10% (14%).

Finally, a shareholder resolution called on the board to consider an investment into Musk’s social media and artificial intelligence play X.AI; the board gave no recommendation on this resolution, which is probably why 19% of shareholders abstained. Unusually for a shareholder resolution we’ll assume insiders backed it; if so, the headline 57% opposition (including those abstentions) looks more like 80% once the Musk shareholding is excluded. Of the votes actually cast, 54% supported the idea; the company says about this: "While more votes were cast in favor of the proposal than against, a significant number of shareholders abstained. Since our bylaws generally consider abstention as votes against, this was not approved under the bylaw standard. As a result, given that this is an advisory vote, the Board will examine next steps in light of these voting results (including the high number of abstentions)."

That’s all we’ll cover in this issue. We’ll be back with a more normal Most Significant Votes, covering the whole fortnight, on November 21st.

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